WB puts new Congo deals on ice until row resolved

The World Bank’s private investment arm, the International Finance Corporation (IFC), will not make new commitments in the Democratic Republic of Congo until a dispute over a cancelled mining contract is resolved, a spokesman said.

The IFC owns 7,5% of a 553m copper and cobalt project led by Canada’s First Quantum Minerals that the Congo cancelled in August after a review of mining contracts. The case is now before an international arbitration court in Paris.

“The cancellation of this project is unjustified,” IFC spokesman Hannfried von Hindenburg said in Washington last week. “We’re reviewing future projects and we’re awaiting the outcome of this case before making any new investments.”

The IFC, which advises and helps finance private industry investment has nine projects in Congo ranging from banks to textile factories. Its total commitment to the country was 104,6m as of June. Its role as an investor and a development agency allows it to go into countries such as Congo that are seen as too risky for most private companies.

The IFC invested in the Kinganyambo Musonoi Tailings Sarl copper and cobalt project in 2005 when Congo was led by a transitional government after almost decade of war had crippled most state-owned mining companies. Attracting private investment in Congo’s natural resources, which include half the world’s cobalt and 4% of its copper reserves, offered the country a source of income for reconstruction, Hindenburg said.

Kinganyambo was due to produce 70000 tons of copper and 14000 tons of cobalt per year by 2012. Congo cancelled the project because output failed to start in February 2008 as agreed, according to a letter Prime Minister Adolphe Muzito sent  to First Quantum in August.

The letter also said First Quantum did not make an up-front payment of 130m, did not give state-owned Gecamines a bigger share in the venture, refused to pay 2,5% royalties on gross turnover, and declined to drop 1,5% management fees on sales.

After months of negotiation, First Quantum took the case to the International Chamber of Commerce’s International Court of Arbitration in Paris on February 1. Both First Quantum and the IFC still hope to resolve the case amicably. “If the decision stands, it would bode ill for private sector investments in Congo mining,” Hindenburg said.

Source: www.businessday.co.za, 20100224

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