Gecamines says Lundin withdrawal from Congo would be problematic

KINSHASA – Gecamines, the Democratic Republic of Congo’s State-owned miner, warned that any decision by Lundin Mining to withdraw from the Tenke Fungurume copper mine could scupper Freeport McMoRan Inc.’s proposed sale of its stake in the project.

By exiting at the same time as Freeport and transferring full ownership of the project to new parties without securing Gecamines’ approval, Lundin and Freeport would further violate the State-owned miner’s rights, chairperson Albert Yuma said by e-mail Friday. Gecamines must be permitted to match any offers for Lundin’s stake, or it could block the deal, he said.

Freeport announced in May it sold its indirect 56% stake in Tenke Fungurume to China Molybdenum for $2.65-billion. Gecamines, which owns 20% of the mine, said it hadn’t been informed about the transaction and would investigate the deal in order to “assert its rights.” As Freeport’s partner in the project, Lundin has an option that expires Sept. 29 to match China Molybdenum’s offer. Lundin plans to exit the venture and has held talks with China Molybdenum and other companies about offloading its 24% stake, people familiar with the matter said Friday.

“Any simultaneous withdrawal by Lundin and Freeport in favor of CMOC or other buyers will be problematic and would in fact actually reinforce the suspicion of fraud to Gecamines’ and the state’s rights," Yuma said. The transaction “will remain in a deadlock, unless Lundin and Freeport respect Gecamines’ and the state’s rights,” he said.
Bermuda Unit

Freeport, based in Phoenix, Arizona, says China Molybdenum is acquiring ownership via a 70% interest in Bermuda-based TF Holdings, not the local operating entity in which Gecamines is a shareholder, and therefore it’s not subject to the state-owned miner’s approval or pre-emption.

Canada’s Lundin Mining, which owns the rest of TF Holdings, has a right of first offer, or ROFO, on Freeport’s stake that has been extended twice as it assesses its options. Gecamines says it should also have a ROFO and that its pre-emption rights are further strengthened if Lundin sells, one of a series of options that could see new parties take full ownership of the project alongside the state-owned miner.

Earlier this month, Gecamines said it had submitted a competing bid to TF Holdings that includes an offer for either Freeport’s stake or for all of the holding company’s 80% interest in the project, insists that its proposal must be considered.

“The obvious solution remains for Lundin and Freeport to accept Gecamines’ offer to restructure the TFM joint-venture with new partners selected by Gecamines,” Yuma said.

Gecamines had debt of $1.58-billion as of June, but says it has a group of investors ready to fund a bid for the project, details of which it has not yet provided.