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» Canada's Moto in DRC gold plan


Okimo calls dispute with Moto
David McKay
Posted: Tue, 04 Apr 2006

[miningmx.com] -- OKIMO, the Democratic Republic of Congo’s (DRC’s) state-owned gold company, said it had declared a dispute with Moto Goldmines, a Toronto-listed junior mining firm.

The dispute turns on a proposal by Moto Goldmines to swap Okimo’s asset level interests in the DRC’s Kilo-Moto gold fields for a 10% stake in Moto’s listed shares.

Okimo has asked for a 30% undilutable stake in Moto – a demand rejected by Moto CEO, Klaus Eckhoff. “You can’t have one shareholder having more rights than another,” he said.

First, however, Okimo has declined to enter into further negotiations with Moto until it addresses its concerns about lease agreements, some first signed in 1998. Okimo has also commissioned SRK to conduct an independent study into Moto’s stated gold resources of nine million ounces.

“We want to review the agreements drafted in 1998,” said Victor Kasongo, CEO of Okimo in an interview. “The government has given Okimo the blessing to review the agreements.” However, Eckhoff said the DRC’s interim government had verified the integrity of its lease contracts.

The current arrangement is that Moto pays a small rental on the leases and capitalises the balance which will be offset against production after a mine is developed. Eckhoff said this suited all sides as Okimo was also carrying debt. Okimo has a $20m facility with the African Development Bank.

Commenting on the gold resource estimates, Eckhoff said an internal audit was also being completed by Moto.

“Moto has not acknowledged there is a problem,” said Kasongo who claimed to have issued a letter to Moto outlining his company’s displeasure with its activities. Commenting on demands for a non-dilutable stake in Moto Goldmines, Kasongo said: “This is partly in return for use of our geologists and two of the four drilling rigs Moto uses on our properties.”

Moto owns properties in the north-east of the DRC, about 560km north-east of Kisangani. AngloGold Ashanti, the world’s third largest gold producer, also has exploration prospects in the Kilo-Moto gold fields.

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 have not had legal reviews of our agreements with AngloGold yet.”

The dispute between Okimo and Moto Goldmines comes some three months before democratic elections begin in DRC, slated as a crucial period for future investment in the country.

“There’s a lot to be lost if both sides don’t play this carefully,” said Brenton Saunders of Craton Capital, a Johannesburg fund management company that owns shares in Moto. “A negative precedent is the biggest risk here,” he said.
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Mining companies operating in the DRC were due for re-rating if the central African country successfully completed democratic elections, scheduled for later this year, analysts have said. “We believe the companies exploring and producing in the DRC will have those operations evaluated as less risky investments once the political elections pass off peacefully,” said Mark Smith, an analyst for RBC.

Moto Goldmines, which has applied to list on Britain’s Alternative Investment Market, has gained 75% this year. By midday, however, the share was nearly 5.5% weaker at C$6.90/share with about 520,000 shares traded compared to its three-month average of 260,000 shares.