December 17, 2017

Dispute at DRC cobalt mine heads to court, halts supply

Congo state mine under a legal dispute. Photo/Courtesy of Bloomberg

An attempt by Democratic Republic of Congo’s Gecamines to profit from the boom in battery metals has backfired, leaving the state-owned miner facing two international court actions and halting cobalt production at a key mine.

Gecamines blocked its 16-year partner GTL’s access to the cobalt site in Lubumbashi in March to make way for a new investor, as prices for the metal soared. The attempt to switch one partner for the other has resulted in both parties taking legal action against the state-owned company for breach of contract.

Jersey-registered GTL, a joint venture in which closely held Groupe Forrest International has a 70 percent stake and Gecamines holds 30 percent, is suing Gecamines in the commercial court in Brussels for damages, according to two people familiar with the matter.

The court schedule means no more cobalt is likely to be produced at the site until at least 2020 if there isn’t a settlement, said the people, who asked not to be identified because they’re not authorised to speak publicly about the matter. The court declined to comment.

Separately, British Virgin Islands-registered, Shamrock Global Inc. says it petitioned the International Court of Arbitration in Paris on Nov. 2 to rule whether Gecamines breached a July 2016 agreement to grant Shamrock access to the same site after GTL’s contract ended, Chief Executive Officer, James McCormack said in a statement emailed Nov. 22.

Groupe Forrest spokesman Henry de Harenne confirmed the case is ongoing, but declined to comment on the details of the dispute. Gecamines said in an emailed response to questions that the dispute with GTL centers around “the interpretation and execution of contractual agreements concluded in 1997,” noting that Belgian courts have already “ruled in favor of Gecamines” twice this year.

GTL contests Shamrock’s claim to the tailings and says its contract grants it preemption rights to the parts of the site it wasn’t exploiting. Shamrock’s own arbitration further complicates the prospects of future production at the site.

A ruling in Shamrock’s favor by the Paris arbitration court will “have the effect of ordering Gecamines to cease and desist from the conclusion of any and all contract negotiations and or settlement agreements with any third parties in respect to the Lubumbashi slag dump, pending the outcome of the main arbitration hearing between Shamrock and Gecamines,” McCormack said.

The court heard the case on Nov. 24 and will decide whether to issue an emergency arbitration order on Monday, he said. Shamrock will continue with the main arbitration hearing if the emergency order isn’t granted, McCormack said.

Contract Interpretations

“Gecamines considers that the agreements concluded between Gecamines and Shamrock have not entered into force” because “preceding conditions” are yet to be satisfied, the state-owned miner said.

Under a 1997 contract, GTL had the right to produce as much as 5,000 tons of cobalt annually from the tailings site for about 15 years. That agreement was revised in January 2013 and Groupe Forrest has said its interpretation of the amendment gives GTL the right to continue to process cobalt at the same rate until the resource is fully depleted.

In October 2016, independent assessments by Gecamines and GTL agreed that about 1.47 million tons of ore remained in the dump. That’s equivalent to a further five years of operations, Groupe Forrest said in April.

Despite the amendment, in December Gecamines said GTL had exceeded the quota permitted by the original contract and it reserved the right to annul the agreement, according to copies of correspondence provided by Groupe Forrest in April. Gecamines said in August that the amended contract abolished a 20-year fixed term contained in the original accord “while maintaining the maximum quantity of 75,000 tons of cobalt.”

Gecamines said its “external studies” showed GTL had surpassed its allowance and the state miner had “consequently ceased to deliver slag, in accordance with the terms of the contract.”

GTL has produced less than 65,000 tons and there is no production limit under the revised contract, Groupe Forrest said in April.

Source: Bloomberg

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