Initial Report – October 2011
1. Background
We have been asked to prepare an assessment of the
Democratic Republic of the Congo (the “DRC”)
in respect of its obligations to the International Monetary Fund (the “IMF”) under its current three-year
Extended Credit Facility (the “ECF”). In particular, we have been asked to examine
the DRC’s management of its substantial mineral wealth since the extension of
the ECF in order to evaluate whether the current DRC government, headed by
Joseph Kabila Kabange (“Kabila”),
has honoured its commitments to the donor community.
On 11 December 2009 the IMF approved a US$551.45
million ECF for the DRC.[1] A key structural benchmark of this programme
is the implementation of governance and transparency reforms in extractive
industries. These measures include,
inter alia:
1. Publication
within 60 days:
•
Of partnership
agreements between public and private enterprises (including information on
bonus signing shares, taxation system, private shareholders, and members of the
board of directors. (Structural benchmark)
•
Of the
negotiation results between mining companies and the government regarding the
review of mining contracts.
2. Implement
the Extractive Industries Transparency Initiative.
3. Establish an
independent anti-corruption agency.[2]
The latest IMF review of this programme, dated April
2011 and published in July 2011, concludes the following:
Structural
reform progressed as planned (Table 6). The government reported that it
published all new partnership agreements between public entities and private
enterprises…”[3]
Implementation
of governance and transparency reforms in extractive industries is proceeding
satisfactorily, in close collaboration with the World Bank. The reform agenda
includes 30 broad measures covering forestry, mining, and oil sector activities
and focuses on transparency and accountability in the management of these
resources; ensure best practice in the sale of public assets; and the immunity[4]
of contracts (Appendix II contains the full complement of measures and an
update of the status of each measure). Implementation has been initiated on all
30 measures and seven have been completed thus far; the timing of some measures
has been slower than envisaged but progress is being made on all fronts….[5]
Despite the positive assessments of the IMF, we can
find almost no evidence to support the IMF’s conclusions. In fact, the evidence we have collected and
analysed to date suggests the opposite.
At best, the DRC has complied with neither the spirit nor the letter of
these IMF structural benchmarks. At
worst, it has acted in a manner inconsistent with these criteria and with prior
reform initiatives.
2. Scope of This Initial Report
This assignment arose out of continued reports of
secretive and/or commercially-questionable dealings in DRC mineral and
hydrocarbon assets, including (among others) Gecamines’ sales of its interests
in the Mutanda and Kansuki concessions, and Sodimico’s disposition of its
interest in Sodifor. There was growing
concern that the structural benchmarks of the ECF (set forth above) were
neither being honoured by the DRC nor effectively monitored by the IMF. We have been asked in that context to prepare
an analysis of the sales of Mutanda, Kansuki, and Sodifor (which holds the
Frontier and Comisa concessions), as well as all other the sales or other
transfers (including joint-venture or concession arrangements) of mineral or
hydrocarbon assets either directly or indirectly (i.e., through wholly-owned
public enterprises) held by the DRC since the commencement of the IMF programme
on 11 December 2009. Our report is to
include:
- relevant
background information on the transferred assets;
- background
information on the private counterparties to these transactions, including
beneficial ownership, corporate structure and financial capacity;
- financial
terms of the transaction (i.e., was the deal, based on the available
information, done on market or otherwise commercially-reasonable terms?)
- If the
deal was completed on seemingly commercially unreasonable terms, an
analysis of the potential losses to the DRC;
- whether
public disclosures regarding the transaction were made by the
DRC/Gecamines/Sodimico (was the asset offered via public tender or were
the proposed deal terms disclosed prior to the transaction?)
To that end, we have prepared a matrix of the
information (Appendix I) that should have been disclosed for each identified
asset as required under the IMF structural benchmark noted above[6]
and whether this information has in fact been published as required.
Subject to budgetary constraints, to the extent we
have found a common pattern between the post-ECF transactions and any other
transactions since Kabila was sworn in as the DRC’s elected president in
December 2006, we were asked to prepare a brief summary of those transactions
(see Appendix II). If the evidence
suggests non-compliance with the IMF programme and/or mismanagement, we were
asked to prepare a list of possible investigative avenues for the subsequent
phases of this project.
Finally, if the evidence suggests that the DRC has not
properly managed its mineral resources, we have been asked to formulate policy
recommendations that might limit or otherwise discourage such practices.
3. Methodology
This report is primarily based on documentary
evidence. Where we lacked documentary evidence to substantiate
information received from non-documentary sources, it is noted. We have also noted where our evidence could
be supplemented by documents known to exist, but that were unavailable to us. We have limited our analysis to transactions
entered into by either Gecamines or Sodimico, as well as those involving the
DRC itself in relation to the Lake Albert oil concessions. Other transactions may be worth examining,
but we have not yet been able to obtain the necessary transactional documents
nor has the government published them.
Despite the strength of the documentary evidence we
have gathered to date, we want to point out the following caveats respecting
this report:
- there
could be additional evidence that contradicts our evidence or otherwise
leads to a different interpretation of the facts;
- valuing
mineral assets can be difficult and imprecise. In certain cases, fair value can be
relatively easy to determine, as when an asset has been almost immediately
sold or “flipped” to a third party.
In the absence of a contemporaneous sale, however, we have relied
in this report upon valuations prepared by reputable, publicly-traded
companies or independent, third party analyses;
- due to the
sensitivity of the investigation, we have not approached all potential
sources at this time. This can be a
topic of discussion for subsequent phases;
We have only exhibited the documents that are not
publicly-available (or readily publicly-available). To the extent that a document is available on
the internet from a reliable source, the url of the document is noted in the
footnotes.
4. Executive Summary
Since 11 December 2009, the DRC government directly or
through its wholly-owned mining parastatals, Gecamines and Sodimico, has
entered into or cancelled[7]
the following deals in relation to its mineral and hydrocarbon assets (in rough
chronological order):
- December
2009/February 2010: the sale of Gecamines’ 50% interest in the JV company
SMKK to ENRC via Emerald Star Enterprises Limited (beneficially owned by
Dan Gertler);
- January
2010: the cancellation of
Gecamines’ contract with First Quantum Minerals (“FQM”) pertaining to KMT; FQM has commenced arbitration
proceedings at the ICC;
- January
2010/August 2010: the granting of
KMT to the Highwind Group (beneficially owned by Dan Gertler); parent of
Highwind selling 50.5% of this and other Congolese assets to ENRC;
- February
2010: Gecamines enters into a JV
agreement regarding the Chabara concession with Dino Steel International
SPRL (apparently beneficially owned by Groupe Bazano); contract
unpublished; terms unknown;
- February
2010: Gecamines enters into the
SECAKAT Sprl JV; contract unpublished; terms/private partner unknown;
- Spring
2010: Failure to renegotiate and/or
issue Presidential Decrees granting Lake Albert blocks 1 and 2 to Tullow
and Heritage; Tullow has apparently dropped all legal claims;
- Spring
2010: Failure to issue Presidential
Decree granting Lake Albert Block 1 to the Divine Inspiration Group consortium,
potentially leading to legal claims;
- May
2010: Congolese court strips FQM of
its Lonshi and Frontier properties and grants them to Sodimico, leading to
ICSID arbitration;
- May
2010: DRC enters into Production
Sharing Agreement for Lake Albert Blocks 1 and 2 with Caprikat and
Foxwhelp (beneficial ownership unclear);
- May
2010/March 2011: DRC enters into
Amended Production Sharing Agreement with SacOil for Lake Albert Block
III; SacOil selling a 60% interest
in the concession to Total;
- June
2010: Sodimico enters into a JV
Agreement with Fortune Ahead Limited (beneficial ownership unknown) re
Comisa and Frontier;
- July
2010/August 2010: Gecamines enters
into a JV agreement regarding the Kansuki concession with Kansuki
Investments SPRL (beneficial ownership unknown); Kansuki Investments SPRL
selling 50% of its interest in Kansuki to Glencore;
- August
2010: Gecamines enters into the
Grande Cimenterie du Katanga (GCK Sprl) joint venture; contract
unpublished; terms unknown; partner unknown;
- September
2010: Gecamines executes lease
(amodiation) contract with Chemaf SPRL; contract unpublished;
- Spring
2011: Gecamines sells its interest
in Mutanda and Kansuki to Rowny Assets Limited and Biko Invest Limited
(both beneficially owned by Dan Gertler) (see Appendix III);
- March
2011: Sodimico sells its remaining
30% interest in the JV company holding Comisa and Frontier to Sandro
Resources Limited and Garetto Holdings Limited (beneficial ownership
unknown; same BVI registered agent as Rowny and Biko);
- Summer 2011: Gecamines “buys” EGMF’s (George Forrest)
interest in CMSK by forcing it to sell (and obtaining a court order doing
so) its shares after EGMF had received an offer for those shares (but had
not accepted it); a claim has been brought by EGMF in front of the ICC in
Paris.
As set forth in detail in this report, these
transactions share one or more of the following characteristics:
- Sales/transfers
of state assets at well below market value (e.g., SMKK/Emerald Star;
Mutanda/Kansuki, Comisa/Frontier, Sodifor, Lake Albert); based on our
analysis, the money lost to the government (and gained by private parties)
as a result of these below-market sales in the last two years alone
exceeds US$3 billion;
- transfers
of state assets at unknown terms/prices to unknown private parties
(potential losses unknown);
- To the
best of our knowledge, none of the assets listed above that were
sold/transferred to private parties were open to public tender;
- The mere
existence of most of the transactions listed above, if disclosed at all,
was not disclosed until many months after the transaction had closed;
- Unilateral
cancellation of contracts and/or expropriations which have left the DRC
and Gecamines with potential legal liability topping US$4 billion and
significant delay in the receipt of dividends, royalties and tax revenues
from these assets (easily topping US$300 million to date);
These losses are summarized in Appendix IV to this
report.
DRC has almost entirely failed to fulfil its
obligations to the IMF in respect of the disclosure-related structural
benchmarks described earlier in this report.
As previously noted, Appendix I to this report is a matrix setting forth
the information that the DRC was supposed to publish, and what it actually did
publish. The IMF has stated that:
“[s]tructural reform [has] progressed as planned….The government reported that
it published all new partnership agreements between public entities and private
enterprises.” While the government may
have “reported” that it published this information, as Appendix I shows, in
fact the DRC has published virtually none of what was required. It would appear that the IMF is simply taking
the DRC government at its word and not conducting any due diligence to confirm
that the DRC is in fact complying with this structural benchmark.
To summarize the DRC’s lack of compliance:
- Not a
single contract amended as a result of the 2007-2010 mining contract
revisitation has been published except for the amended Tenke Fungurume
joint venture agreement. Hence, no
concrete and verifiable information on the renegotiated signature bonuses,
tax regimes, royalties, etc. has been provided by the government;
- No
information has been published by the government regarding the beneficial
ownership of the private partners to any of these transactions (although
since some of the partners are publicly-traded, some of this information
is available through other sources, although not confirmed by primary
documentation). A very significant
number of the private partners to these transactions are hidden behind a
web of offshore companies and trusts.
Hence, beneficial ownership cannot be readily identified and the
ultimate beneficiaries of many of these highly lucrative deals are
unknown;
- Outside
the amendments arising from the DRC 2007-2010 mining contract
revisitation, a number of new agreements between Gecamines and private
parties for the sale and/or transfer to joint ventures of Gecamines’
assets have not been disclosed, including:
Sales agreement for of 50% of SMKK; CHEMAF Sprl contract; GCK Sprl
JV agreement; Kansuki Sprl JV agreement; Chabara Sprl JV agreement;
Secakat Sprl JV agreement; Sales agreement for Gecamines’ interest in
Kansuki Sprl; Sales agreement for Gecamines’ interest in Mutanda Mining
Sprl. Taking into account SMKK,
Kansuki, and Mutanda alone, Gecamines appears to have sold those assets
for roughly a billion US dollars under market value.
In summary, and as developed in detail in the
subsequent section, since the IMF granted the DRC the ECF worth US$551.45
million, the DRC has:
- Apparently
lost over a billion US dollars in below-market asset sales;
- left
further billions in the hands of offshore companies that have flipped
state assets in exchange for cash and/or carried interests in mining and
hydrocarbon assets;
- incurred
significant legal exposure likely in excess of US$4 billion by cancelling
contracts and expropriating assets;
- has
significantly delayed the receipt of state revenues from these
cancelled/expropriated projects (not to mention the loss of thousands of
jobs in the formal economy); and
- has almost
entirely failed to comply with the disclosure requirements set by the IMF
as a structural benchmark.
We have also identified commonalities between the
post-ECF transactions and other, earlier transactions that have occurred during
the Kabila presidency. The commonalities
include an explosion in BVI shell companies affiliated with trusts, persons or
law firms located in Gibraltar and which companies end up with ownership interests
and/or intermediate transactions involving DRC mining and hydrocarbon
assets. The documentary evidence
suggests that some of these companies are owned by or are otherwise associated
with Dan Gertler, who has also been involved in many of the post-ECF
transactions noted above. The ownership
of other similar companies, however, remains unknown or unverified.
Given these commonalities, we have prepared a brief
summary of companies that fit this pattern, including the assets they hold and
whether their beneficial ownership in known.
This summary is Appendix II to this report.
The penultimate section of this report includes
limited policy recommendations, mostly confined to an examination of the IMF’s
current programme.
The final section has to do with potential next phases
of the investigation. Throughout the
report, we have noted a number of potential avenues that lend themselves to
further inquiry.
5. Detailed Analysis of Post-ECF Transactions
The organization of this section is mostly
chronological. In cases where several
events are related to one asset, however, we have grouped those events
together.
5.1.
Sale of
Gecamines’ 50% interest in SMKK to ENRC via Emerald Star Enterprises Ltd.
Although ENRC[8] is perhaps best
known for its acquisition of 50.5% of First Quantum Minerals’ erstwhile KMT
asset through BVI companies owned by Dan Gertler, that transaction was actually
the last of a series of acquisitions of Congolese mining assets by ENRC in
roughly an 11-month period. The second
of these transactions occurred on 21 December 2009 – just 11 days after the ECF
closed.[9] (The first transaction – the purchase of
CAMEC - is noted in Appendix II).
It was common knowledge that Société Minière de Kabolela et de Kipese SPRL (“SMKK”),
a joint venture company, was owned 50% by ENRC (through its acquisition of
CAMEC) and 50% by Gecamines. SMKK
controls the Kabolela copper and cobalt project, which consists of two
exploitation permits, 495/2003 and 496/2003, allowing for the research,
development and exploration of copper, cobalt, gold and nickel in the Kambove
area.
When reviewing various ENRC documents in relation to
the Highwind/KMT transaction, we noted the following:
On 21 December
2009, a fellow group company acquired an option for a cash consideration of
US$25,000,000 to purchase the outstanding 50% of the issued share capital of
SMKK by acquiring the entire issued share capital of Emerald Star Enterprises
Limited ('ESEL'), the owner of the outstanding 50% of SMKK. The fellow group
company exercised this option and the acquisition of ESEL was effectively
completed and control obtained by ENRC PLC In June 2010. The total cash
consideration in respect of the outstanding SMKK shares, inclusive of the
US$25,000,000 option, amounted to US$75,000,000.[10]
Only a few months earlier, CAMEC (acquired by ENRC)
had stated that Gecamines (not Emerald Star Enterprises Limited (“Emerald Star”)) owned this 50% of SMKK.[11]
Our local sources reviewed Gecamines’ board minutes
from 2009, but found no reference to the sale from Gecamines to Emerald
Star. The first reference was in the
board minutes dated 2 February 2010, which states that an option was offered by
Emerald Star to Gecamines to acquire Gecamines’ interest in SMKK for US$15
million. The second reference to the
sale was made in the 9 April 2010 Gecamines’ board minutes. In those minutes, the board notes that the
Prime Minister had asked Gecamines to transfer to the state the US$15 million
it had received from the sale of its shares in SMKK. A copy of these minutes is Exhibit 3 to this
report.
We have not seen a copy of the sales agreement. These Gecamines’ board minutes strongly
suggest, however, that Gecamines agreed to sell its 50% of SMKK to Emerald Star
in January/February 2010 for US$15 million.
On 23 March 2011 ENRC announced its preliminary 2010
results. That report states that Emerald
Star “is an entity controlled by the Gertler family trust”.[12] We have confirmed that Emerald Star was
incorporated in the British Virgin Islands by Equity Trust (BVI) Limited (“Equity Trust”) on 24 October 2009.[13] Equity Trust has incorporated/served as the
registered agent/office for dozens of entities associated with Dan
Gertler. A list of the currently known
companies is included as part of Appendix II to this report.
At the very least, the available evidence suggests
that Dan Gertler sold an asset to ENRC for US$75 million, which he bought for
US$15 million from Gecamines, meaning that Gecamines lost US$60 million on the
deal by not selling directly to ENRC. ENRC
owned the other half of SMKK and was thus the logical buyer for this interest,
particularly as it seems to have had a right of first refusal on any sale of
Gecamines’ interest in SMKK.
The SMKK JV agreement has been published on the
Ministry of Mines website.[14] Although this agreement has certainly been
amended (although the amendments have not been published by the DRC as required
by the IMF), Article 23 in the published version, regarding transfers and sales
of interest, contains a clause commonly found in mining joint venture agreements: the right of first refusal (“ROFR”) (see, in particular Article
23.3):
23.3. S'il advenait que le Vendeur est disposé à procéder
à la Cession, il doit exiger une offre d'acquisition écrite de toute personne
qui désire se porter acquéreur (l'Acheteur).Le Vendeur doit ensuite aviser
l'autre Partie par écrit de son intention de vendre, de l'identité de
l'Acheteur ainsi que des modalités, conditions et considérations (lesquelles
considérations doivent être nécessairement monétaires) auxquelles cette Cession
doit être effectuée (l‘Avis). Sur réception de l'Avis, l'autre Partie aura
l'option, pour une période de soixante (60) jours commençant dès la réception
de l'Avis, d'acquérir le droit ou l'intérêt faisant l'objet de l'offre aux
mêmes modalités, conditions et considérations que celles mentionnées dans
l’Avis.
If this clause survived any subsequent amendments, it
is unclear why ENRC (who owned the other 50% of SMKK through its purchase of
CAMEC and thus would seemingly have the ROFR over Gecamines’ 50%), would have
bought the other 50% of SMKK from Emerald Star for US$75 million when it would
appear to have had the right to buy it from Gecamines for US$15 million under
the ROFR. Perhaps the ROFR was removed
by a subsequent amendment, but we can only speculate given that the DRC has
failed to publish the amendments as required by the IMF.
A further note regarding the fair value of this
asset: while the fair value can
obviously be said to be the value paid by ENRC (US$75 million), it is hard to
imagine how Gecamines could have arrived at a valuation for its 50% of SMKK of
only $15 million. Barely over a year
before this transaction, CAMEC (again, later acquired by ENRC), had bought the
other 50% of SMKK from Kara Enterprises Limited[15] (“Kara”)[16] for US$85 million
in CAMEC shares.[17] This price was further verified by CAMEC in
various public filings.[18]
We note that Kara was, like Emerald Star (and dozens
of other companies involved in dealing in the DRC), incorporated by Equity
Trust in the BVI. Equity Trust is one of
over 100 registered agents in the BVI.[19] The Kara Share Sale Agreement identifies the
director of Kara as Dino Chincotta. Mr
Chincotta is at attorney at a law firm in Gibraltar called Hassans[20]
and a company manager at its affiliated corporate and trusts services companies
(Line Management[21]
and Line Trust). Persons affiliated with
Hassans, as well as Line Trust and Line Management, are linked to a number of
the entities incorporated by Equity Trust that are involved in dealings in DRC
assets.
In some cases, these entities have been reported by
publicly-traded partners to be owned by the Gertler Family Trust. In other instances, the beneficial ownership
is unknown. In the case of Kara, CAMEC
in its regulatory filings denied that Gertler owned Kara (or the Vendor, as it
is called in the CAMEC press release).
CAMEC states that an “independent third party” from Prairie (a company
affiliated with Gertler) acquired SMKK, and that CAMEC subsequently acquired
SMKK from this independent third party.[22]
Thus, while we have identified a pattern within the
corporate structuring of entities involved in many of these transactions, this
does not necessarily imply that there is common beneficial ownership.
Obviously, much of this uncertainty as to the
beneficial ownership of certain assets (whether involving Equity Trust/Hassans
or not) would be resolved if the government were simply to comply with the
disclosure requirements set by the IMF.
In summary:
·
Gecamines
appears to have sold an asset worth at least US$75 million for US$15 million;
·
A basic
internet search would have revealed the asset was worth in the range of US$85
million;
·
Gecamines’ loss
of US$60 million appears to have been a gain of US$60 million to a
privately-owned BVI shell company, Emerald Star;
·
According to
ENRC, Emerald Star is owned by Dan Gertler;
·
The DRC has
made no disclosures regarding this transaction – the sales agreement has not
been published, nor were any amendments to the original SMKK JV agreement
published, nor has any statement been made by the government regarding the
beneficial ownership of the private party (Emerald Star) to this deal.
5.2.
Cancellation of
KMT/Kolwezi
In April 2007, the DRC government created a commission
to “revisit” all mining contracts that had been signed prior to that date. A
detailed overview of this process can be found on the Carter Centre website.[23]
One of the primary justifications for the mining
contract revisitation process was that certain contracts had been entered into
with no serious attempt on the part of the DRC or Gecamines to value the assets
beforehand. These assets were then
transferred to entities with neither experience in the mining sector nor the
financial capacity to develop them. The
technical requirements under these prior contracts were made so vague that it
was difficult for the DRC or Gecamines to cancel these contracts even when
these financially and/or technically deficient partners had essentially done no
work. Moreover, these partners (having
invested little time or money to acquire or develop the assets and without any
genuine capability to do so) would then flip the assets to “real” mining
companies (i.e., companies that did have the technical and financial resources
necessary to develop serious mining operations) for very substantial
profits. By failing to properly value
the assets and by dealing with counterparties who had no practical ability (or
even desire) to develop these substantial mining properties, the government
lost very likely billions of US dollars and allowed significant sums to be
pocketed by entities that were nothing more than asset flippers.
Despite this real concern, the manner by which the
current administration undertook the “revisitation” process was dominated by
opacity, as noted by the Carter Centre.[24] Many of the contracts that were considered by
experts to be the most problematic sailed through the review process with few
disclosures about what went on behind closed doors. Indeed, as noted earlier in this report,
despite its obligations to the IMF, the DRC has published only one of the
revisited contracts – the amended Tenke Fungurume agreement –out of the dozens
of contracts revisited and renegotiated.
Instead of focusing on the most questionable deals,
the DRC demanded significant concessions from its two most substantial and
serious joint venture partners – Freeport McMoran (“Freeport”) and First Quantum Minerals (“FQM”). Unlike many of the
private JV partners, Freeport and FQM had invested several hundred million US
dollars (in the case of Freeport eventually over US$1 billion) developing their
respective mining operations (Tenke Fungurume and KMT[25]/Kolwezi). Both companies are publicly-traded and had
made substantial disclosures regarding their operations in the DRC. In the case of FQM, its JV partners included
the International Finance Corporation (the “IFC”), a division of the World Bank, and South Africa’s Industrial
Development Corporation (the “IDC”). In short, these were reputable partners that
had invested significant sums to develop some of the largest mines in the DRC.
What happened to FQM is detailed in its Statement of
Claim[26]
filed with the BVI court. In particular,
FQM states that it had reached an agreement with the DRC and Gecamines
regarding the renegotiated contractual terms on 6 March 2009 (see paragraphs
31-34 of the Statement of Claim).
Despite this, the DRC government in August 2009 began a series of steps
to revoke FQM’s rights to KMT, including sealing KMT’s facilities and a series
of spurious legal actions. Detailed descriptions
of these actions can be found in various FQM press releases.[27] On 7 January 2010 Gecamines’ board (along
with the DRC government) unilaterally cancelled its contract with FQM in
respect of KMT.
In response to these apparent breaches of contract,
FQM commenced arbitration at the International Chamber of Commerce (the “ICC”) against the DRC and
Gecamines. Their claim is believed to be
in excess of US$2 billion. This is in
line with independent valuations of FQM’s assets, including one prepared by
Numis Securities Ltd. in July 2010.[28] They have calculated a net present value for
FQM’s 65% share of KMT/Kolwezi at US$2.498 billion.
Regarding FQM’s likelihood of success in the
arbitration, most observers consider it very likely that they will obtain a
substantial award from the ICC. As noted
by Numis Securities:
First Quantum
have, unfortunately for its shareholders, provided a textbook case study in the
perils of applying high corporate governance standards to a region where the
rule of law is clearly not independent from political interests. We believe
that the company has been the victim of a classic shakedown, simply because it
refused to play the “brown envelope game”. As a consequence, in our view it has
always seemed that FQM have excellent grounds to dispute both the Kolwezi and
the Frontier/Lonshi court rulings.[29]
Furthermore, FQM has brought suit in the BVI against
the companies that were subsequently awarded KMT by Gecamines (see Exhibit
9). As this legal action does not
involve the DRC, but rather private parties, we have not included it in this
analysis. For the sake of completeness,
however, a judgment recently handed down by the BVI court is Exhibit 10 to this
report.
Beyond the very significant legal exposure the
DRC/Gecamines has brought upon itself by cancelling KMT, the costs to the DRC
go far beyond that. As noted in a recent
FQM press release:
When the
Kolwezi Project was cancelled First Quantum had already invested over $400
million in a plant on site, which was 75% completed, and prior to the DRC’s
cancellation, was scheduled for commissioning by no later than May of 2010….[30]
Regrettably, as
a result of the illegal cancellation of the Kolwezi Project over 750 Congolese
workers have already lost their jobs and the RDC is now foregoing direct
revenues of up to $150 to $300 million a year while the Kolwezi Project sits
idle.[31]
Even using the low end of these numbers, US$150
million, the DRC has thus lost at least US$225 million since the KMT/Kolwezi
asset should have commenced production 18 months ago.
In summary this questionable cancellation of a
substantial mining contract has cost the DRC:
·
potentially
US$2.5 billion in legal claims;
·
at least US$225
million in direct revenue as of today, which number grows daily; and
·
750 jobs
It is worth noting that the ECF is a three-year
facility for US$551.45 million. Over the
course of three years, KMT alone would have generated at least US$450
million (and up to US$900 million) in direct revenues for the DRC.
5.3.
Awarding KMT to
the Highwind Group/Flipping 50.5% to ENRC
On the same day – 7 January 2010 - that Gecamines’
board approved cancelling FQM’s contract for KMT,[32]
it signed a new joint venture agreement, creating a company known as Metalkol
SARL, with four BVI shell companies.[33] These companies – like Emerald Star – are all
incorporated by Equity Trust, and also have a Gibraltar connection.[34] The signatory to the contracts is Sydney
Attias, and the JV Agreement lists an address for him in Gibraltar.[35]
For months, few, if anyone, outside the parties to
this deal even knew that it had been executed.
As noted by the Carter Centre in November 2007, a historical problem
with some of the DRC mining contracts was that:
There was no valuation of the assets prior to the contract. No
known economic modeling was done by the parastatal prior to entering into these
agreements, making the question of whether the DRC is getting an appropriate
return for its asset contribution very difficult to answer. The absence of
valuation points to haste, which could be due to a number of factors, including
corruption, intense pressure from the corporation, or simple lack of resources
and representation of the parastatal. [36]
In
the case of KMT, however, an asset in which a publicly-traded company and its
partners had invested US$750 million, was 75% complete and slated to be
operational within a matter of months (had it not been taken from FQM),
valuations were plentiful. As noted
above, Numis Securities values FQM’s 65% share of KMT at US$2.498 billion,
making 100% of the asset worth US$3.84 billion. Yet, Gecamines transferred 70% of this asset
to these four BVI companies (collectively, the “Highwind Group”), for upfront consideration of only a US$60
million signature bonus. There was
no public tender for this asset.
Furthermore,
the construction and engineering involved in building KMT was known to be
extremely complex (possibly why 1.5 years after it was supposed to be
operational, it still is not).
Nevertheless, in a transaction precisely of the kind that the mining
contract revisitation process was purportedly designed to identify and weed
out, the DRC awarded these highly complex and extremely valuable assets to four
recently-formed shell companies without a public tender or indeed any publicity
at all.
As
it turns out, the Highwind Group did not need to possess technical nor
financial capacity. Within months it
had flipped these assets (at a significant profit) to ENRC, a company with
substantial mining operations and financial capacity.
On
20 August 2010, ENRC announced that it had purchased 50.5% of Camrose Resources
Ltd.[37]
(“Camrose”), the parent company of
the Highwind Group, for US$175 million.[38] Cerida Global Limited[39]
(“Cerida”), a company reported by
ENRC as being owned by the Gertler family trust, continued to own the other
49.5% of Camrose (and thus indirectly 49.5% of Highwind). ENRC also provided a
loan of up to US$400m to Camrose to provide working capital, repay committed
loans and fulfill existing payment obligations.[40]
Regarding
this US$175 million purchase price, not all (although most) can be attributed
to KMT. Through this transaction, ENRC
also acquired other assets held by Camrose, including 45,400,000 shares of
Africo Resources. On 20 August 2010 (the
date of the sale to ENRC) Africo Resources was trading at CDN$0.91/share. Thus, the market value of 50.5% of those
shares was approximately CDN$20 million (also US$20 million).
Camrose
also held part of a minor mining asset through Comide SPRL (“Comide”).[41] Comide owns a property called Mashitu, which
one of our sources, an expert on DRC mining properties, described as
“garbage”. We have no way of
independently evaluating his assessment other than to note that Africo
Resources had previously decided to terminate an agreement[42]
to purchase Mashitu, apparently following an independent valuation of the
property.[43] We will, thus, (perhaps generously) ascribe a
value of US$10 million to 50.5% of Mashitu.
Netting
out the value of the shares of Africo Resources and (US$20 million) the possible
value of Mashitu (US$10 million), the value ascribed by ENRC to 50.5% of the
Highwind Group would be US$145 million.
That is, the Highwind Group paid US$60 million for 70% of KMT, then sold
50.5% of that 70% for US$145 million.
This implies that 100% (of that 70%) would be worth cash consideration
of US$287 million. Putting aside the
well-publicized valuations of KMT, which indicate a value well in excess of
this, the transaction with ENRC alone suggests that at the very least the
market value of 70% of KMT was worth US$287 million.[44] Yet, the DRC and Gecamines sold it months
earlier without public tender to the Highwind Group for US$60 million[45]
implying that the government lost at least US$227 million in just the cash
consideration for this 70% of KMT by not dealing with ENRC directly – a party
with which the DRC/Gecamines was already partners in other mining operations.
The
losses to the government from the Highwind transaction do not stop there. The 20 August 2010 ENRC press release also
states that ENRC is to provide a working capital loan of US$400 million to
Camrose. As KMT was almost complete and
likely required less than US$200 million of capital to make it operational,[46]
it seems that the owner of the other 49.5% of Camrose would not have to invest
any capital to make the mine operational.
This interest would effectively be carried. 49.5% of 70% is 34.65% - giving ultimately
the Gertler family trust that controls Camrose an apparent 34.65% carried
interest in KMT (which is now held through the Metalkol JV). To further put this in perspective, the DRC’s
and Gecamines’ combined carried interest in the Metalkol JV is only 30%.
If
ENRC was willing to shoulder 100% of the development costs for a 35.35%
ownership interest (50.5% of 70%) and if it assigned cash value of
approximately US$287 million for just 70% of KMT, it is puzzling why did the
government not deal directly with ENRC.
In summary,
·
The government’s actions were
antithetical to the entire purpose and justification of the mining contract
revisitation;
·
once again, the DRC did not place a
valuable mining asset out to public tender;
·
instead, behind closed doors, the DRC
awarded the mining rights to shell companies lacking any discernable financial
and technical capacity to carry out the project themselves – precisely the kind
of transaction the three-year mining contract revisitation sought to revise or
cancel.
·
the DRC failed to offer any rationale
for the sales price or division of ownership interests;
·
within months, the shell companies had
flipped the assets for a significant gain to a substantial mining company,
ENRC;
·
by not dealing directly with ENRC,
which already had significant interests in the DRC, the DRC/Gecamines lost
approximately US$227 million in cash and an additional 34.65% carried interest
in the project.
5.4.
Undisclosed JV
Agreements
On 8 September 2011, the Mining Ministry sent a letter
to all state-owned mining companies requesting that they transmit copies of all
revisited contracts to the Ministry.[47] Gecamines, however, apparently refused and
submitted a list (which appears incomplete) of its current partnership
agreements.[48] This list not only revealed dozens of
contractual amendments that have not been published, but several completely new
joint ventures which have never been disclosed.
The post-ECF joint ventures of which we can find almost no public
reference before the publication of this list by the Mining Ministry includes:
·
Chabara SPRL: the original
JV agreement was signed in February 2010 and an amendment was signed in
November 2010. Based on information on
Gecamines’ website, the JV partner appears to be Dino Steel International SPRL[49]
(which by virtue of common directors seems to be affiliated with Groupe Bazano
– discussed below). Regardless, the
contract is unpublished, the terms are unknown and there is no certainty
regarding the beneficial ownership of the private partner.
·
SECAKAT SPRL: the JV
agreement was signed in February 2010.
The contract is unpublished; deal terms and private partner unknown;
·
GCK SPRL: The JV
agreement was signed in August 2010. The
contract is unpublished; deal terms and private partner unknown;
·
Chemaf SPRL: Gecamines
entered into a lease agreement with Chemaf SPRL in September 2010. Although the owner of Chemaf is generally
known to be Shiraz Virji, the contract is unpublished and the terms of the deal
are known.
A number of JV agreements pre-dating the ECF, but
post-dating the mining contract revisitation, were also disclosed in this list
published on the Mines Ministry website.
There has been no public disclosure of their terms. They are listed in Appendix I to this report.
As one can see from the Highwind/KMT/Metalkol deal
noted above, even when the value of an asset is well-known, the DRC and
Gecamines have still managed to sell them for substantially below such
value. In respect of the joint ventures
listed above, it is unclear what assets they hold, let alone what steps, if
any, Gecamines took to value those assets prior to entering into the joint
venture. We can find no evidence that
any of these assets were offered via public tender before these joint venture
agreements were signed.
As nothing is known about these deals beyond their
mere existence, it is impossible to evaluate the financial benefit (or detriment)
associated with these deals. This only
underscores the need for the IMF to demand compliance with the structural
benchmarks associated with its programme.
5.5. Failure to renegotiate and/or issue Presidential
Decrees granting Lake Albert Blocks I and II to Tullow and Heritage
Subsidiaries of Tullow Oil PLC (“Tullow”) and Heritage Oil PLC, both proven mid-size oil companies,
signed a production sharing agreement (“PSA”)
with the DRC in July 2006 regarding Blocks I and II on the Congolese side of
Lake Albert.[50]Tullow
and Heritage had already secured licences on the Ugandan side of Lake
Albert.
Kabila, however, refused to sign the presidential
decree approving the Tullow/Heritage PSA.
In 2008, Block I was awarded to Divine Inspiration Group (see subsequent
section). Kabila also failed to issue a
presidential decree for this subsequent contract. In May 2010, both Blocks I and II were
awarded to two BVI shell companies, Caprikat Ltd. and Foxwhelp Ltd. (discussed
below), and for these companies, Kabila issued the needed presidential decree.
Tullow initiated legal proceedings against the DRC for
breach of contract. However, these
proceedings were recently discontinued.
From Tullow’s 2010 annual report:
In 2006, Tullow
was awarded two Congo (DRC) licences adjacent to its Ugandan acreage on Lake
Albert through a transparent bidding process. In June 2010, the Government
awarded the licences via Presidential decree to two British Virgin
Islands-registered companies. Tullow commenced legal proceedings to challenge
that award and obtained an interim injunction preventing those companies
carrying out any work until Tullow's rights had been legally determined. In
subsequent proceedings, it became clear that Tullow's rights were not likely to
be upheld so long as the DRC Government maintained its position that it had the
right to ignore or revoke the earlier award to Tullow. Given the expense of
further proceedings and the difficulty in enforcing any award against the DRC
even in the event of success, the Board has regretfully taken the decision to
discontinue the legal proceedings and withdraw from the DRC.[51]
Although the DRC’s legal risk has vanished thanks to
Tullow having abandoned this litigation, it is important to note the very
different paths Uganda and the DRC have taken in respect to developing Lake
Albert’s significant oil reserves. In
the past five years, while Uganda has become a “new oil province” to borrow
Tullow’s words, the DRC side of Lake Albert has essentially been locked in a
state of paralysis. As
noted, however, by Peter Pham,[52]
a well-regarded academic focusing on Africa:
The problem is they’ve either sold the blocks several times
over, or where there is [clearly] one licensee -- for one reason or another --
Kabila has withheld the final presidential approval that would permit them to
go on ahead. And as a result, they have
virtually no production.[53]
The following is a summary of Tullow’s developments in
Uganda since it took over the licenses in 2004:
During 2004 and 2005 extensive 2D seismic data was
acquired in both Blocks 2 and 3A and this data identified structures with good
hydrocarbon trapping potential. The existence of a working seal and reservoir
to trap oil in commercial quantities could only then be understood through
drilling. In early-2006, Tullow and its
partners drilled the first well, since 1938, in the Kaiso-Tonya region….
Tullow then embarked on a major exploration campaign
to discover sufficient volumes for commercial development. Over 35 wells have been drilled in the basin from
Kingfisher-1 in the south to Buffalo-1, 150km to the north. All but one of
these wells has encountered hydrocarbons and proven up 1.1 billion barrels of
oil resources (P50). This is sufficient volume to exceed the commercial
threshold for development with an additional 1.4 billion barrels (P50) yet to
find.[54]
Tullow and its partners, CNOOC and Total, have made
plans to invest over US$10 billion in Uganda to develop upstream (production),
midstream (pipeline), and downstream (refining) assets. Meanwhile, the DRC has chosen to award its
perhaps two most valuable blocks – I & II – to BVI shell companies, with
unknown ownership and no apparent experience in the exploration or production
of oil, let alone operating offshore fields in the middle of a continent.
Sources have told us that 1) it is questionable that a
major oil company will be willing to invest the billions of dollars necessary
to build an export pipeline through the DRC (assuming such project were even
technically feasible) and 2) that Tullow will not allow oil produced on the DRC
side of Lake Albert to flow through its pipeline on the Ugandan side without
appropriate compensation (i.e., being given a percentage of the DRC
blocks).
We have not approached Tullow to attempt to verify
this, nor do we feel that they would comment.
Regardless, this raises a serious question: what are the DRC’s plans for developing its
Lake Albert oil resources? Does it have
a viable plan to do so without the participation of Tullow? If not, the oil will remain in the ground,
placing Congo even further behind Uganda than the five years it has lost to
date.
In summary:
·
while the DRC
may have dodged a bullet in respect of legal claims brought by Tullow, the
development of the DRC side of Lake Albert has seen little progress in over
five years;
·
it is unclear
if the government has a viable plan to develop the Congolese side of the lake
independent of the infrastructure being constructed by Tullow on the Ugandan
side;
·
continued
inertia in the development of a very significant oil play will only insure that
the DRC will continue to look to the donor community for years to come instead
of relying upon its own resources;
·
it is unknown
what the IMF (or World Bank) is demanding from the DRC in respect of Lake
Albert – are they content to see little development in the DRC side of the
lake?
5.6.
Failure to
issue Presidential Decree granting Lake Albert Block I to Divine Inspiration
Group/H-Oil
On
21 January 2008 – exactly 18 months after executing the PSA with Tullow and
Heritage – the DRC government executed a PSA with other parties covering one of
the same blocks – Block I. The ownership
interests in this new PSA were as follows:
Divine and HOIL entered into a Joint Production Contract
(hereinafter the “JPC”) dated January 2008 whereby Consortium Divine
Inspiration Group (Pty) (hereinafter “Divine”), H Oil Congo Ltd (hereinafter
“HOIL”), La Congolaise Des Hydrocarbons (hereinafter “CDH”), Congo Petroleum
And Gas Sprl (hereinafter “CP&G”), Sud Oil Sprl (hereinafter the “SO”)
(Divine, HOIL, CDH, CP&G and SO collectively the “Consortium”) are granted
exclusive exploration rights on Block I in Graben Albertine (hereinafter the
“Block I”) in the Democratic Republic of Congo (hereinafter “DRC”), with the
following percentages:
Title Holders (Consortium) Participating
Interest/Working Interest
Divine 51%/58%
HOIL 37%/42%
CDH 7%/0%
CP&G 3%/0%
SO 2%/0%[55]
CDH is the Congolese state-owned oil company, also
known as Cohydro. As noted in the chart
above, along with Cohydro, CP&G and SO – local privately-owned companies -
ended up with carried interests in the project.
Once again, for over two years following the execution
the PSA, President Kabila did not sign the presidential decree approving this
agreement with Divine and HOIL. His
failure to issue the decree may have been complicated by an unexecuted Option
Agreement, which we believe to be authentic.
This agreement is dated 26 February 2010, but apparently was never
executed. On its face, this Option Agreement was linked to the issuance of the
presidential decree:
WHEREAS, the JPC requires to become effective the DRC
Presidential Order, which to-date has not been received;….
WHEREAS Buyer [Yewville] has an in-depth knowledge
of the DRC and the issues surrounding the final approval of the JPC, and is
a long-term investor in the DRC, having established a strong track record of
successful partnership with the Government of DRC;….
WHEREAS Buyer believes that Buyer joining the
Consortium with the largest Participating Interest and in no case less than
forty per cent (40%) would provide a much-strengthened profile for the
Government of DRC; [emphasis supplied]
The financial terms of the Option Agreement seem to be
favourable to the recipient of the option, Yewville:
·
For the option
to buy this 40% participation, Yewville will pay Divine and H-Oil $1.00 each
(Articles 2.1.1, 2.1.2, 2.2);
·
When Yewville
chooses to exercise the option, it can do so for 45.49% of Divine and H-Oil’s
past costs of US$13,642,614.46, or US$6,206,025.32 (Articles 2.4.1, 2.4.2).
·
Yewville does
not have to pay this amount until two months after exercising the option, but
will pay the consideration before selling this 40% interest (Articles 4.1 and
4.2) (i.e., Yewville can essentially have a buyer lined up for this 40% before
it has to pay Divine or H-Oil anything)
·
Yewville does
not have to pay any development costs of the block – Divine and H-Oil have to
carry Yewville (Article 6) or they have to buy out Yewville at market value
(Articles 6.2 and 6.3)
We have no definitive proof regarding the provenance
of this Option Agreement. We, however,
note the following commonalities with other DRC transactions:
·
First, the
company that would “purchase” the option (and the alleged author of the Option
Agreement), Yewville Enterprises Limited[56] (“Yewville”) was incorporated in the BVI
by Equity Trust, as were dozens of companies known to be affiliated with DRC
mining interests (see Appendix II);
·
Secondly, the
Option Agreement states that all correspondence sent to Yewville is to the
attention of Maximilian Torres and Abigail Harrison, two attorneys at
Hassans/Line Management[57] –entities that
have been involved in other DRC dealings (e.g., Camrose, Kara Enterprises as
noted above and Caprice Enterprises noted below).
As noted above, Divine and H-Oil were never issued a
presidential decree. Whether their
purported failure to sign the Option Agreement had anything to do with it, is
likely never to be known.
Despite the government’s failure to issue the decree,
Divine and H-Oil did raise and spend several million of dollars on the block,
only to have their investment held hostage by the lack of a presidential
decree. Furthermore, Divine has assigned
a portion of its legal claims to SACOil (and received consideration from SACOil
for those claims),[58] and it is possible
(although not certain) that legal actions may be brought against the DRC. If
the Option Agreement is genuine, its existence does not inspire investor
confidence in the DRC as it creates the impression that executive decisions may
be linked to private commercial arrangements.
5.7.
DRC entering
into Production Sharing Agreement for Lake Albert Blocks I and II with Caprikat
and Foxwhelp
On 5 May 2010, the DRC awarded the Lake Albert Blocks
I & II not to major oil companies, but rather two recently-formed BVI shell
companies, Caprikat Ltd. and Foxwhelp Ltd.[59] A copy of the Production Sharing Agreement
can be found on the Minister of Mines website.[60]
The
signatories to the PSA for Caprikat and Foxwhelp were Khulubuse Zuma and
Michael Hulley. Khulubuse Zuma is the
nephew of South African President Jacob Zuma, and Michael Hulley is Jacob
Zuma’s lawyer. Prior to his foray into
the Congolese oil patch, Khulubuse had no known experience running an oil
company. Moreover, the latest news
(October 2011) out of South Africa regarding Khulubuse’s business practices
hardly inspires confidence in the DRC’s apparent choice of partners:
The politically
connected directors of Aurora Empowerment Systems are in danger of being
declared personally liable for bringing Pamodzi Gold's East Rand and Orkney
gold mines to their knees.
This follows the ratification yesterday by the Pretoria High
Court of a R9-million Aurora liquidation application by Copper Eagle.
If the directors are found to be personally liable, their
personal assets could be attached to recover creditors' money.
Aurora's four directors are President Jacob Zuma's nephew,
Khulubuse Zuma; Nelson Mandela's grandson, Zondwa Mandela; Jacob Zuma's
attorney, Michael Hulley; and Thulani Ngubane….
Aurora took
over management of the two Pamodzi mines in 2009. Two months ago, an assets
audit by provisional liquidators found that the mines had been stripped of
their assets to the extent that huge capital expenditure would be necessary to
restore them to operation.
Many of the
company's employees have not been paid since February last year.[61]
Although it is common knowledge that various large,
multinational oil companies had been in Kinshasa in the winter/spring of 2010
expressing interest in those blocks, it does not appear that the DRC formally
put the blocks out to public tender.
Sources have stated that certain companies had offered signature bonuses
several times what was paid by Caprikat and Foxwhelp (US$6 million – article
12.8 of the PSA). We cannot verify these
statements, but had transparent public tender procedures been in place, this
would be public knowledge.
In any event, given the evident value of these
concessions, these signatures bonuses appear to be very low. Only a few months after these oil blocks were
awarded to Caprikat and Foxwhelp – companies with no apparent technical or
financial ability to develop offshore oil concessions – Heritage Oil sold a 50%
interest in adjacent Ugandan concessions to Tullow for US$1.305 billion.[62] It is unknown what, if any, work has been
performed by Caprikat and Foxwhelp since being awarded those blocks nearly 1.5
years ago.
Once again, despite the IMF structural benchmarks, the
DRC has not given any information on the beneficial ownership of Caprikat and
Foxwhelp. Although it has been made to
appear that it is Khulubuse Zuma, there are credible rumours that others may be
involved in this transaction. As such we
looked for connections to others within our body of documentary evidence. The
following is a summary of what we can verify to date, however limited it may
be. The PSA lists two different
addresses for Caprikat and Foxwhelp;
Caprikat
1st Floor North
Wing
54 Melville
Road
The Reserve
Illovo, 2196
Johannesburg
South Africa
Foxwhelp
23 Glenhove
Road
Melrose Estate
Johannesburg.
2401
South Africa
A search of the South African and UK corporate records
reveal that both addresses are associated with Mark Willcox and affiliates of
Africa Management Limited.[63] A press release by one of the partners in
Africa Management Limited provides background information on the company and
confirms that Willcox is its CEO.[64]
Although we can find no public disclosures of Africa
Management Limited’s involvement in this deal, it appears in the BVI corporate
records that they have previously provided funding to one of Gertler’s
companies, Camrose. In connection with
Camrose’s CAN$100 million private placement with Africo Resources (briefly
touched upon in the section of this report involving ENRC and Metalkol),
Camrose borrowed money from Vipar Investments Limited (“Vipar”), which was secured by 45,400,000 shares of Africo Resources
(that is, Camrose’s entire holding in Africo).[65]
According to the BVI records, on
20 November 2008, Camrose’s Articles of Association were amended. In this document, “Affiliate” is defined as
“in respect of Vipar, (a) any company which is its subsidiary or holding
company or another subsidiary of any such holding company from time to time;
and (b) any partnership or other entity that is managed, advised or controlled
by, or which receives any investment management services from Africa
Management Limited or its successors and assigns….” “Africa Management Limited” is defined as
“means Africa Management Limited, a company incorporated in Guernsey with
registered number 47651 and whose registered office is at Ogier House, St
Julian's Avenue, St Peter Port, Guernsey, GY1 1WA, Guernsey….”[66] The Guernsey corporate records confirm that
this is the same Africa Management Limited established by Och-Ziff and
Mvelaphanda Holdings.[67]
Thus,
Vipar, which is lending money to Camrose, appears to be affiliated with Africa
Management Limited, which is run by Mark Willcox, whose addresses correspond to
those in the Caprikat and Foxwhelp PSA.
At
the very least we can establish that Africa Management Limited, through
Camrose, has previously invested in companies with interests in the DRC. It is unclear what Mark Willcox or Africa
Management Limited’s interests are in Caprikat or Foxwhelp
Any
speculation would obviously be rendered unnecessary were the DRC to comply with
the terms of the IMF conditions and publish verifiable information on the
beneficial ownership of its partners. At
a minimum, it may be said that the DRC’s failure to make these contractual
arrangements transparent has again obfuscated the terms and conditions under
which the DRC has sold a State asset that is clearly worth hundreds of
millions, if not billions, of dollars.
5.8.
Amended
Production Sharing Agreement with SACOil for Lake Albert Block III; Total
Farm-in
The case of SACOil further underscores the losses to
the DRC when it chooses to contract with partners that do not have the
financial or technical expertise to develop complex mines, offshore concessions,
etc. These companies inevitably seek to
sell, farm-in or otherwise flip their interests to a major oil company – which
raises the question why in the first place the DRC did not sell these assets
through public tender with minimum financial and technical requirements for
bidders.
On 26 May 2010, SACOil signed an amended PSA for Lake
Albert Block III with the DRC government.
SACOil had 85% of the concession; the DRC has 15%.[68] Under Article 12.8 of the PSA, SACOil was
required to pay the following bonuses to the government:
Event
|
Bonus
|
Signing of Amendment
|
$4,000,000
|
Granting of Exploration Permit
|
$2,500,000
|
Renewal of Exploration Permit
|
$1,250,000
|
Granting of Exploitation Permit
|
$4,000,000
|
Renewal of Exploitation Permit
|
$2,000,000
|
First Barrel of Production
|
$5,000,000
|
10 millionth Barrel
|
$10,000,000
|
Total:
|
$28,750,000
|
Ten months later, SACOil, through its new subsidiary
Semliki SPRL, entered into a Farm-In Agreement with Total, one of the world’s
largest oil companies. The rationale behind
this decision is unsurprising. According
to SACOil’s Board:
The Board has concluded that, in order to effectively
explore and evaluate the oil deposits of Block III, it is necessary to form
a relationship with a major international oil company which has the necessary
financial capacity, technical skills and operating expertise to operate the
asset. Following careful consideration of a number of potential
participants, SacOil entered into detailed discussions with Total during 2010.
These discussions have resulted in the conclusion of the Agreement.[69]
[emphasis added]
Under the terms of its agreement with Total, SACOil
was to receive the following payments[70] (structured for
easy comparison to payments due from SACOil to the DRC shown above):
Event
|
Bonus
|
Signing of Amendment
|
$15,000,000
|
Granting of Exploration Permit
|
$0
|
Renewal of Exploration Permit
|
$0
|
Granting of Exploitation Permit
|
$58,000,000
|
Renewal of Exploitation Permit
|
$0
|
First Barrel of Production
|
$50,000,000
|
10 millionth Barrel
|
$0
|
Total:
|
$123,000,000
|
Thus, should this block be fully developed, Total will
have to pay SACOil US$94,250,000 more than the DRC is due under the PSA. Furthermore, according to SACOil, it
apparently had only incurred US$6 million in expenses prior to entering into
the agreement with Total: “In
consideration for the Block III Sale Interest, Total shall make payment to
Semliki in an aggregate amount of US$15.0 million (including compensation for
Semliki’s back costs in an agreed amount of US$6.0 million)….”[71]
In addition, SACOil and its partner Divine Inspiration
Group retain a 25% carried interest through the exploration phase of the
investment, meaning that Total will fund the entire exploration phase. That is, they do not have to risk any of
their money during the riskiest phase of any oil play – figuring out if oil is
actually there.[72] Once oil is discovered and reserves are
proven, the value of SACOil’s 25% will increase dramatically, meaning that it
could sell its interest for a substantial amount without having taken any
financial risk.
In summary, by once again failing to deal directly
with a major oil company in a transparent and open bid process, the DRC has let
private parties substantially benefit from state assets.
5.9.
DRC Strips FQM
of its Lonshi and Frontier Properties; Grants them to Sodimico;
Following the cancellation of FQM’s Kolwezi/KMT
concession in January 2010 (discussed above at Section 5.3), the DRC then
sought to divest FQM of all of its assets in the country following FQM’s decision
to commence international arbitration.
What happened to FQM’s Lonshi and Frontier assets is detailed in it 24
May 2010 press release:
First Quantum Minerals Ltd. (“First Quantum” or the
“Company”, TSX Symbol “FM”, LSE Symbol “FQM”) announces that on May 21, 2010
the Company's subsidiaries Comisa SPRL and Frontier SPRL, which operate the
Lonshi and Frontier copper mines respectively, received notification of a
decision of the Democratic Republic of Congo (“RDC”) Supreme Court of Justice
with respect to a case introduced by the state owned mining company, Société
de Développement Industriel et Minier du Congo (“SODIMICO”). This case was
brought by SODIMICO against its own shareholder, the RDC, requesting the
annulment of a letter of a former RDC Minister of Mines of February 5, 2000
pursuant to which the RDC allegedly withdrew exploration rights belonging to
SODIMICO. As a consequence, SODIMICO requested its rights be reinstated on the
"exclusive exploration zones" which SODIMICO previously held and which
were allegedly converted into a number of exploration and exploitation licences
now held by Frontier and Comisa. Comisa and Frontier were named in the
proceedings and therefore lodged submissions on April 5, 2010. The main
defendant, the RDC, never defended the proceedings.
A hearing was held on May 14, 2010. Neither the Company nor
Frontier or Comisa were notified of the hearing. The Supreme Court rejected all
arguments submitted by Frontier and Comisa and canceled the Minister of Mines
February 5, 2000 letter and "rehabilitated (SODIMICO) in its [mining]
rights and titles". The Supreme Court does not address what impact, if
any, the rehabilitation has or will have on the valid and still existing mining
licences held by Comisa and Frontier. To date no direct action has been taken
by the RDC authorities against either Frontier or Lonshi as a result of the
Supreme Court decision and our operations continue.
“We are extremely concerned with the orchestrated attack on
the Company’s Frontier and Lonshi operations in the RDC in obvious retaliation
for our commencement of international arbitration with respect to the illegal
cancellation of our Kolwezi Project and our refusal to resolve this dispute by
agreeing to submit to arrangements with unspecified third parties” said Philip
Pascall, Chairman and CEO of First Quantum. “In addition to our $750 million
investment in the Kolwezi Project, First Quantum has invested over $300 million
at Frontier in reliance on mining licences granted under the World Bank sponsored
Mining Code having obtained all necessary government approvals and permits.[73]
Again, two valuable properties were stripped from FQM
based on dubious legal pretexts. On 25
August 2010, Sodimico (the state-owned company that, 10 years after the fact,
claimed it was the rightful owner of the concessions), sent FQM letters, copied
to President Kabila and a large portion of the government, telling FQM to
abandon Lonshi and Frontier within 24 hours or risk criminal charges.[74] After receiving these letters, FQM shut down
its operations at Lonshi and Frontier.
At the time Lonshi was undergoing exploration work,
but Frontier was actively producing minerals and had months earlier received an
award for being the largest taxpayer in DRC history. As noted in FQM’s 23 May 2010 press release:
“In addition to our $750 million investment in the
Kolwezi Project, First Quantum has invested over $300 million at Frontier in
reliance on mining licences granted under the World Bank sponsored Mining Code
having obtained all necessary government approvals and permits. More than
1200 Congolese workers and contractors are currently employed at Frontier, with
an additional 250 Congolese workers at Lonshi. In addition, both Frontier
and Lonshi have contributed immensely to the local economy, social facilities
and way of life. Frontier recently made a tax payment of $55 million, the
largest ever made in the RDC. It is simply inconceivable that the well
being of so many Congolese citizens and the largest source of revenue for the
RDC, not to mention our valid mining rights, could be put at risk as a result
of a dispute between the RDC and its own company almost a decade after the
matter in dispute arose. [emphasis
added]
It is believed that neither property is currently
operational. After the expropriation of
these assets, FQM commenced arbitration proceedings against the DRC at the International
Centre for Settlement of Investment Disputes (“ICSID”).[75] Numis Securities has valued FQM’s stake in
Frontier at US$1.568 billion and its stake in Lonshi at US$408 million, for a
total of US$1.976 billion.[76] While unconfirmed, it is believed that FQM is
seeking approximately US$2 billion in damages in this arbitration, which would
be consistent with Numis’s valuation. As
in the KMT/Kolwezi ICC arbitration, observers feel that FQM has a high chance
of succeeding in the arbitration.
In summary,
·
In what FQM calls retaliation for its
bringing ICC arbitration proceedings against the DRC in respect of KMT, the DRC
courts quickly and with very questionable due process stripped FQM of its
remaining assets in the DRC;
·
The DRC now
faces additional legal claims of approximately US$2 billion;
·
The DRC’s
largest taxpayer has been shut down, and it is likely the government has lost
at least US$55 million (the last annual tax payment by Frontier) since
end-August 2010;
·
Between Lonshi
and Frontier, 1,450 Congolese workers lost their jobs;
·
These seemingly
baseless actions against proven investors have only further eroded the DRC
business climate for, and its ability to attract legitimate, serious investors.
5.10.
Sodimico JV
Agreement with Fortune Ahead Limited re Lonshi/Frontier
On 10 June 2010 – just weeks after the Congolese
courts stripped the Lonshi and Frontier properties from FQM and granted them
back to Sodimico – Sodimico entered into a joint venture agreement with a
company called Fortune Ahead Limited (“Fortune”),
creating SODIFOR SPRL.[77] As noted above, Numis Securities weeks later
would value these properties at almost US$2 billion. Indeed, Frontier was a fully operational
mine generating significant revenues.
For 70% of the JV company, Fortune paid Sodimico a signature bonus of
US$30 million.[78] 70% of US$2 billion is US$1.4 billion.
Like many of these partnerships, the beneficial
ownership of Fortune Ahead is unknown.
Fortune was incorporated in Hong Kong on 10 May 2010 – approximately two
weeks before the DRC court ruling. The
signatory to the Sodifor JV agreement is Saul Valt. The Hong Kong records list Saul Simao Valt,
of Brazilian nationality, as the director of Fortune.[79] The Hong Kong records list a Gibraltar
address for Mr Valt.[80] We have seen documentation which states that
Pieter Deboutte is the managing director of Sodifor. We have, however, been unable to verify
this. Mr Deboutte is a known associate
of Mr Gertler (see, for example, Article 13 of Exhibit 21, in which Mr Deboutte
is listed as the contact for Comide SPRL).
Once again, the DRC has sold an extremely valuable
state asset for an apparent pittance, without public tender, to a shell company
with unknown beneficial ownership.
Moreover, the fact that Fortune was incorporated just weeks before the
DRC court gave the properties to Sodimico, and the JV agreement was signed a
few weeks later, leaves the impression that this transaction was engineered
before FQM’s properties were taken.
5.11.
Kansuki SPRL
JV/Kansuki Investments selling 50% of its interest in Kansuki SPRL to Glencore
The sale of Gecamines’ 25% of Kansuki SPRL[81]
to Biko Invest Limited, “an entity associated with Dan Gertler,”[82]
which transaction is discussed below, has already generated media (and IMF)
attention. Another aspect of the Kansuki
JV, however, appears to have been overlooked to date: the July 2010 creation of the Kansuki SPRL JV
between Kansuki Investments SPRL (“Kansuki
Investments”) and Gecamines, and the immediate on-sale by Kansuki
Investments of 50% of its interest in the new Kansuki SPRL JV to Glencore
International PLC (“Glencore”). Again, the DRC did not provide any public
information about this transaction, let alone the information required by the
IMF. The only known publicly-available
details of this transaction were discovered in documents published by Glencore,
including its prospectus which was published on 3 May 2011.
Inter alia, the prospectus stated:
Glencore holds a 50 per cent. interest in Kansuki
Investments Sprl which in turn holds a 75 per cent. interest in Kansuki Sprl,
the owner of the Kansuki concession (thereby giving Glencore an effective
interest of 37.5 per cent. in Kansuki). The remaining 25 per cent. in Kansuki
was recently acquired by Biko Invest Corp. from Gecamines. Glencore is the
operator.
Kansuki Sprl was granted its rights in the Kansuki
concession under its incorporation in July 2010. Kansuki is a 185 square
kilometre copper and cobalt pre-development project which borders the Mutanda
concession.[83]
A
document later posted on the Ministry of Mines website states that the Kansuki
SPRL JV agreement was signed on 6 July 2010.[84] According to that document, about a month
after the JV agreement was signed, Glencore acquired 50% of Kansuki
Investments’ interest (75%) in the Kansuki SPRL JV, giving Glencore an
effective 37.5% interest in the Kansuki SPRL JV, on the following terms:
In August 2010, Glencore acquired an ultimate 37.5 per cent.
interest in the Kansuki concession, a 180 square kilometre copper and cobalt
pre-development project which borders Glencore’s partly owned Mutanda
concession in the DRC. In exchange, Glencore has (i) an obligation to
finance the first U.S.$400 million of development related expenditures, if any,
as and when such expenditure is incurred, (ii) the right to operate the
operations, and (iii) a life of mine off-take agreement for all copper and
cobalt produced by Kansuki. In addition, one of the partners in Kansuki has the
right to sell an additional 18.75 per cent. ultimate interest to Glencore at
the then calculated equity value of the operation, at the earlier of the date
the operation produces a minimum annual 70,000 metric tonnes of copper and August
2013.[85]
That
is, for 37.5% of the joint venture, Glencore is willing to fund what could very
well be 100% of the development costs, giving the other 50% owner of Kansuki
Investments (currently unknown[86])
an apparent carried interest of 37.5% - larger than Gecamines’ carried interest
of 25% (which interest Gecamines then sold to Biko, as discussed below).
Moreover,
Kansuki Investments sold this interest to Glencore only a month after Gecamines
signed the Kansuki SPRL JV agreement with Kansuki Investments. It is unclear why Gecamines first contracted
with Kansuki Investments and did not simply do the deal directly with
Glencore. Glencore, after all, is one of
the largest investors in the DRC mining sector.
Not only does it own approximately 90% of Katanga Mining Limited, but it
operates the very significant Mutanda concession (discussed below) that is
directly adjacent to Kansuki and has extended financing to other entities in
relation to DRC mining interests.[87]
Deutsche
Bank values Glencore’s 37.5% interest in Kansuki at US$313 million.[88] Kansuki Investments’ share is the same
Glencore’s, but apparently without the obligation to fund. Indeed, if Deutsche Bank is correct that
“Kansuki has the larger concession area [than the adjacent Mutanda] and therefore
the potential to be a bigger producer,”[89]
then Deutsche Bank’s valuation may be on the conservative side.
In
summary, by failing to negotiate directly with Glencore, who was apparently
willing to finance 100% of the Kansuki JV development costs for 37.5% of the
joint venture, Gecamines appears to have handed over a 37.5% carried interest
to Kansuki Investments (for terms unknown; beneficial owners of which unknown),
which entity entered into the Kansuki SPRL JV with Gecamines only a month
before selling half of its interest to Glencore.
5.12.
Gecamines’ sale
of its interest in Mutanda and Kansuki to Rowny Assets Limited and Biko Invest
Limited
It is fair to say that the Glencore IPO has brought
more transparency to the DRC government’s dealings than the IMF conditions have
to date. Glencore’s prospectus revealed
Gecamines’ sales of its interests in the Mutanda and Kansuki concessions for
the first time, and, in respect of Mutanda, Glencore provided significant financial
details that establish the net present value (“NPV”) of Gecamines’ interest in Mutanda. Mutanda began producing copper in September
2010.[90]
The prospectus revealed that Gecamines had “recently”
sold its 20% interest in Mutanda Mining SPRL (“Mutanda”) to Rowny Assets Limited (“Rowny”), which is “associated with” Dan Gertler:
Glencore holds a 50% interest in Samref Congo Sprl which in
turn holds an 80% interest in Mutanda. The remaining 20% interest in Mutanda
was recently acquired by Rowny Assets Limited (entities associated with Dan Gertler)
from La Generale des Carrieres et des Mines (“Gecamines”), a State-owned mining
company in the DRC.[91]
The
prospectus also revealed that Gecamines had “recently” sold its 25% interest in
Kansuki SPRL to Biko Invest Limited (“Biko”),
another entity “associated with” Dan Gertler.[92]
Both Rowny and Biko were incorporated in the BVI on 23 February 2011.[93] Thus, these sales must have occurred sometime
between 23 February 2011 and 3 May 2011 (the date of publication of the
prospectus).
The
prospectus states:
It is understood that Rowny Assets Limited (as a successor
to Gecamines) is entitled to receive royalty, dividend and Pas de Porte
payments from Mutanda over the life of the mining project.[94]
That
is, Rowny will not only be entitled to 20% of Mutanda free cash in the form
dividends, but will also be entitled to receive Gecamines’ royalty and pas de
porte (i.e., signature bonus) payments.
As the amendments to the Mutanda JV agreements have not been published
by the government, we do not know the quantum of the pas de porte yet to be
paid.
For
Mutanda, the prospectus contains a detailed valuation report prepared by Golder
Associates Africa (Pty) Ltd (“Golder”). This report provides enough data to calculate
the NPV of the dividend and royalty that Rowny will now receive instead of
Gecamines. Regarding this data, Golder
stated the following in its report:
Mutanda is an operational mining company. Its resources and
reserves are well-defined, and a comprehensive body of technical information on
its current and planned operations is available. This information allows the
future cash flows of Mutanda throughout the life of the mine to be projected.
This is compatible with the discounted cash flow (“DCF”) methodology, which
determines the value of an asset by calculating the net present value of the
future cash flows over the useful life of that asset….The valuation was based a
financial model provided by Glencore. GAA [Golder] verified the integrity and
structure of the model to ensure that calculations are performed correctly and
that the model is comprehensive and fully accounts for all cash flows of the
project.[95]
The
data from the Golder report have been recreated in Appendix III to this
report. Using the same methodology as
Glencore/Golder, one can calculate the following NPV for the Gecamines’
dividend and royalty, now held by Rowny:
Total Rowny Royalty - Life of
Mine
|
$507,016,675
|
Total Rowny Free Cash - Life of
Mine
|
$1,277,182,200
|
Total Rowny Cash - Life of Mine
|
$1,784,198,875
|
Discount Rate (rate used by
Glencore)
|
10.00%
|
NPV Rowny
|
$848,704,333
|
That is, the
net present value of the dividends (free cash) and royalties is nearly US$850
million.
Since Kansuki is still in the development phase,
similar numbers were not provided by Glencore/Golder for Kansuki. As noted in the previous section, Deutsche
Bank values Glencore’s 37.5% share of Kansuki at US$313 million.[96]This
would make 100% of Kansuki worth US$834.7 million and 25% (Gecamines/Biko’s
share) worth US$208.7. The value of the
Gecamines piece of Kansuki should also be increased by its 2.5% royalty. As shown above, the royalty from Mutanda is
roughly 39% of the value of the dividend, so this added value could be quite
significant to the NPV of Gecamines’ share of Kansuki. For the sake of simplicity and the fact that
we have no insight into the Deutsche Bank methodology, we will simply use the
US$208.7 number as an approximate value of the 25% interest in Kansuki.
Combined,
the Gecamines’ pieces of Mutanda and Kansuki would thus represent an approximate
NPV of US$1.057 billion.
Over the summer of 2011, various articles appeared in
the press regarding these sales. Gecamines apparently refused to comment on the
sales prices of these assets. Based on a
document posted on the Ministry of Mines website, entitled “Réponses de Gécamines Sarl au
questionnaire du FMI sur la Cession des Parts Sociales dans MUMI Sprl.”,
it appears that the IMF at some point asked Gecamines about its sale of Mutanda
(aka MUMI). Gecamines response in
respect of the sales price is as follows:
Gécamines Sarl a évalué ses parts sociales dans MUMI Sprl
à 137 millions de Dollars américains, bien au-delà de la valorisation qu’en a
faite BNP Paribas, en avril 2010, soit 108 millions de Dollars américains, dans
une approche « basée sur un escompte des flux de trésorerie ».[97]
Gécamines Sarl values its shares in MUMI Sprl at US$137
million, far beyond the valuation done by BNP Paribas, in April 2010, which was
US$108 million, an approach based on a discount cash flows." [Translation]
This comment leaves the clear impression that
Gecamines sold its shares in Mutanda at “far beyond” the valuation given to
them by BNP Paribas. As discussed below,
not only is this inaccurate and misleading (the sales price for both Mutanda
and Kansuki was US$137 million – see below), doubts had previously been raised
about the BNP valuation and, moreover, the BNP valuation was as of 31 December
2009, a nearly year before Mutanda started producing copper and over 15 months
before the sale in question.
In August 2011, Gecamines had prepared a business plan
in which it states the following:
La cession des parts sociales minoritaires ciblées
détenues dans les partenariats non stratégiques dont les revenues futurs trop
lointains. Une première transaction a été
faite en cédant au partenaire majoritaire les parts détenues dans MUMI et
KANSUKI pour une valeur totale de 137 millions, négociée sur base d’une
évaluation de notre participation faite par une banque d’affaire
internationale…. [98]
The sale of minority shareholdings held in targeted
non-strategic partnerships with very distant future revenues. The first
transaction was made by selling the majority partner our shares in MUMI and
KANSUKI for a total of 137 million, negotiated on the basis of an evaluation of
our participation made by an international investment bank .... [Translation]
This document not only contradicts what Gecamines told
the IMF (that the purchase price for Mutanda alone was US$137 million), but
contains its own misleading statements: the first in respect of the “very
distant future revenues”. As shown in
Appendix III, the Glencore/Golder data shows very significant current
cash flow to Gecamines from Mutanda. In
fact, its cash flows over the next five years alone are over US$633 million:
2011
|
2012
|
2013
|
2014
|
2015
|
Total
|
|
Rowny Total Cash (KUSD)
|
25,688.93
|
178,259.65
|
167,194.93
|
139,398.03
|
122,670.53
|
633,212.05
|
It is also curious why Gecamines, after the government
sought to increase the DRC’s participation in mining joint ventures through the
three-year mining contract revisitation process, would now be looking to cash
out of its carried interests in very lucrative mining concessions.
The second misstatement by Gecamines is that it sold
its interest to the “majority partner” in the joint ventures. From the available data, Dan Gertler (who
Glencore reported as the owner of Rowny and Biko) has no ownership interest in
SAMREF Congo SPRL (the majority partner in Mutanda), which is believed to be
owned 50% by Glencore and 50% by Groupe Bazano.[99]
Regarding the BNP valuation report, a source showed us
(but would not allow us to copy) a document prepared by the Conseil Permanent
de la Comptabilité au Congo. This report, which was prepared in November
2010 states the following regarding the BNP valuation of Gecamines’ assets:
Cette Sous Commission a présenté les résultats de ses
travaux a deux reprises. Les résultats de ses premiers travaux reposaient
essentiellement sur l’examen des données comptables et l’exploitation des
conclusions de la valorisation des titres de 8 partenariats effectuée par BNP
Paribas.
Ces résultats n’ont pas été approuvés par quelques
membres de la Commission Technique qui estimaient que le nombre de partenariats
miniers retenus par BNP Paribas était trop limite et que l’évaluation de BNP ne
reposait pas sur un revenu certain. Ainsi, ii a été demandé a la Sous
Commission de tenter de recourir a d’autres approches d’évaluation ou de
préparer un memo sur les limites d’applicabilité des méthodes généralement
admises.
This Sub-Commission presented its findings on two occasions.
The results of its early works were mainly based on the review of accounting
data and use of the results of the valuation of eight partnership interests
performed by BNP Paribas.
These results have not been approved by some members of the
Technical Committee who felt that the number of mining partnerships reviewed by
BNP Paribas was too limited and that BNP’s assessment was not taking into
account certain income. Thus the Sub-Commission was asked to try
to use other approaches to assessment or prepare a memo on the limits of
applicability of generally accepted methods. [Translation]
It seems that the Congolese government, through its
statutory body the Conseil Permanent de la Comptabilité au Congo, had serious issues with the BNP valuations. Furthermore, as a joint venture partner,
Gecamines should have routine access to Glencore’s data. To get anywhere near a US$108 million NPV for
Mutanda requires a 90% discount rate (see Appendix III).
Although we have not been able to obtain a copy of the
BNP valuation report, another source gave us a document that is (at least
apparently) based in part on that valuation.[100] The date of that
valuation is as of 31 December 2009.
Since Mutanda did not start producing copper until September 2010, any
valuation of the asset as of 31 December 2009 is going to be lower than when
the asset was sold in the spring of 2011.
As far as Gecamines’ claim that the prices for both Mutanda and Kansuki
were “negotiated on the basis of an evaluation of our
participation made by an international investment bank”, Kansuki did not even
exist as a joint venture until July 2010 and thus could not have been captured
by a 31 December 2009 valuation.
In
summary, it appears that Gecamines:
·
sold assets worth approximately
US$1.057 billion for US$137 million (or approximately 13% of their value), a
difference of roughly US$920 million;
·
made misleading statements to the IMF
regarding the purchase price (by failing to note the price also included
Kansuki);
·
made misleading statements in its
publicly-disseminated business plan in respect of both the timing of cash flows
to Gecamines (immediate, not in the “very distant future”), and the purchaser
(it was not the “majority partner”, but rather “entities associated with Dan
Gertler”);
·
Relied on an out-of-date and apparently
discredited valuation in an attempt to justify the sales price;
·
Did not put either asset up for public
tender; and
·
Has refused to publish the purchase and
sale agreement for either of these assets.
5.13.
Sodimico sells
its remaining 30% interest in Comisa and Frontier to Sandro Resources Limited
and Garetto Holdings Limited
Around the same time Mutanda and Kansuki were being
secretly sold to Rowny and Biko, two companies with the same registered agent
as Rowny and Biko (out of over 100 possible agents in the BVI) and incorporated
mere weeks before Rowny and Biko, purchased Sodimico’s remaining 30% interest
in Sodifor – the joint venture it had set up not even a year before with Fortune
Ahead Ltd. These companies, Sandro
Resources Limited (“Sandro”)[101]
and Garetto Holdings Limited (“Garetto”)[102]
purchased Sodimico’s 30% interest for US$30 million on 28 March 2011.[103] As set forth previously in this report,
analysts have valued the assets now held by this joint venture at almost US$2
billion, making 30% of that worth US$600 million. At the very least, this contract has been
published on the Minister of Mines website.
5.14.
Gecamines
forces a so-called ROFR on George Forrest; Forrest brings ICC Arbitration
against Gecamines in Paris
The details of what actually happened are a bit
murky. According to a Reuters report:
Mining magnate
George Forrest's EGMF will cancel a planned US$250 million cobalt processing
project in the Democratic Republic of Congo if the country does not back down
from an attempt to take away its stake in a mine there, the company said on
Monday.
EGMF, or
Entreprise Generale Malta Forrest, is seeking international arbitration in a
Paris court over claims Congo's state mining firm Gecamines is trying to force
it to sell a 60 percent stake in the CMSK copper and cobalt project in the
southern province of Katanga for $15 million, it said.
"Of course
it won't happen, (if we're forced to sell)" EGMF spokesman Henry de
Harenne told Reuters, when asked if the cobalt processing plant project would
go ahead.
In May, George
Forrest offered to buy EGMF's stake in CMSK for $15 million but EGMF refused,
according to Harenne. He did not explain why Forrest had made a bid on a
holding that was controlled by a company his family already owned through
Forrest Group.
When EGMF told Gecamines, which holds the other 40% of
CMSK, about the approach by George Forrest, Gecamines activated a clause in the
contract for first refusal:
"Gecamines
says that EGMF accepted the bid by George Forrest, (but) EGMF never intended to
sell its stake in CMSK," Harenne said, adding that Gecamines had the right
to first refusal but only if there was an official intention to sell the stake.[104]
Apparently, Gecamines delivered EGMF a check for
US$15.7 million and, according to Bloomberg, obtained a judgment from a
Lubumbashi court backing up Gecamines’ right to purchase EGMF’s shares in CMSK.[105] According to press releases made by the
Forrest Group, EGMF brought arbitration proceedings in Paris on 24 August 2011.[106]
If the story is accurate that Gecamines attempted to
exercise a right of refusal on the basis that EGMF received an offer (as
opposed to “accepting” an offer), Gecamines will not prevail in the arbitration
proceedings. According to Gecamines’ own
numbers, EGMF’s stake in CMSK is worth far more than the US$15,700,000 that
Gecamines attempted to pay (the word “attempted” is used as it seems that EGMF
has refused to deposit Gecamines’ check).
As of 31 December 2009, Gecamines valued its 40% stake in CMSK (using
the discounted cash flow method) at US$34 million[107],
making the other 60% held by EGMF worth US$51 million. As such, it is not unreasonable to think the
EGMF would ultimately be awarded at least that amount by an arbitral tribunal.
The potential costs of Gecamines’ actions go beyond
the value of any arbitration award.
According to the Forrest Group, a US$250 million investment is being
held up as a result of Gecamines’ taking EGMF’s shares, and 600 jobs are
“threatened”.[108]
5.15.
Summary of
Losses from Actions since Approval of ECF
As set forth in detail in Appendix IV, the
above-described actions of the DRC have cost the DRC:
-
US$3.8 billion
in cash and assets;
-
US$4.5 billion
in legal claims;
-
2,800 jobs; and
-
other losses
that are difficult to quantify based on currently-available information
6.
Compliance with
IMF Structure Benchmarks re Transparency and Governance
Under the conditions set for the ECF, the DRC was
supposed to do the following:
“1. Publication within 60 days:
•
Of partnership
agreements between public and private enterprises (including information on
bonus signing, shares, taxation system, private shareholders, and members of
the board of directors). (Structural benchmark)
•
Of the
negotiation results between mining companies and the government regarding the
review of mining contracts.
2. Implement the Extractive Industries
Transparency Initiative.
3. Establish an independent anti-corruption
agency.”
Appendix I to this report is a matrix regarding the
DRC’s compliance with the structural benchmark and is based on the information
the government is supposed to be publishing, but has not published, to the
Minister of Mines website.[109] For the DRC to be in compliance with the
structural benchmark, the very large number of boxes currently stating “No” in
the matrix would have to become “Yes”.
In summary,
·
Many contracts
have not been published at all;
·
of the joint
venture agreements published by the government, most are significantly out of
date (and in some cases no longer in effect), having been amended various
times;
·
Almost none of
these amendments have been published, meaning that there is no way to evaluate
the status of signing bonuses, shareholding, or tax regimes;
·
Nearly all of
Gecamines’ joint venture agreements (dozens) were amended or restated as a
result of the mining contract revisitation.
Of these, only the Tenke Fungurume contract has been published;
·
No information
that would allow one to identify the beneficial ownership of the private shareholders
has been published by the government; and
·
While seemingly
less significant than the other criteria, no information has been published on
the members of the boards of directors of these joint ventures. Such information provides a clear picture of
who actually controls the joint venture and serves as a cross-check to the
beneficial ownership information.
Regarding the other criteria:
·
the negotiation
results of the mining contract revisitation will only effectively be disclosed
once the government publishes all of the missing documents noted in the matrix;
·
the government
has made limited EITI disclosures, but for only the first three months of 2011,
and it is unclear if they capture all of the data that they should. For instance, they contain no information on
payments to any of the state-owned mining companies or the state-owned oil
company.[110]
·
We cannot find
any reliable information on an anti-corruption commission, let alone enough to
verify its independence from the government.
7.
Commonalities
with Other Dealings
As we noted in the main part of the memorandum, we
found a number of BVI companies all with the same registered agent – Equity
Trust (although a new registered agent has appeared in the most recent
transactions involving BVI companies).
According to the BVI Financial Services Commission, there are over 100
registered agents in the BVI, making it unlikely that, were these companies
unrelated, all BVI companies owning interests in DRC mining companies would all
choose the same registered agent.
Furthermore, we note that many of them have
established connections to Gibraltar, most to Hassans/Line Trust. It seems likely that these BVI entities are
owned by either Gibraltar companies or trusts.
In some cases, disclosures made by publicly-traded companies have
indicated that certain BVI entities are owned by the Gertler family trust. In many cases, no beneficiary of the company
is identified. In at least one case (Kara
Enterprises), it was stated that Gerlter was not the beneficiary. In another case, Caprice Enterprises
(discussed below), the Congolese National Assembly has suggested that the
actual beneficial owners are within the management of Gecamines or the
Lubumbashi judiciary.
A list of these BVI companies, the deals they are/have
been involved in, their connections to Gibraltar, and any disclosures regarding
their beneficial ownership are included at Appendix II to this report.
Caprice Enterprises Limited
In approximately May 2010, copies of two judgments
were circulated by various NGOs and human rights organizations. These judgments were referenced in a report
published by Global Witness earlier this year.[111] One was a
judgment from the Lubumbashi court awarding a company called Caprice
Enterprises Limited (“Caprice”)
US$23.7 million against Gecamines.[112] This judgment states that Caprice had
recently been assigned a decades-old debt, on which it immediately proceeded to
sue Gecamines. In this judgment, the
directors of Caprice are identified as Dino Chincotta and Maximilian Torres. Both are lawyers at Hassans and both are
affiliated with BVI companies previously referenced in this report (Chincotta –
Kara Enterprises, Camrose Resources; Torres – Yewville Enterprises). A search of the BVI records revealed that
Caprice was incorporated by Equity Trust.[113]
According to a report of the Congolese National
Assembly, this judgment was paid in full by Gecamines with the pas de porte
Gecamines was set to receive from its minerals-for-infrastructure deal with
China.[114] The other judgment is an appeal of this
decision to the Lubumbashi Appeals Court.[115]
The report of the Economic and Financial Commission
(“ECOFIN”) of the Congolese National Assembly states:
Dossier GECAMINES
(Gestion Pas de porte Chinois)
Le rapport sur l’affectation de la première tranche des
pas de porte chinois fait ressortir la connivence de certains cadres de
l’entreprise en association avec la justice locale à Lubumbashi, laquelle a
facilité la ponction de 23.722.036 dollars sur les 50 millions de dollars
américains qui étaient destinés à la Gécamines.
RECOMMANDATION : La remise
à la Gécamines, des pas de porte doit tenir compte de ses besoins réels étant
donné que ce sont les entreprises bénéficiaires des concessions minières qui
sont engagées dans les activités de production. Il y a lieu de redimensionner
la Gécamines et lui faire jouer le rôle d’entreprise conseil et de bureau
technique du Gouvernement au lieu de continuer à lui allouer d’énormes
ressources financières qui devraient alimenter le trésor public étant entendu
que les concessions minières ne sont pas la propriété de la Gécamines mais
plutôt de l’Etat congolais. Il faut craindre une surliquidité qui renflouerait
les poches des dirigeants alors que ceux qui produisent sont ailleurs.
That is, the ECOFIN report suggests a conspiracy
between the Lubumbashi judiciary and certain management of Gecamines, implying
that some or all of them are the beneficiaries of Caprice. We were told the name Caprice Enterprises
(and the names of the individuals alleged to be involved) were censored from
the final report.
8.
Policy
Recommendations to Improve the DRC’s Governance and Transparency Issues
The first and obvious recommendation is that the IMF
actually verify that the government is complying with its structural benchmarks. What is worse, however, is for the IMF to
publish statements suggesting the government has complied with these benchmarks
when it clearly has not.
Secondly, the disclosure requirements, in any event,
do not go nearly far enough. In many of
these cases, information on transactions subject to the existing disclosure
requirements do not trickle out at all (e.g., Emerald Star) or only do so many
months if not years after they have closed.
If the IMF does not even know about the existence of a transaction, how
can it confirm that all relevant information and documentation has been
published?
One possible measure would be to require the
publication of the minutes of the DRC’s council of Ministers, the minutes of
the parastatal mining companies and the minutes of the joint venture companies
holding state mineral rights. While any
of the above minutes could certainly omit the existence of certain transactions
from their boards, they would do so at the peril that the transactions have not
been duly approved and thus could be invalidated. Indeed, many of these documents are supposed
to be publicly-available at the various Congolese Commercial Courts, but they
are often difficult to obtain or only at substantial cost to many Congolese
NGOs that are operating on limited budgets.
For relative insignificant sums, the IMF could ensure these documents
are publicly-disseminated on a government website. While it is certain that the
DRC will raise the usual objections of confidentiality, sovereignty, etc., it
is increasingly clear the donor community is not getting the benefit of its
bargain and must demand accountability before committing further resources to a
country that continues to mismanage its own resources.
To put this in perspective, in addition to the ECF,
donor countries recently (July 2010) provided US$12.3 billion in debt relief to
the DRC.[116] As noted in Appendix IV, the DRC since
December 2009 has incurred (between below-market asset sales and legal
liability) preventable losses of US$8.3 billion – meaning that the equivalent
of 2/3rds of the benefit of substantial HIPC debt relief has already
been squandered by the DRC in a very short period of time.
9.
Potential Next
Steps
Were the IMF to force the DRC to comply with the
structural benchmarks, much of this proposed additional investigative work
would be unnecessary. Failing that,
potential areas for further work would include:
·
obtaining the
documentation that the government has refused to publish;
·
seeking
additional information so that asset valuations can be made more precise;
·
investigating
the beneficial ownership of the nearly four dozen shell companies that have
been identified as dealing in DRC assets;
·
undertaking
asset tracing exercises to determine where the proceeds of some of these deals
may be ending up.
INDEX OF APPENDICIES
Appendix
|
Description
|
I
|
Matrix of Compliance with IMF
Structure Benchmark re Transparency
|
II
|
List of Shell Companies Holding
DRC Interests
|
III
|
Mutanda Valuations
|
IV
|
Summary of Economic Costs on
Post-ECF Mineral Dealings
|
[1]IMF Executive
Board Approves US$551 Million PRGF Arrangement for the Democratic Republic of
the Congo and US$73 Million in Interim HIPC Assistance. 11 December 2009. http://www.imf.org/external/np/sec/pr/2009/pr09455.htm
[2]Democratic
Republic of the Congo. Letter of Intent.
30 November 2009. p. 23.
http://www.imf.org/external/np/loi/2009/cod/113009.pdf
[3] Third Review
of the Three-Year Arrangement Under the Extended Credit Facility, Financing
Assurances Review, and Request for Modification of Performance Criteria. April 14, 2011. International Monetary Fund. p. 7 http://www.imf.org/external/pubs/ft/scr/2011/cr11190.pdf
[6] The IMF
structural benchmark required publication of partnership agreements between
public and private enterprises (including information on bonus signing shares,
taxation system, private shareholders, and members of the board of directors),
as well as the publication of the negotiation results between mining companies
and the government regarding the review of mining contracts (see language
quoted above from IMF reports).
[7] Cancellations
of various deals by the DRC/Gecamines are noted as they not only expose the DRC
and/or Gecamines to substantial legal liability, but also have the potential to
harm the economic viability of certain assets and thus negatively impact the
royalties, dividends and taxes that would otherwise be collected by the DRC
and/or Gecamines.
[9] Exhibit 1 –
ENRC Africa Holdings Limited Financial Statement for the year ended 31 March
2010 (filed 30 September 2010). p. 21
(see post balance sheet events)
[11] Exhibit 2 –
Excerpts from CAMEC 2009 Annual Report.
24 September 2009. p. 20. The entire report is located at: http://www.enrc.com/PageFiles/2313/15-06-09%20CAMEC%20Plc%202009%20Annual%20Report%20and%20Accounts%2031%20March%202009.pdf On 24 September 2009, CAMEC had
released its annual report for the year ending 31 March 2009. This report confirmed, “the remaining 50% of
SMKK is held by Gecamines, the DRC state owned mining company.”
[12] ENRC PLC
Announcement of 2010 Preliminary Results.
23 March 2011. p. 67.
http://www.enrc.com/PageFiles/5041/23-03-11%20Announcement%20of%202010%20Preliminary%20Results.pdf
[14] The JV
agreement, which has likely been amended one or more times, can be found
at:
http://mines-rdc.cd/fr/documents/avant/gcm_melkior%20resources%20inc.pdf
[16] Exhibit 6 –
Share Sale Agreement between Kara Enterprises Limited and CAMEC PLC. 10 October 2008.
[19] A complete
list of BVI registered agents can be found at:
http://www.bvifsc.vg/RegulatedEntities/RegisteredAgents/tabid/122/Default.aspx
[23]The Carter Center
Review of DRC Mining Contracts - Update and Recommendations. November 30,
2007. http://www.cartercenter.org/documents/drc_mining_contracts_113007.pdf
[27] FQM Press
Releases: http://www.first-quantum.com/Theme/FirstQuantum/files/doc_news/2009-08-28_NR.pdf
[30] FQM Press Release . 19 September 2010.
http://www.first-quantum.com/Theme/FirstQuantum/files/NR%2011-%2024%20-BVI%20Update%20-%20FINAL.pdf
[31]FQM Press
Release. 23 May 2010.
http://www.first-quantum.com/Theme/FirstQuantum/files/doc_news/NR-10-19-SODIMICO_DECISION.pdf
[33] This contract
is available on the Minister of Mines’ website:
http://mines-rdc.cd/fr/documents/contrat_gcm_highwind.pdf
[34] Exhibits 14-17
– BVI Records for Highwind Properties Ltd., Pareas Ltd., Interim Holdings Ltd.
and Blue Narcissus, Ltd.
[35]This address
corresponds to Castiel Winser, an “Independent Financial Consultancy” that
services that “life assurance, investment portfolios and pension policies of
over 9,000 people in Gibraltar”. Castiel Winser website: http://www.castielwinser.com/about.html Sydney Attias is the Managing
Director of Castiel Winser. Castiel Winser website: http://www.castielwinser.com/about_p.html We note that Hassans/Line Wall is
apparently in the same office building – NatWest House and 57/63 Line Wall
Road.
[36]The Carter Center
Review of DRC Mining Contracts - Update and Recommendations. November 30,
2007. p. 4
[37] Exhibit 18 – BVI
Corporate Records of Camrose Resources.
NB that Camrose was also incorporated by Equity Trust. Also, the link between Camrose and
Hassans/Line Wall is also established by an agreement between Camrose and
Africo Resources – see Exhibit 19 – Subscription Agreement dated 17 April
2008. Note that notices are to be sent
to Dino Chincotta (who also executed the agreement between Kara Enterprises and
CAMEC noted above) and that the agreement was executed by him on behalf of
Camrose.
[38] ENRC Press
Release - Acquisition of 50.5% of the
Shares of Camrose Resources Limited. 20
August 2010.
http://www.enrc.com/Documents/PressReleases/CamroseAnn2(20_8_2010_15_29_221).pdf
[39] Exhibit 20 –
BVI Corporate Records of Cerida Global.
NB – Cerida was also incorporated by Equity Trust.
[41] Based on
documents obtained by the Carter Centre, the ownership of COMIDE is divided 75%
Simplex Holdings SPRL and 25% Gecamines.
It is thus assumed that Camrose holds an ownership interest in Simplex
Holdings. This document, which appears
to have been prepared by the DRC in relation to the mining contract
revisitation, was published on the Congomines.org website funded and/or managed
by the Carter Centre.
http://www.congomines.org/wp-content/uploads/2011/10/PV-Dec-2008-COMIDE.pdf
[43] See Africo
Resources press releases: http://www.africoresources.com/ir/press_display.php?Id=2008/12jun2008
http://www.africoresources.com/ir/press_display.php?Id=2009/19jun2009
[44] There is
believed to be a dispute regarding what Metalkol the new JV company actually
owns. The Congolese legal actions stripped
FQM of its mineral rights, but not necessarily title to the improvements it had
constructed on the site. That is the
purported reason why the Congolese courts awarded a judgment of US$12 billion
in favor of Gecamines: so that Gecamines
could then put KMT in liquidation and grab the improvements. It is our understanding that the ICC has
enjoined Gecamines from taking any such action.
We are unsure how the value of KMT is split between the mineral rights
it lost and the improvements to which it still apparently has title.
[45]
Coincidentally, the amount of the signature bonus paid by these Gertler
companies is the exact amount apparently made by Emerald Star on the SMKK
transaction.
[46] KMT’s private
partners – FQM, IFC, and IDC – owned 82.5% of the asset and were responsible
for 100% of the funding. Oriel
Securities in a 28 September 2010 report (p. 30) states that as of the time of
the contract cancellation, FQM had already spend $440 million of its $550
million required to make the mine operational.
Based on FQM’s ownership of 65% of KMT, this would mean that this
additional US$110 million would be 65/82.5ths of what was needed to
complete the mine, implying that 82.5/82.5ths would be roughly US$140
million. Quote from Oriel Securities re
FQM: “By Q3 2009, development of the
project was approximately 75% complete and approximately US$440m of the
US$550m capital budget had been committed to. The project was expected to come
online in 1H 2010….”
[49]http://www.gecamines.cd/chabara.php Note that Dino Steel is represented by Mr.
Lenge Masangu, who in Panamanian corporate records pertaining to the Mutanda JV
(discussed below), is an apparent representative of Groupe Bazano.
[50] To reduce the
volume of exhibits, this contract has not been included. It is available online at:
http://www.platformlondon.org/carbonweb/documents/drc/French_Tullow_Heritage_PSA&annexes_July_2006.pdf
[51] Tullow Oil PLC
2010 Full Year Results. p. 7
http://www.tullowoil.com/files/pdf/results/2010_full_year_results_report.pdf
[52] J. Peter Pham,
nonresident Senior Fellow in Africa Policy Studies, is Senior Fellow and
Director of the Africa Project at the National Committee on American Foreign
Policy in New York City. He also holds an academic appointment as Associate
Professor of Justice Studies, Political Science, and African Studies at James
Madison University in Harrisonburg, Virginia. Dr. Pham is Vice President of the
Association for the Study of the Middle East and Africa (ASMEA) and
Editor-in-Chief of its new flagship publication, The Journal of the Middle East
and Africa. http://www.defenddemocracy.org/index.php?option=com_content&task=view&id=23730&Itemid=283
[53] DRC
Mismanagement Frustrates Investors. 9
September 2010.
http://www.isn.ethz.ch/isn/Communities-and-Partners/Partners/Detail/?lng=en&id=120902
[58] See 16 March
2011 Circular to Shareholders. p. 44
http://www.sacoilholdings.com/im/files/c/sacoil_circular_16mar2011.pdf
[61] Aurora
directors may be criminally charged. The Times. 5 October 2011. http://www.timeslive.co.za/politics/2011/10/05/aurora-directors-may-be-criminally-charged
[64] Och-Ziff press
release: http://phx.corporate-ir.net/phoenix.zhtml?c=213764&p=irol-newsArticle_print&ID=1101494&highlight
Mvelaphanda Holdings (Proprietary) Ltd ("Mvela Holdings"), OZ
Management LP ("OZ Management"), a subsidiary of Och-Ziff Capital
Management Group LLC (NYSE: OZM - News; "Och-Ziff") and Palladino
Holdings Ltd ("Palladino") have announced the creation of a joint
venture, Africa Management Limited….As part of the joint venture, Africa
Management Limited has established African Global Capital I, L.P.
("African Global Capital"), as a platform to invest in both the
private and public markets across Africa, with a bias towards natural resources
and related businesses…..Mark Willcox, Chief Executive Officer of Mvela Holdings
and newly appointed Chief Executive Officer of Africa Management (UK) Limited,
said: "We have a strong pipeline of transactions across a broad spectrum
of industries and geographies. We are excited by the opportunities available to
African Global Capital and feel our partnership with Och-Ziff and Palladino
places us in a prime position to capitalise on them."
[68] The PSA is
available on the Minister of Mines website:
http://mines-rdc.cd/fr/documents/Hydro/avenant1_rdc_sa_congo_oil_cohydro.pdf
[69] SACOil Press
Release. 4 March 2011.
http://www.sacoilholdings.com/im/press-display.php?Id=2011/04mar2011
[71] SACOil Press
Release. 4 March 2011.
http://www.sacoilholdings.com/im/press-display.php?Id=2011/04mar2011
[72] SACOil
Circular to Shareholders. 17 March 2011.
p. 3 http://www.sacoilholdings.com/im/files/c/sacoil_circular_16mar2011.pdf
[73] First Quantum
Provides Update on Sodimico Proceedings Conference Call on Monday. 24 May 2010.
http://www.first-quantum.com/i/pdf/NR-10-19-SODIMICO_DECISION.pdf
[75] FQM Press
Release. 1 October 2010.
http://www.first-quantum.com/Theme/FirstQuantum/files/doc_news/NR-10-33.pdf
[77] Contract is
available on the Ministry of Mines website:
http://mines-rdc.cd/fr/documents/Contrat_convention_sodifor.pdf
[81] Note that the
Carter Centre website, congomines.org, calls this JV Kansuki Mining SPRL,
rather than Kansuki SPRL as it is called in various Glencore documents.
[82] Glencore
Prospectus. p. 70 http://www.glencore.com/documents/Glencore_IPO.pdf (NB - pdf is over 1600 pages)
[86] The Carter
Centre website, congomines.org, lists the owner of this 50% of Kansuki
Investments as Simplex Holdings. As
noted above in footnote 41, other documents obtained by the Carter Centre state
that Simplex Holdings is the only private partner in Comide (the other public
partner being Gecamines). As noted in
ENRC press releases, Comide (and thus Simplex Holdings) is partially owned by
Dan Gertler (and now ENRC) through Camrose Resources. We have been unable to independently the
information obtained by the Carter Centre.
http://www.congomines.org/fr/fiche-dinformation-kansuki-mining-sprl-kansuki/
[87] See the BVI corporate records of Lora
Enterprises Limited, Zuppa Holdings Limited, Greenworth Limited, Holdgreen
Finance Limited, Caramia Enterprises Limited – Exhibits 29-33.
[88] Glencore - The
value in volatility, Initiating with a Buy.
6 June 2011. Deutsche Bank. p. 117.
http://www.scribd.com/doc/57254342/34/Mutanda-–-a-tier-1-greenfield-development-asset
[90] “The first
module is a 20 000 tpa plant, of which the Cu Plant had been operational since
September 2010 whilst the Co Plant was expected to be commissioned in February
2011.” Glencore Prospectus. Page 110 of
Golder Associates’ valuation; page 938/1637 of pdf.
[91] Glencore
Prospectus. Page 2 of the Golder
Associates’ valuation of Mutanda, page 830/1637 of the pdf.
[94] Glencore
Prospectus. Page 125 of the Golder Associates’ valuation of Mutanda, page
953/1637 of the prospectus pdf.
[96] Glencore - The
value in volatility, Initiating with a Buy.
6 June 2011. Deutsche Bank. p. 117.
http://www.scribd.com/doc/57254342/34/Mutanda-–-a-tier-1-greenfield-development-asset
[97] Réponses de
Gécamines Sarl au questionnaire du FMI sur la Cession des Parts Sociales dans
MUMI Sprl. 16 September 2011.
http://mines-rdc.cd/fr/documents/Vente_Mumi.pdf
[99] Exhibit 37 –
Panamanian corporate records of SAMREF Overseas S.A., the company which owns
SAMREF Congo SPRL. The representatives
of the company are split between two shareholders. The representatives of one have an address
the corresponds to Glencore in Switzerland; the other has an address that
corresponds to Groupe Bazano in the DRC.
[103] Contracts are
available on Ministry of Mines website.
Sales agreement: http://mines-rdc.cd/fr/documents/accord_cession_parts_sodimico_sandro_garetto.pdf Price Agreement:
http://mines-rdc.cd/fr/documents/accord_prix_achat_sodimico_sandro_garetto.pdf
[104]EGMF threatens to cut $250 mln project in DRC row. Reuters. 6 September 2011.
http://af.reuters.com/article/investingNews/idAFJOE78501G20110906
[105] Congo’s George
Forrest Takes Gecamines to Arbitration Over Forced Sale. Bloomberg. 2 September 2011.
http://www.bloomberg.com/news/2011-09-02/congo-s-forrest-takes-gecamines-to-arbitration-over-forced-sale.html
[106]EGMF veut poursuivre ses activités au sein de CMSK. 2 September 2011.
http://www.forrestgroup.com/uk/chap06/infos67.html
[108]EGMF veut poursuivre ses activités au sein de CMSK. 2 September 2011.
http://www.forrestgroup.com/uk/chap06/infos67.html
[111] China and
Congo – Friends in Need. Global
Witness. March 2011. p. 24
http://www.globalwitness.org/sites/default/files/library/friends_in_need_en_lr_1.pdf
[114] Exhibit 41 –
Report of the Economic and Financial Commission of the Congolese National
Assembly.
[116] IMF and World Bank
Announce US$12.3 billion in Debt Relief for the Democratic Republic of the
Congo. 1 July 2010. http://www.imf.org/external/np/sec/pr/2010/pr10274.htm