Congo State Miner Handed Royalties To Israeli Billionaire Dan Gertler

The Democratic Republic of Congo’s state mining firm has signed away royalties from one of the country’s most lucrative mining projects to a company owned by a close friend of President Joseph Kabila, Global Witness said on Tuesday, allegations that were swiftly denied.

The NGO, which fights corruption and environmental and rights abuses, said state firm Gecamines signed over the royalties from Swiss mining giant Glencore for a copper project known as KCC to a Cayman Islands company called Africa Horizons Investment Ltd.

Africa Horizons is owned by Israeli billionaire Dan Gertler, who Global Witness said was involved in murky mining deals in DR Congo and was a close friend of Kabila.

Gertler’s Fleurette group hit back at the Global Witness claim, saying it was “highly misleading” and “based on factually inaccurate information”.

The financial calculations are “amateurish to the point of bogus,” Fleurette said.

‘Full value’

The January 2015 deal related to the Kamoto copper mines in southeastern DR Congo and was signed between Gecamines and the Fleurette Group.

The payments are fresh evidence of financial ties between Switzerland-based Glencore, one of the biggest publicly traded mining companies in the world, and Mr. Gertler, who is the subject of a U.S. Justice Department investigation, according to people familiar with the matter. Mr. Gertler has repeatedly denied paying bribes.

Under a deal with the Congolese government, Gecamines is allocated a slice of annual sales from a mining company known as KCC, short for Kamoto Copper Co., Fleurette said. KCC is majority-owned by Katanga Mining, which in turn is owned by both Glencore and Fleurette.

According to the companies and the documents seen by the Journal, the royalty payments were instead diverted to a Cayman Islands company called Africa Horizons Investment Ltd., which Fleurette owns.

Glencore, which controls and operates KCC, said in an email to AFP that it was “not involved in the negotiations between Gecamines and Africa Horizons” and that KCC “acted in accordance with the instructions it received from Gecamines” to operate the royalty transfer.

Global Witness said the contract “does not explain what, if anything, Congo’s state mining company received in compensation for handing over these rights” from the Kamoto mines.

“The royalties could generate as much as $880 million (820 million euros) -– more than Congo’s annual health spending,” it said.

“It’s troubling that the state miner Gecamines has signed away rights to potentially huge flows of cash that should go towards building Congo’s future,” said Global Witness campaigner Pete Jones.

Jones said the contract “provides no reason for Gecamines giving away these royalties”.

“It is imperative that Gecamines and Gertler explain what is behind this agreement. If they can’t show that this is a good deal for Congo, there should be an investigation into what’s really behind the agreement,” he said.

However, Fleurette said that the deal “ultimately resulted in Gecamines safeguarding value for the DRC economy and Fleurette making a considerable loss due to the subsequent collapse in commodity prices and suspension of… operations.”

Gecamines sold the royalties just before operations were suspended, meaning that Fleurette had to pay “in full for a royalty stream that ceased soon afterwards”.

“While Fleurette was left unable to recoup its investment, Gecamines received full value for it,” according to the group.

Gecamines director general Deogratias Ngele Masudi told AFP that the firm “does not comment on statements by NGOs even if they are international ones”.

And Glencore, in an email to AFP, simply said it was “not involved in the negotiations between Gecamines and Africa Horizons”.

DR Congo, a former Belgian territory, has one of Africa’s richest mineral reserves but has been wracked by unrest, misrule and corruption since independence.

Kabila took power in 2001, 10 days after the assassination of his father, the then-president, Laurent Kabila.

Mr. Gertler was a central figure in a $412 million settlement in September between the U.S. Justice Department and the Securities and Exchange Commission with New York hedge fund Och-Ziff Capital Management Group LLC.

The Justice Department found in its investigation that Mr. Gertler paid more than $100 million in bribes to Congolese officials, including President Joseph Kabila, in exchange for access to some of the nation’s best mineral assets.

Congolese government officials haven’t responded to requests for comment about the allegations. Prosecutors are weighing whether to charge Mr. Gertler in the alleged bribery matter, the people familiar with the matter have said.

Daniel Och, chairman and chief executive of Och-Ziff, said the events were “deeply disappointing” and called Och-Ziff’s conduct “inconsistent with our core values and not representative of our hundreds of employees world-wide.”

An Och-Ziff background check on Mr. Gertler found that he “is happy to use his political influence against those with whom he is in dispute…[and] keeps what can only be described as unsavory business associates,” according to the Justice Department’s settlement.