UPDATE 1-Congo sells mining assets to fund polls -MPs, docs

Thu Aug 18, 2011 6:56pm GMT
 

* Copper mines sold, to fund polls - lawmaker, documents
    * Asset sale is ahead of expected Kabila re-election bid

    By Jonny Hogg
    KINSHASA, Aug 18 (Reuters) - Congo's government has sold
its minority stake in two confiscated copper mining projects
for $30 million, and the state mining company involved has paid
millions to fund upcoming elections, according to a senior
lawmaker and documents.
    The sale involves Congo's No. 3 copper mine and was well
below the estimated value of the assets. It is the latest in a
series of controversial transactions that have dominated the
mining industry, months before President Joseph Kabila is due
to face re-election in the Central African nation.
    Modeste Bahati Lukwebo, the head of the audit board of the
National Assembly's economic and financial committee, said
Mines Minister Martin Kabwelulu ordered the sale of state
mining company Sodimico's 30 percent stake in Frontier and
Lonshi mines to Fortune Ahead, a Hong Kong-registered shell
company.
    Fortune Ahead already owned the other 70 percent under an
agreement creating a joint venture, known as Sodifor, which was
signed last year.
    Kabwelulu, who on Wednesday denied the government's stake
in the mines in the copper-rich Katanga region had been sold,
could not immediately be reached for comment.
    Fortune Ahead has not responded to requests for comment.
    "They sold it for a price of $30 million, which was imposed
on the CEO of Sodimico .... The order was given by the minister
of mines," Lukwebo told Reuters.
    The $30 million price tag would be just over 6 percent of
the estimated market value of the stake, according to analysts.
An expert valuation done by the government last year put the
stake's value at a much higher $900 million, Lukwebo said,
meaning it was sold at just over 3 percent of the value.
    Other industry sources said the actual value of the asset,
given the legal risk involved, is much lower.
    The two mines at the centre of the sale were previously
part-owned by Canadian miner First Quantum until both
were confiscated last year, passing back to Sodimico before
then being transferred into the hands of Sodifor.
    First Quantum is still contesting the removal of the
licenses in court.
    ELECTION CASH?
    In a May 19 letter to the governor of Congo's central bank,
a copy of which was seen by Reuters, Sodimico authorised the
transfer of $10 million to a sub-account of the treasury named
"general elections" to pay for Sodimico's "participation" in
the elections, which are due later this year.
    It was not clear exactly what the funds would be used for
but Lukwebo said the funds were being "diverted."
    "It's not (Sodimico's) job (to pay for elections). The
budget for the elections is planned for in the general state
budget," he said.
    Another member of parliament, who follows the mining sector
but asked not to be named, said the cash would be used to fund
Kabila's re-election campaign.
    Sodimico Chief Executive Officer Laurent Lambert Tshisola
Kangoa did not take calls seeking comment on the reported
sale.
    A letter from Sodimico to the mines ministry, a copy of
which was seen by Reuters, also says that Sodimico had sold its
share in the Sodifor joint venture for $30 million.
    The deal was completed on March 18, the letter showed.
    Frontier is Congo's third-largest copper mine, and Lonshi
is a depleted open pit mine being eyed for underground
development.
    Congo has vast mineral assets, but the country has been
crippled by decades of poor governance, and it is still
struggling to recover from years of war.
    Post-war elections in 2006 were meant to pave the way for
increased investor confidence, but they were swiftly followed
by an opaque review of mining contracts.
    The controversial sale of expropriated assets has done
little to reassure firms. The Kolwezi project was confiscated
from First Quantum in 2009 as part of the review of mining
contracts and has subsequently been sold to London-listed
Kazakh miner ENRC .

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