August 22, 2010 / 9:05 AM / 10 years ago

First Quantum says ENRC Congo deal violates ruling

KINSHASA (Reuters) - Canada’s First Quantum said on Saturday that Kazakh mining group ENRC’s acquisition of mining rights in Congo violated a tribunal order freezing the sale of a contested mining project.

Mineworkers work deep underground at Harmony Gold Mine's Cooke shaft near Johannesburg, September 22, 2005. REUTERS/Mike Hutchings

ENRC announced on Friday that it agreed to buy a majority stake in Camrose Resources Ltd, which through an off-shore company has secured a new permit to take over the Kolwezi project after First Quantum put $750 million into developing it.

Camrose is controlled by Israeli investor Dan Gertler, who has built up a wide portfolio of interests in resource firms across Congo over the last 13 years.

First Quantum said that a tribunal at the International Chamber of Commerce (ICC) in Paris had issued an order the day before the ENRC announcement to prohibit Congo “from taking any action to transfer or allow the transfer of the Kolwezi tailings exploitation permit”.

“These announcements (by ENRC) appear to indicate a clear contradiction of the Tribunal’s orders,” said the statement from First Quantum, adding that the company believes it has exclusive rights and a binding contract for the project.

“(A)ny purported transfer of the tailings exploitation permit covering the Kolwezi Project is ineffective,” it added.

Officials from the ICC were not immediately available for comment.

First Quantum sought international arbitration at the ICC in February after its Kolwezi copper tailings project, KMT, was closed by Congo’s government late last year following a protracted mining contracts review.

The company said on Saturday a second order from the ICC prohibits Congo enforcing a local court judgement that required First Quantum to pay $12 billion in damages.

ENRC CEO Felix Vulis said on Friday his company was not award of any legal action regarding the deal.

“We have done a very, very good legal due diligence ... We are in really good comfort,” he told Reuters by telephone.

“Everybody’s putting the emphasis on arbitration, but we also have internal legal proceedings in Congo, and arbitration does not overrule what the Congolese court, a sovereign court, does,” Bene M’Poko, Congo’s spokesman on the deal with ENRC and ambassador to South Africa, told Reuters by telephone on Friday.

First Quantum said its Frontier mining project, the biggest copper producer in the country, had also been informed in a letter dated August 5 that its production permit had been withdrawn, but said its operations at the site were unaffected.

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