CONGO: Congo Planning First Quantum Financial Misconduct Probe
Congo intends to launch a probe into financial misconduct at First Quantum Minerals Ltd.'s (FM.T) operations in the country shortly after the miner suspended operations at the Frontier mine.
The Congolese Minister of Mines, Martin Kabwelulu Labilo Tuesday announced the government's plan to initiate an independent forensic audit into allegations concerning First Quantum Minerals operations in the country.
The investigation will be carried out by a body engaged in financial audit with the aim of examining suspected wide-scale misconduct, Kabwelulu said. No further details regarding the allegations of misconduct were disclosed in the statement but Bene M'Poko, the co-ordinator for the Congolese government on investment issues and natural resources, said allegations range from illegally exporting ore across the border to Zambia for processing to undervaluing the value of its exports.
First Quantum declined to comment on the Congolese government's plans to launch a probe.
Separately, Kabwelulu also said the government will work through state-owned mining company Sodimico to pay the salaries of all 1,500 workers who no longer have employment after First Quantum suspended operations at the mine Friday.
"For six months we have been awaiting the enforcement of the Supreme Court ruling [to return Frontier to its previous owner, Sodimico]. Now that FQM has fulfilled the court's decision, we intend to work through Sodimico until the mine is back in operation," the minister said.
First Quantum lost mining rights to all its mines in the Congo over the past two years. The Congo revoked the mining license to its coveted Kolwezi copper and cobalt tailings project after First Quantum (and its partners) failed to arrive at a compromise on how to resolve defects in the contract. The Frontier and Comisa mining licenses were revoked on grounds that they were wrongly taken away from the alleged former owner, Sodimico.
First Quantum has initiated two international arbitration processes to resolve the dispute. The two processes are expected to cost First Quantum $10 million to $20 million in legal fees. The one on the Kolwezi project is expected to conclude in 2011 and the other on the Frontier project is expected to take two to three years to conclude, according to Philip Pascall, chief executive of First Quantum.
First Quantum expects to report an impairment charge of $230 million to $240 million on its Frontier mine after deciding to suspend operations there Friday. It suspended operations to ensure the safety of its workers after CAMI, the Congo mining registry, withdrew its exploitation license and the company received a letter from Sodimico demanding that Frontier stop all mining and exports and leave the mining title areas.
The Congolese government is claiming $12 billion in damages following First Quantum's attempt to appeal a Congolese court ruling on the Kolwezi project. The country's gross domestic product was estimated at $11.1 billion at an official exchange rate and $21.9 billion on a purchasing power parity in 2009, according to the U.S. Central Intelligence Agency.
First Quantum has a market capitalization of 4.95 billion Canadian dollars.