Katanga and Canadian Regulator Near Settlement

The Ontario Securities Commission has announced it will be considering whether to move forward with a settlement between itself and Glencore’s (LSE:GLEN) Katanga Mining (TSX:KAT) over its business dealings in the Democratic Republic of Congo (DRC).

The commission’s Monday (December 17) release, said that it would be conducting a hearing to “consider whether it is in the public interest to approve a settlement agreement” with Katanga and several executives associated with the DRC-focused company and its majority owner Glencore, reportedly to the tune of C$30 million, according to the Wall Street Journal.

In a statement of allegations, the commission alleged that Katanga’s leadership team undermined their own corporate guidance and as a result, the company made misleading financial disclosures that were against public interest.

Katanga’s area of operation — copper and cobalt mining in the DRC — was highlighted by the commission as “a country perceived to have significant risk of public sector corruption.”

The company acknowledged the hearing in a press release, but said the terms of the agreement were required to be kept confidential.

The settlement hearing will be conducted on Tuesday (December 18) in Toronto. As of Monday, it has not been revealed by the commission or Katanga whether the executives and Katanga Mining have admitted to any wrongdoing.

The Wall Street Journal report cited an unnamed source familiar with the matter, that said Katanga and the executives named had agreed to pay C$30 million to settle the allegations.

Israeli businessman Dan Gertler also featured heavily in the commission’s statement of allegations, noting that Katanga’s executives failed to reveal its reliance on dealing with Gertler in the DRC, and failed to disclose “the risk that a cessation or deterioration in Katanga’s business relationships with the Gertler Associates could have an adverse impact on Katanga’s business.”

Gertler is known to have a close relationship with DRC President Joseph Kabila, who recently defended the Israeli businessman in the face of US corruption allegations.

Gertler has featured prominently in the news for Glencore in 2018, having historical ties to the company in the DRC until his stakes in JVs shared with Glencore were bought out in early 2017.

A tiff over royalties paid to Gertler by Glencore earlier this year concluded with a US$3-billion payout after Gertler began tying up the company’s copper and cobalt operations in the Congo courts.

Executives named by the commission included Glencore’s recently forced out copper chief Aristotelis Mistakidis, as well as high-ranking executives Tim Henderson, Liam Gallagher, Jeffrey Best, Jacques Lubbe, and Matthew Colwill.

Current Katanga CEO and director Johnny Blizzard was also named.

The commission has been undertaking a probe into Katanga’s financial dealings since mid-2017.

On the TSX, Katanga was down 6.35 percent with the release of the news, trading at C$0.59 as of 1:45pm EST. Glencore on the other hand was up 1.59 percent on the London Stock Exchange.

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Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any company mentioned in this article.