Warning bells in DRC squabble
DISAGREEMENT between the Democratic Republic of Congo’s state-owned gold company Okimo and Canadian-listed Moto Goldmines could affect South African explorers and miners in the region.
Okimo CEO Victor Kasongo said that he wanted to review lease agreements signed between his predecessor at Okimo and Moto Goldmines – some being signed in 1998 – as he believes there are inconsistencies. Kasongo also claimed that Moto has incorporated a property into its overall lease area it never owned. [Blockierte Grafik: http://www.smiliemania.de/smilie132/00000116.gif]
Finally, Okimo has contracted consulting firm SRK to conduct an independent review of Moto’s estimated 9 million oz of gold it said it had discovered in the Kilo-Moto goldfields in north-eastern DRC. Kasongo said it was hard to believe that the company could add gold resources at a rate of 500,000 oz/month.
Moto CEO Klaus Eckhoff said the dispute could be resolved. However, at the time of writing he was trying to shore up a drop in the firm’s share price after the news of Okimo’s disaffection became public.
Brenton Saunders, a fund manager at Craton Capital, which owns Moto shares, said that there’s a danger that a precedent could be set. “There’s a lot to be lost if both sides don’t play this carefully. A negative precedent is the biggest risk here.”
RBC Capital Markets, a Canadian stockbroker, said recently that mining firms operating in the DRC could benefit from a peace rerating if the country was able to successfully democratise itself. Though the DRC is currently ruled by an interim government of alliances, full-blown democratic elections are scheduled for end-June.
But the last thing the DRC needs is for the seed of uncertainty to be planted on issues related to security of tenure in the manner that’s unseated confidence in Zimbabwe’s resources industry. At the same time, Kasongo wants foreign investors to give the cash-strapped DRC government a fair shake in their dealings.
The relevance to South Africa is that AngloGold Ashanti is one of the companies that might next fall under the stare of Kasongo. In February, Okimo said that AngloGold Ashanti should accelerate its exploration plans in the DRC.
Commenting on whether the dispute with Moto could be expanded to AngloGold Ashanti, Kasongo said: “We haven’t had legal reviews of our agreements with AngloGold yet.” However, it’s understood that a letter may be drafted to CEO Bobby Godsell outlining some of Okimo’s concerns.
Steve Lenahan, a spokesman for AngloGold Ashanti, said the firm had already been on record stating its willingness to review lease agreements with Okimo.
Meanwhile, there’s also no knowing how the dispute could affect the outlook of the DRC’s other state-owned mining companies, including Gecamines, which looks after base metal properties, and Miba (diamonds). Might they adopt a similar review of lease and business agreements with miners? Unlikely, but possible.
The DRC’s economy is starting to improve. Its GDP was $7bn, increasing 7% in 2005 and a further 8% this year, growth supported by the resuscitation of its mining industry. Mark Smith, an analyst at RBC Capital Markets, said that the country holds 10% of total copper resources and a third of all cobalt.
BHP Billiton has an estimated 50 000 square kilometres of exploration property under its control. Kumba Resources is also active there, as are a host of junior and major mining companies worldwide, including Phelps Dodge.
Paul Conibear, president of $400m Tenke Mining Corporation, a Canadian firm that’s invested in the DRC, said the country requires nerves of steel. “We’re comfortable with the environment – but it’s not for the faint of heart. You need patience and deep pockets.”
http://www.miningmx.com/gold_silver/175967.htm
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