MAC/20: Mines and Communities

Africa update

Published by MAC on 2007-03-13


Africa update

13th March 2007

Troubled Congo draws Friedland

Billionaire plans to take latest play public

ANDY HOFFMAN, MINING REPORTER, Toronto Globe and Mail,

13th March 2007

Robert Friedland cemented his status as a legend in the metals and minerals sector in 1996 when he sold the Voisey's Bay nickel deposit to Inco Ltd. for $4.3-billion, pocketing a nifty $600-million in cash and stock for himself.

Then he defied the odds again last year, winning the backing of industry giant Rio Tinto PLC, which agreed to partner with his Ivanhoe Mines Ltd. in developing the massive Oyu Tolgoi copper and gold project in Mongolia.

Now the billionaire mining entrepreneur has zeroed in on Africa for his next big play -- a pair of deposits in the long-troubled Democratic Republic of the Congo, formerly Zaire.

Currently held in a private entity called Ivanhoe Nickel and Platinum Ltd. or "Ivanplats," Mr. Friedland is planning to take the company public some time this year.

"It's only a matter of time before we take this to the market to incentivize our people and try and do in the Congo what we did in Mongolia," Mr. Friedland said recently at a mining conference in Florida.

Ivanplats, which Mr. Friedland indicated has an implied market value of $600-million (U.S.), is planning a dual listing on the Toronto Stock Exchange and in London.

In a 30-minute presentation at a conference late last month, Mr. Friedland, 56, was his usual charismatic and mercurial self.

He highlighted the enormous difficulties inherent in operating in Congo, while at the same time extolling the richness of its deposits. He said some drill holes at the company's Kalongwe copper-cobalt project in the Katanga province showed ore containing about 8 per cent copper.

"That rock is worth more than Voisey's Bay rock," Mr. Friedland said, later adding that Congo has plenty of challenges, including lots of "kinky" and "nasty stuff," such as hepatitis, Ebola and ethnic conflict.

Ivanplats has claim to about 20,000 square kilometres of land in Congo, which has endured decades of ethnic strife and a five-year civil war that officially ended with a fragile truce in 2003. It has 15 geologists and 70 support staff in the country and, besides the copper and cobalt at Kalongwe, it also plans to develop the Kengere project, near the town of Kolwazi, which holds zinc, lead, silver and germanium. (Germanium is used to make LCD television screens.)

"This area was the personal preserve of King Leopold of Belgium. He owned the people, he owned the ivory, the elephants and the copper, and he was a very nasty bastard," said Mr. Friedland, who added that his copper project is buried under metres of sand and has been left relatively untouched for almost half a century.

"We are the first people since the late 1950s to go into this area and drill holes. We sort of believe in the rubber knife theory. It may look really scary and it might really hurt you, but . . . you might as well give it a try," he said.

Mr. Friedland controls 50 per cent of the issued shares of Ivanplats. His control stake is approximately 36 per cent if special warrants held by others that will convert to shares are taken into account. Ivanplats has several institutional shareholders, including Canadian Imperial Bank of Commerce, as well as pension and mutual funds. In February, the company raised $80-million in a private stock offering.

"We went out to raise $30-million and didn't have a broker. We raised $80-million in one day from people who wanted to write us a cheque. They're all well-known institutions," Mr. Friedland said.

Investment banking sources expect an initial public offering of Ivanplats shares later this year, once the company carries out more drilling work, expected in May.

Congo has emerged as a new hot spot for the global mining industry, which has been forced to search in increasingly difficult areas to find untapped sources of mineral wealth.

Mr. Friedland's copper-cobalt project is roughly 10 kilometres north of Tenke Fungurme, a joint venture between Arizona copper giant Phelps Dodge Corp., Congo's state mining company Gécamines, and Tenke Mining Corp. of Vancouver.

Construction of the Tenke mine has started and copper production is expected by the end of 2008.

Tenke Mining chief executive officer Paul Conibear, estimates that between $1.5-billion (Canadian) and $2-billion in capital has been raised in the past two years by companies operating or developing projects in Congo such as Anvil Mining, Katanga Mining and First Quantum.

Mr. Conibear described Mr. Friedland's activities in Congo as early stage. "It's fairly easy to hit high grades, perseverance is needed in finding the tonnes," he said, adding that "Mother Nature has chopped it up a lot."

Mr. Friedland doesn't expect to begin mining copper in Congo until at least 2016, and is counting on the government of China to complete a railway near the project. China's surging economy has driven the current boom in metal prices and Mr. Friedland said "the Chinese government's hand-to-wallet reflex" should be stimulated by the metal riches in the region.

"It's pretty exciting stuff, but it has to be, in order to justify going to this place," Mr. Friedland said. "It's adventure capitalism."


Ethiopia: DR Congo 'Uranium Ring Smashed'

The Reporter (Addis Ababa)

10th March 2007

Authorities in the Democratic Republic of Congo (DRC) say they have dismantled an international network set up to illegally use uranium mined there.

Scientific Research Minister Sylvanus Mushi said DRC's top nuclear official and a colleague were being questioned in connection with the case.

The official, Fortunat Lumu, and the colleague were arrested on Tuesday.

The move comes amid reports that a large quantity of uranium has gone missing in recent years in DRC.

State prosecutor Tshimanga Mukeba earlier told the BBC that an "important quantity" of uranium was taken from the atomic energy centre in the capital, Kinshasa, without revealing any figures.

DRC's daily newspaper Le Phare on Wednesday reported that more than 100 bars of uranium, as well as an unknown quantity of uranium contained in helmet-shaped cases, had disappeared from the centre as part of a vast trafficking of the material going back years.

But the BBC's Kinshasa correspondent, Arnaud Zajtman, says that as of yet, no evidence has been made public to support the allegations made by the newspaper.

Mr Mushi said that "a vast network aimed at the fraudulent exploitation of DRC's uranium has been dismantled".

"It was a criminal network," he said, without giving any more details. Referring to earlier reports that the two officials had been arrested on suspicion of uranium smuggling, Mr Mushi said that the prospection and exploitation of DRC's uranium had not yet started.

The UN's nuclear watchdog, the International Atomic Energy Agency (IAEA), has expressed concerns over the reports from DRC, saying it was investigating the situation.

Uranium is the basic raw material of both civilian and military nuclear programmes.

A mine in DRC's southern province of Katanga supplied the uranium that was used in the atomic bombs that were dropped by the Americans on the Japanese town of Hiroshima in 1945.

To thank and reward DRC, the Americans funded the creation of DRC's nuclear centre in 1958.

It was established on the university campus and only for research purpose.

But in the late 1970s, a bar of uranium disappeared from the centre, raising concern about security at the site.

Moreover, the site of the centre is facing some erosion problems. And people fear a landslide that could lead to a wider disaster, our reporter says.

In recent years, the IAEA has visited the centre and security was believed to have improved.


Mozambique Says 16 Gold Panners Died in Floods

PlanetArk MOZAMBIQUE

14th March 2007

MAPUTO - Mozambique said on Tuesday that at least 16 Zimbabwean gold panners had died after being buried in mudslides triggered by torrential rains in the flood-ravaged southern African nation.

Other Zimbabweans who were panning for gold illegally in a mountainous area near the Mozambique-Zimbabwean border may have perished on Feb. 22 when Cyclone Favio swept through the region, officials told Radio Mozambique.

"We are yet to confirm whether others were dragged further downstream when they were panning for gold ... ," district police commander Lido Machava told the state-run broadcaster. Machava said authorities had learned of the 16 deaths only recently because of poor communication with the remote area, where an estimated 5,000 Zimbabweans are believed to illegally pan for gold in rivers and streams.

A total of 61 people have died in the former Portuguese colony last month when heavy rains triggered flash floods along the Zambezi river and its tributaries. Some 170,000 people were forced to flee their homes.

It was the worst flooding to hit Mozambique since 2000-2001, when 700 people died and another half a million were driven from their homes.

REUTERS NEWS SERVICE


World Bank Body to Put $150M Into Lonmin

By Rob Rose, Resource Investor

14th March 2007

JOHANNESBURG (Business Day) -- The World Bank's private sector arm, The International Finance Corporation (IFC), took its largest stake in a JSE-listed company yet when it said yesterday that it would spend R370 million ($49 million) to buy shares in platinum company Lonmin [LSE:LMI; JSE:LOL].

This pushes the IFC's total investment in South Africa to date over the R2 billion ($267 million) mark, underlining the growing influence that this often-ignored organisation has in the corporate sector.

The IFC's $49 million investment in Lonmin shares was announced as part of a $150 million package for the platinum company, marking the institution's largest investment in South Africa to date.

Lonmin plans to use the $100 million loan, which is repayable over 10 years, to fund the involvement of communities and empowerment groups in Lonmin's various projects, which are mostly situated in Mpumalanga.

Black-owned groups will be able to use these funds to buy an interest in Lonmin's various platinum projects, without having to raise the finance themselves from commercial banks.

Lonmin CEO Brad Mills said the plan was to use the cash to create "thriving communities" around Lonmin's projects so that when the platinum was depleted and the miners left, the communities would be "comfortably middle-class" and able to support themselves.

"We intend to use 100% of this facility to facilitate partners in our business," Mills said.

Lonmin would use part of the cash to build 5,000 houses in the next five years for community members, with 600 scheduled to be built this year.

Rashad Kaldany, the IFC's director for oil, gas mining and chemicals, said his organisation would be willing to pump money into other mining companies looking to improve the lives of people living on the mines.

"The broad-based effort (at community development) is a model than can and should be replicated in Africa and around the world," he said.

Kaldany also revealed that this was the IFC's largest investment yet in the JSE. These investments were important to "build relationships with companies," he said.

"We want a blend of (loans) and investments in this country that will help us cement longer-term relationships."

Most of its investments in South African companies had taken place through empowerment deals, such as the deal with banking group FirstRand.

Although the IFC's $50 million investment in Lonmin stock will give it less than 1%, this deal is an indication that the corporation is set to take a greater punt on South African stocks than previously.

By June, the IFC had R1.9 billion ($256 million) of investments in South Africa. Of that, R1.4 billion ($187 million) was loans to companies such as FirstRand, Standard Bank and Mvelaphanda Gold.

By June, the IFC had shares worth R500 million ($ 66.7 million) in South African companies, including a R51 million ($6.8 million) investment in South Africa Home Loans and R15 million ($2 million)in the Spier Estate Hotel.

This year, the IFC's investment has climbed considerably as it ploughed R220 million ($30 million) into the private equity fund of Ethos, and another R185 million ($25 million) into Brait's private equity fund.

 

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