Glencore’s Katanga Mining faces probe by Canadian regulators

GLENCORE’S subsidiary in the Democratic Republic of Congo (DRC) is under investigation by Canadian regulators over its corporate governance and accounting practices.

The investigation of Katanga Mining comes just two weeks after the Paradise Papers leak brought a wave of scrutiny over Glencore’s dealings in the DRC.

The Congolese copper producer, which has restated its financials, is owned by Glencore.

In a major sign of how toxic the problem has become for the Swiss commodities giant, three executives, including billionaire Aristotelis Mistakidis, resigned from the board of Katanga.

Mistakidis is a key part of Glencore. Among management, he is the third-biggest shareholder and long-time lieutenant to chief executive Ivan Glasenberg.

He helped lead the company’s ascent from a scrappy trader to a commodities giant and the world’s third-biggest copper miner.

While Katanga is financially a small part of Glencore’s overall business, it faces an ongoing headache over the past relationship with controversial Israeli billionaire Dan Gertler.

An internal review found, among other problems, that Katanga had failed to disclose compensation paid to some executives and overstated copper output in 2014.

In some cases, senior management and executive directors were responsible for overriding control processes. Canada’s Ontario Securities Commission is also investigating the accuracy of Katanga’s financial reporting, corporate governance and the conduct of some directors and officers.

It is also reviewing disclosures related to bribery and anti-corruption laws. Glencore nominated three new directors to the Katanga board, including chief financial officer Steven Kalmin.

It will strengthen controls across its copper division, Glencore said. Katanga’s business dealings in Congo and Canadian disclosures have been questioned before.

In March, Global Witness said more than $100 million (R1.4 billion) in payments due to stateowned Gecamines were instead paid to a firm controlled by Gertler. The payments were not clearly described in Katanga’s reporting, according to the London-based advocacy group. In filings between 2013 and 2015, Katanga either said the payments went to Gecamines or didn’t specify the recipients.

At the time, Glencore said it made the payments to Gertler’s Africa Horizons Investments at Gecamines’s request, and complied with all Canadian disclosure rules.

Glencore owns about 86 percent of Toronto-listed Katanga Mining.