Katanga Mining’s penalties in settlement with watchdog to top $20M, sources say

TORONTO Katanga Mining Ltd., a subsidiary of Anglo-swiss commodities and mining conglomerate Glencore PLC, is expected to settle serious allegations — including making misleading statements and failing to disclose risks associated with its operations in the Democratic Republic of Congo — at a hearing Tuesday in front of Canada’s largest capital markets regulator.

The combined financial penalties in the proposed settlement are understood to exceed $20 million, and a number of individuals are also expected to settle, including a key long-serving executive of the parent company who sat on Katanga’s board, sources say.

The Ontario Securities Commission had been investigating Katanga for months, including whether the firm, whose shares are traded on the Toronto Stock Exchange, adequately disclosed risks pertaining to international bribery, government payment and anti-corruption laws.

Commission staff disclosed their allegations resulting from the probe in a 33-page document made public on Monday.

The settlement, which must be approved by a panel of commissioners Tuesday, marks the first regulatory move against Katanga and people who are associated with the company. The firm’s activities in the Democratic Republic of Congo have also drawn scrutiny from a powerful watchdog in the United States. Sources say the regulatory probes have involved multiple jurisdictions including Switzerland, the U.S., the United Kingdom and the Democratic Republic of Congo, where Katanga has copper and cobalt operations.

The proposed settlement includes a number of Katanga executives, former executives and directors. Seven were named in the statement of allegations published by the OSC on Monday, including Glencore’s former head of copper trading and marketing Aristotelis Mistakidis, a longstanding key lieutenant of the Glencore chief executive, billionaire Ivan Glasenberg. Also named is current Katanga chief executive Johnny Blizzard.

It was revealed this month that Mistakidis would leave Glencore by year-end, amid growing scrutiny by regulators on the Congo operations.

Mistakidis was a director of Katanga, but he stepped down from the majority-controlled subsidiary’s board a year ago along with two fellow Glencore executives, Liam Gallagher and Tim Henderson, after an internal probe prompted by the OSC investigation unearthed “material weaknesses” in Katanga’s financial controls.

The OSC declined to discuss terms of the negotiated settlement with Katanga. Spokesperson Kristin Rose said the regulator doesn’t comment on settlement discussions.

Charles Watenphul, a spokesperson for Glencore, also declined to comment on the OSC matter.

OSC sanctions can include bans on capital markets activities, such as acting as a director or officer of a publicly traded company, as well as financial penalties for corporations and individuals that can reach into the millions of dollars.

In the statement of allegations by OSC staff, which led to the behind-closed-doors negotiated settlement, Katanga is accused of failing to disclose the risks posed by its reliance on Gertler Associates, which the regulators says Katanga paid “to maintain relations with the DRC government (of Joseph Kabila) and for a variety of other services which required interactions with DRC government officials to represent Katanga’s interests.”