MAC: Mines and Communities

Freeport falls foul of DR Congo government - but scrapes by

Published by MAC on 2009-08-25

For more than two years the government of the Democratic Republic of Congo has been reviewing mining contracts that were signed under the previous regime.

Most companies have now passed muster - although First Quantum's contract has been cancelled. (The decision may be "revised").

The world's biggest non-state copper miner, Freeport McMoran, has been allowed to keep its massive Tenke Fungurume copper-cobalt lease.

However, the company has been fined for alleged corrupt dealings; will have to reduce its stake in what could be the world's biggest mine of its type; pay an increased contract fee; and concede 2.5% of its turnover to the state mining company.

Freeport to Pay $16 Million to Settle Congo Visa, Permit Claims

By Franz Wild, Bloomberg

18 August 2009

Freeport McMoRan Copper & Gold Inc.'s copper and cobalt unit in the Democratic Republic of Congo agreed to pay authorities $16 million to settle claims that workers misused the nation's visa and work permits system.

Three employees of Tenke Fungurume Mining Sarl, in which Lundin Mining Corp. also holds a stake, are being held and investigated for their part in a suspected corruption scandal, in which the company may have saved millions of dollars in visa and work permit fees, Attorney General Octave Tela said yesterday in a telephone interview from Kinshasa, the capital.

Tenke agreed to pay $16 million in fees and penalties, William Collier, the company's spokesman, said in an e-mailed statement yesterday.

"The procedures associated with obtaining labor and immigration authorizations for short-term workers on a timely basis are not clearly established in the DRC," Collier said. "Tenke continues to work proactively and cooperatively with the tax authorities to establish approved procedures for doing so consistent with its mining convention and local law."

The Tenke Fungurume mine in Congo's southern Katanga province is the world's richest undeveloped deposit of its kind, according to the company's Web site.

Congo Detains Freeport Employees for Questioning

Wall Street Journal

17 August 2009

LONDON -- Freeport-McMoRan Copper & Gold Inc.'s relations with the Congolese government took a turn for the worse Monday after the country detained three company employees in association with alleged misappropriation of public funds.

While the government hasn't yet provided any evidence of wrongdoing, the U.S. copper-mining company said it was cooperating with the Congolese inquiry as well as conducting its own internal investigation. "We understand that three of our employees have been detained for questioning associated with an inquiry opened by the Kinshasa Prosecutor in connection with their potential involvement in alleged misappropriation of public funds related to work permits and visas for the Tenke Fungurume copper project," company spokesman William Collier told Dow Jones Newswires.

"The government has not presented Tenke Fungurume with any evidence of wrongdoing by Tenke Fungurume's employees. We will take appropriate action if it is determined that any of our personnel have acted improperly," Mr. Collier added.

The mine, located in the mineral-rich Katanga Province, is a joint venture between Freeport, Lundin Mining Corp. and the government of Congo, through state-owned miner Gecamines. Freeport has the majority stake and is the project operator.

Tenke has been fraught with problems since earlier this year when the Congo government said Freeport had failed to meet the requirements of its mining license review. Earlier this month, the government ruled that Freeport should reduce its stake in the project, increase Gecamines' stake, pay a $30 million contract signing fee and give Gecamines 2.5% of the project's total annual turnover.

The review for Tenke, which produced its first copper in March, began in 2007 and has dragged on ever since. Freeport has always maintained that its contract is fair and equitable, complies with Congolese law and is enforceable without modification.

A total of 61 mining companies that signed licenses between 1996 and 2003 have been reviewed in the renegotiation process. Most of them have now been cleared to proceed.

Congo may renegotiate cancelled First Quantum deal

By Joe Bavier, Reuters

17 August 2009

KINSHASA- Democratic Republic of Congo may review its decision to cancel a copper and cobalt project in which Toronto-listed First Quantum Minerals is the majority stakeholder, a government official said on Monday.

Earlier this month, the government cancelled a contract with First Quantum's Kingamyambo Musonoi Tailings (KMT) unit following a review of 61 mining contracts. [ID:nL6706669]

"For KMT, the contract that was dissolved, the government remains open to discussions. There is still a possibility of renegotiation," Emile Bongeli, the head of the government's contract review panel, told Reuters.

First Quantum's wholly owned subsidiary Congo Minerals Development wrote to Congolese Prime Minister Adolphe Muzito soon after the contract's cancellation, lobbying the government to reexamine its decision. [ID:nLB34276]

At the time of cancelling the contract, the government cited five points, including non-payment of royalties and the failure to adhere to an agreed timetable, as reasons for the contract's termination.

The contract review, launched in early 2007 following elections the year before, was intended to boost revenues from the country's once-lucrative mining sector and bring contracts up to international minimum standards.

Four of the last remaining contracts were approved in the Aug. 6 decision, but the flagship Tenke Fungurume copper and cobalt project was not given the final green light.

Separately, Congolese authorities have held three Tenke employees on suspicion of embezzling millions of dollars in a visa and work permit scam.
(Editing by Daniel Magnowski, Editing by Peter Blackburn)

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