Glen­core’s DRC set­tle­ments should al­lay fears about as­set seizure – an­a­lyst

Zambian Business Times - - MINING -

Di­ver­si­fied miner Glen­core’s set­tle­ment, last week, of var­i­ous dis­putes with en­ti­ties in the Demo­cratic Repub­lic of Congo (DRC), should al­lay in­vestor con­cerns about the risk of a seizure of its DRC as­sets, says Gold­man Sachs.

Glen­core, led by CEO Ivan Glasen­berg, on Fri­day an­nounced that it had reached a set­tle­ment to pay rel­e­vant roy­al­ties to Ven­tora Devel­op­ment and Africa Hori­zons In­vest­ments Lim­ited (AHIL) – two en­ti­ties af­fil­i­ated with Is­raeli-born Dan Gertler, who is fac­ing sanc­tions in the US – when they be­come due, in non-US dol­lars.

Ven­tora in April served freez­ing or­ders in the DRC against Glen­core’s Mu­tanda Min­ing and Kamoto Cop­per Com­pany(KCC) for $695-mil­lion and $2.28-bil­lion re­spec­tively, which Ven­tora said was the value of fu­ture roy­al­ties due to it un­der agree­ments with Mu­tanda and KCC.

Glen­core and its Katanga Min­ing sub­sidiary, which owns Mu­tanda and KCC, have now de­ter­mined that the only way to avoid the risk of seizure of its as­sets in the DRC is for Mu­tanda and KCC to pay the rel­e­vant roy­al­ties to Ven­tora.

Mu­tanda, KCC, Ven­tora and AHIL have, there­fore, agreed to with­draw all pend­ing and threat­ened lit­i­ga­tion.

Glen­core stated that the pay­ment of the roy­al­ties in non-US dol­lars to Ven­tora with­out the in­volve­ment of US per­sons would ap­pro­pri­ately ad­dress all ap­pli­ca­ble sanc­tion obli­ga­tions.

On Wed­nes­day 13 June, Glen­core also an­nounced that Katanga had set­tled its le­gal dis­pute with DRC State-owned com­pany La Générale des Car­rières et des Mines (Gé­camines) af­ter Glen­core agreed to write off $5.6-bil­lion of debt and con­vert it into new KCC equity. The debt-for-equity swap is ex­pected to help KCC pay div­i­dends and brings to an end le­gal ac­tion ini­ti­ated by Gé­camines.

An­a­lysts at HSBC wel­comed Glen­core’s lat­est set­tle­ment, stat­ing that two of the three is­sues fac­ing Glen­core in the DRC have now been re­solved, with the only out­stand­ing mat­ter be­ing a dis­pute be­tween Glen­core and fel­low min­ing com­pa­nies and the DRC gov­ern­ment re­gard­ing a new min­ing code.

Gold­man Sachs noted that the roy­al­ties due to Ven­tora will amount to about $130-mil­lion a year, which is not ma­te­rial from Glen­core’s per­spec­tive.

An­a­lysts at AB Bern­stein, mean­while, said this lat­est set­tle­ment was more ev­i­dence that re­cent events in the DRC should not be seen as part of a “grand as­set ex­pro­pri­a­tion plan”.

“First, we had CITIC's in­vest­ment in Ivan­hoe, then we had the res­o­lu­tion of the Kamoto cap­i­tal­i­sa­tion dis­pute with Ge­camines, and now we have re­solved this roy­alty is­sue too. As such, we be­lieve that the events of this week should lead to a sig­nif­i­cant de-risk­ing of the Congo in in­vestors' minds.”

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