Exxaro, First Quantum poised to sue Gecamines

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Paul Fortin, MD, Gecamines

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Exxaro, First Quantum poised to sue Gecamines
Allan Seccombe
Posted: Fri, 13 Apr 2007

[miningmx.com] -- CANADA�S First Quantum and South Africa�s Exxaro Resources will decide in the next few weeks whether to sue Democratic Republic of Congo�s Gecamines for at least $4m over losing the Kipushi zinc project, the companies� lawyer said on Friday.

Gecamines pulled the project away from the two companies last year and offered it on international tender to other investors. The tender was awarded to United Resources in February.

�Exxaro and First Quantum are still investigating what their next step against Gecamines will be. It is more than likely they are going to sue for damages,� Yves Baratte, a lawyer at Simmons & Simmons told Miningmx in a telephonic interview.

more than likely they are going to sue

�The decision will definitely be made in the next few days or weeks. It will then take a few more weeks to finalise the submission against Gecamines,� he said, adding the case could be before the courts by the end of May.

The companies, if they do sue, will most certainly want to be reimbursed for the $4m they have spent on feasibility studies on the Kipushi project as well as lost earnings, he said.

The lawsuit will be filed in a Belgian court which has jurisdiction over Gecamines. The DRC is a former Belgian colony.

Kipushi was shut in 1993 because of a lack of finance when it was in the Gecamines stable. It is estimated to have a measured and indicated resource of 16.9 million tons with an average grade of 16.7% zinc and 2.2% copper.

The two companies won one court process, which prevented Gecamines from releasing any data they amassed during their studies of the zinc project.

A more recent legal case to prevent Gecamines from embarking on the tender process failed.

�From a Belgian law point of view this was quite a difficult request and the court decided it could not prohibit Gecamines from moving forward and entering new agreements for Kipushi with third parties,� Baratte said.

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One of the options open to Exxaro and First Quantum is to ask the court to render any new contract invalid because it is in breach of the agreement they had with Gecamines.

�The problem is that the new agreement will have been in force for some months and the court might be reluctant to grant such an order,� Baratte said.

In March, the DRC government ordered a review of all mining contracts signed in that country. Deputy mines minister Victor Kasongo told Miningmx earlier this month that up to half of the contracts appeared to be unfair to the state and would have to be renegotiated. The review will affect about 70 companies.

Paul Fortin, Gecamines managing director, has said there was no evidence that Exxaro, then Kumba Resources, or its joint venture partner First Quantum Minerals had an agreement with Gecamines.

�There was a letter of understanding with Adastra Minerals (which First Quantum Minerals subsequently bought) and Kumba Resources (the forerunner to Exxaro Resources). But in five years they did nothing.� Fortin said.

"I asked them to present every piece of paper they had. They did that which we sent to our advisors. Legal advice was that there was no agreement. Then they sent us another box of papers and our legal advice was there was still no agreement they could develop the mine."

Exxaro was keen to bring zinc from the project to its 110,000 tonnes/year Zincor refining operation in South Africa, which is currently fed by concentrate from Exxaro�s Rosh Pinah mine in Namibia. Concentrate also comes from Anglo American�s Gamsberg mine in South Africa, which is high in manganese.

Zincor is South Africa�s only zinc refinery and supplies most of the country�s needs.

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