[Dehai-WN] Africa-Confidential.com: CONGO-KINSHASA -Bargain mine sales draw fire

[Dehai-WN] Africa-Confidential.com: CONGO-KINSHASA -Bargain mine sales draw fire

From: Berhane Habtemariam <Berhane.Habtemariam_at_gmx.de_at_dehai.org>
Date: Sun, 27 Nov 2011 22:05:30 +0100

fire> Bargain mine sales draw fire

The government’s secretive, and cheap, sale of lucrative mining assets is
fast becoming an election issue


Mining companies stripped of valuable concessions have been sounding out the
opposition before the presidential election, which is expected to take place
on 28 November. President Joseph Kabila’s main challenger, Etienne
Tshisekedi wa Mulumba, went to Canada in September to meet the directors of
First Quantum Minerals, one of the companies most affected by the forced
asset sales or seizures. First Quantum is in litigation with the Kinshasa
government over the loss of its concessions while the International Monetary
Fund and World Bank are taking the state-owned company Gécamines to task
over secret mining contracts.

Tshisekedi, veteran leader of the Union pour la démocratie et le progrès
social (UPDS), invited First Quantum and other foreign investors to ‘come
back after 6 December, when Kabila will be gone’ to take advantage of a
better business climate, we hear. In return, a news agency owned by an ally
of Kabila has accused Tshisekedi of acting ‘against his own people’.
Pro-Kabila media denounce Tshisekedi’s talks with mining companies while the
opposition slates the government for selling off the country’s mineral
heritage at bargain-basement prices.

One of First Quantum’s disputes, which has been referred to the World Bank’s
International Centre for Settlement of Investment Disputes (ICSID), concerns
the decision of the Kipushi high court to ratify the takeover of the
Frontier and Lonshi copper and cobalt concessions by a Hong Kong company,
Fortune Ahead Limited, in partnership with the state-owned Société de
développement industriel et minier du Congo (Sodimico) in 2010. First
Quantum’s other dispute, which has been referred to the arbitration tribunal
of the International Chamber of Commerce in Paris, concerns the transfer in
September 2009 of its Kingamyambo Musonoi Tailings (KMT) concession to the
mysterious Highwind company, registered in the British Virgin Islands (BVI,
AC Vol 51 No 19,
<http://www.africa-confidential.com/article/id/3678/The_bonus_culture> The
bonus culture). Highwind is believed to be associated with the controversial
Israeli businessman Dan Gertler, who is one of Kabila’s staunchest and
richest supporters. Highwind recently sold the KMT concession to Eurasian
Natural Resources Corporation (ENRC) of Kazakhstan in unclear circumstances.
The concession may contain 326,000 tonnes of copper and 69,000 tn. of
cobalt, worth about US$5 billion.

IMF/World Bank not amused

Etienne Tshiskedi’s trip to Canada irked Kabila since it follows pressure
from the World Bank over the government’s handling of mining contracts. The
Bank’s private sector investment arm, the International Finance Corporation,
is a partner in KMT with First Quantum. The IMF is also displeased and may
withhold some payments under its $240 million Extended Credit Facility as a

The IMF has asked the government to clarify several obscure contracts signed
by Gécamines, which suggests that state assets have been sold for absurdly
low prices, notably Sodimico’s sale to Fortune Ahead of 30% of its shares in
the Lonshi and Frontier deposits. Opposition member of parliament Modeste
Bahati Lukwebo, of the National Assembly’s Economic and Financial (Ecofin)
Commission and who leads the Alliance des forces démocratiques du Congo,
claims that Fortune Ahead paid Sodimico only one-thirtieth of the stake’s
true value. This would put the loss to the state at $870 mn. An exchange of
letters between Sodimico and Mines Minister Martin Kabwelulu Labilo shows
that the partnership agreement between Sodimico and Fortune Ahead covers
assets that used to belong to First Quantum.

Early this year, Gécamines secretly sold its 20% share (along with its joint
venture partnership) in Mutanda Mining, operated by Samref Congo and 50%
owned by Glencore, to Rowny Assets, another BVI company associated with
Gertler (AC Vol 52 No 16,
Mutatis mutandis). Gécamines also quietly disposed of 25% of a mining firm
called Kansuki Investments to the Biko Invest Corporation, also linked to
Gertler. Based on calculations by consultants Golder Associates that the
Mumi deposit alone was worth $3 bn., a human rights group, Action contre
l’impunité pour les droits humains (ACIDH), has calculated that the sale
involved handing over assets worth about $600 mn., plus $200 mn. in
royalties. Much the same applied to Kansuki. Glencore, its leading
shareholder with 37.5% ownership, assessed its production capacity at around
17,000 tn. of cobalt and 90,000 tn. of copper.

Gécamines, a private affair

The Chief Executive of Gécamines, Albert Yuma Mulimbi, has refused all
requests, from the Mines Ministry to the IMF and others, to publish the
controversial contracts, claiming that as a private company it is not
obliged to, even though the state owns all its shares. The government has
instructed Yuma, we understand, not to provide the information.

Mining companies, and the Minister in charge of State Assets, Jeannine
Mabunda Lioko, will be watching with interest an MP from the Mouvement de
libération du Congo (MLC), Fidèle Babala. In April 2010, he revealed that
the state-owned Office des Mines de Kilo-Moto Okimo) had sold 20% of its
shares in the Kibali Gold Mines joint venture for $113 mn. to its partners
AngloGold Ashanti and Randgold. He estimated that would cover reserves –
certified, measured or probable – of 28 mn. ounces of gold, with a value of
$30 bn. He reckoned that this deal had cost the state several billion

Senator David Mutamba Dibwe, who chaired a commission of inquiry into the
mining sector in 2009, has revealed that, in the two Kivu provinces, Manyema
and Orientale Province, 80% of gold exports were outside state control and
marked by ‘grand-scale fraud’. Official gold exports were 121.58 kilogrammes
in 2007, and about 71 kg. in 2008.

Back in 1983, exports of 6 tn. were recorded, while the official Centre
d’évaluation, d’expertise et de certification des matières précieuses (CEEC)
has estimated real exports at 40 tn. a year – meaning the state could have
lost $1.23 bn. Mutamba’s commission also found that in Kasai-Oriental, the
decline of the province’s pride and fortune, Minière de Bakwanga (Miba), was
universally blamed on Kinshasa. The report spoke of ‘government neglect and
carelessness, appointments in exchange for favours instead of skills, and
repeated raids on funds owned by the enterprise’. On 25 October, a
conference organised byKatangan civil society declared, with Mutamba
present, that little had changed and the mining sector was characterised by
‘generalised fraud’.


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