Exploration drilling at the Kamoa copper project. (Image courtesy of Ivanhoe Mines)
The Democratic Republic of Congo wants to stop Canada’s Ivanhoe Mines (TSX:IVN) recently announced deal to sell a stake in its Kamoa copper project to China’s Zijin Mining, until the government can decide what to do about its own part in the venture.
According to Bloomberg, DRC is trying to buy time to decide on whether or not increase its stake on Kamoa before Ivanhoe’s stake is sold to the Chinese miner. Authorities claim that Ivanhoe had promised them an additional 15% stake and expressed concern that the looming sale would dilute its new shares.
In a statement Wednesday, Ivanhoe Mines confirmed that any sale of up to 15% in Kamoa Copper to the Congolese state would dilute China-based Zijin Mining Group’s future interest in the project.
“This is correct and is understood by both Zijin and Ivanhoe, which have acknowledged the expected future dilution in their agreement announced on May 26, 2015,” said the miner.
“Both Zijin and Ivanhoe would be diluted pro rata by any sale of a further interest of up to 15% in Kamoa Copper SA as their interests would be held through Kamoa Holding Limited (that currently owns 95% of Kamoa Copper SA), and accordingly that entity’s interest in Kamoa Copper SA would be reduced as a result of an increased DRC State interest.”
The company added the Congolese government was already aware of such provision.
Zijin, a large gold, copper and zinc producer, agreed last month to pay $412 million for a 49.5% stake in Kamoa Holding, the Ivanhoe’s unit that owns the majority of the Kamoa copper project in Congo’s southern province of Katanga.
The deal came just two months after the Chinese miner agreed to acquire a nearly 10% stake in Ivanhoe for about $85 million.
Because DRC owns a 5% of the project, Mines Minister Martin Kabwelulu has said the company should have contacted the government about the sale through the portfolio or mines ministries.
Earlier this month, the Vancouver-based miner said it was having “positive discussions” with Congo’s authorities over the future stake in the Kamoa Copper Project that is to be held by the DRC state.
“Negotiations were held in Kinshasa last week between Ivanhoe senior executives and senior members of the DRC government on advancing Ivanhoe’s standing offer to sell up to a further 15% interest in the Kamoa Project to the DRC state on commercial terms,” the company said in a June 9 statement.
But now the government is also planning to re-evaluate Kamoa mine’s legal status in Congo, which is Africa’s largest copper producer.
In response, Ivanhoe said it does not believe that such a review is warranted, and should not delay the closing of its proposed transaction with Zijin. “Ivanhoe previously obtained legal advice to confirm that no consent to the transaction with Zijin is required under Congolese law,” the miner said in today’s statement.
2 Comments
chat.ceo.ca/IVN
There is some heavy tension between Robert Friedland’s Ivanhoe Kamoa Copper Project and the government of the DRC. The DRC is unsure if it wants to increase their stake in this copper rich project and has halted the deal between IVN and Zijin. I’m not surprised as the DRC only has a 5% stake but is interested in increasing that to 15%. In retaliation to being cut out of the deal the DRC has stated “now the government is also planning to re-evaluate Kamoa mine’s legal status in Congo”. Those are very strong words to be in the now for everything Ivanhoe visit http://www.Chat.CEO.ca/IVN to access the Ivanhoe room
Andrew Sheldon
The Congolese govt is looking for a concession, i.e. It is trying to extort influence. this is why the all-powerful state should not exist as a monopoly. Anarcho-capitalism – to the end!!