DRC Says Ivanhoe Mines Deal Should Be Suspended

Reuters reported that a note from the Democratic Republic of Congo stated that the Ivanhoe Mines’s (TSX:IVN) sale of a stake in the Kamoa copper project  to China’s Zijin Mining should be suspended until the government’s concerns can be dealt with.

As quoted in the publication:

Vancouver-based Ivanhoe announced last month that it would sell a 49.5 percent stake in Ivanhoe subsidiary Kamoa Holding Ltd to China’s Zijin Mining Group Co Ltd for $412 million.

Kamoa Holding Ltd currently owns 95 percent of the project in Congo’s Katanga province.

In a statement released on Tuesday, the government, which holds a 5 percent stake in the Kamoa project, said Ivanhoe had promised it an additional 15 percent stake and expressed concern that the sale to Zijin would dilute its new shares.

Ivanhoe stated in a press release issued Wednesday that it was committed to finalizing an agreement for the sale of up to a 15 percent interest in the Kamoa project to the DRC government:

An announcement issued yesterday by the D.R. Congo’s Minister of Mines and Minister of Portfolio stated that any sale of up to 15% in Kamoa Copper SA (the entity that holds the Kamoa Copper Project exploitation permits, or mining licences) to the Congolese State would dilute China-based Zijin Mining Group’s future interest in the project. This is correct and is understood by both Zijin and Ivanhoe, which have acknowledged the expected future dilution in their agreement announced on May 26, 2015. Both Zijin and Ivanhoe would be diluted pro rata by any sale of a further interest of up to 15% in Kamoa Copper SA as their interests would be held through Kamoa Holding Limited (that currently owns 95% of Kamoa Copper SA), and accordingly that entity’s interest in Kamoa Copper SA would be reduced as a result of an increased DRC State interest. The government already is aware of this provision.

The ministers also suggested that a due diligence review be performed of Kamoa Copper SA. Ivanhoe does not believe that such a review is warranted, and should not delay the closing of its proposed transaction with Zijin. Ivanhoe previously obtained legal advice to confirm that no consent to the transaction with Zijin is required under Congolese law.

Ivanhoe remains committed to finalizing negotiations for the proposed sale of up to a further 15% interest in Kamoa Copper SA to the Congolese State. During a recent series of meetings, a senior Ivanhoe Mines team, led by Mr. Johansson, made a number of proposals to senior representatives of the DRC government regarding the proposed sale. Ivanhoe is awaiting a response to those proposals. While the recent meetings also discussed Zijin’s planned investment in the Kamoa Project, the two transactions are separate matters and Ivanhoe’s legal advice confirms that there is no basis for delaying the Zijin transaction pending settlement of the increased DRC State interest in Kamoa Copper SA.

Click here to read the full Reuters article.

Click here to read the full Ivanhoe Mines (TSX:IVN) press release.