Gecamines – the mining and trading company owned by the government of the Democratic Repubic of Congo (DRC) – has started legal proceedings against Kamoto Copper which is a subsidiary of Glencore-controlled Katanga Mining (Katanga).
Katanga has acknowledged Gecamines’ right to bring the legal action but has accused Gecamines of not “meaningfully engaging” over a proposed recapitalisation plan for Kamoto.
Glencore owns 86% of Katanga which in turn holds 75% of Kamoto. Gecamines owns the remaining 25% of Kamoto.
Gecamines has started legal proceedings to dissolve Kamoto “following Kamoto’s failure to address its previously disclosed capital deficiency or, alternatively, if the court provides Kamoto with a period of time within which to regularise the situation, to request the appointment of an expert to assess and report to the court on Kamoto’s financial position and the recapitalisation plan.”
In a statement released on April 22, Toronto-listed Katanga said a court hearing is scheduled for May 8 this year and added, “the court may grant Katanga a maximum period of six months to regularise the situation. The company believes that it has several options to remedy Kamoto’s capital deficiency and avoid Kamoto’s dissolution.”
The Katanga statement acknowledged the capital deficiency stating it first arose in 2014 as a result of historical losses during the rehabilitation of Kamoto’s assets.
“The capital deficiency should have been rectified by December 31, 2017 and, as a result of this not having been done, an interested party was entitled to commence legal action for the dissolution of Kamoto before DRC judicial authorities, which Gecamines has now done.”
But Katanga indicated it had proposed a recapitalisation plan to Gecamines last year as well as made “numerous attempts to engage in constructive negotiations with Gecamines regarding the recapitalisation plan.”
The company added that, “however, Gecamines has, instead of meaningfully engaging with the company, unilaterally commenced the proceedings. The company will continue to attempt to engage in discussions with Gecamines and will take all other necessary steps to ensure the continuation of the operations of Kamoto and protect its rights.”
Katanga said Kamoto is generating positive cash flow and remained liquid “due to operating cash flows and its guarantees from its ultimate parent shareholder. As such all obligations to Kamoto’s creditors are being honoured and the company is meeting all of its commercial obligations.
“Based on current projections, cash flows of Kamoto are expected to be sufficient to allow the repayment of outstanding shareholders debt and fund distributions to shareholders, including Gecamines.”
