ENRC settles Congo claim with $1.25 billion deal

Thu Jan 5, 2012 9:09am EST
 
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LONDON (Reuters) - Kazakh miner ENRC ENRC.L said it agreed a $1.25 billion settlement with Canada's First Quantum Minerals FM.TO to end a long-running dispute over ownership of the Kolwezi project in the Democratic Republic of Congo.

The London-listed miner said on Thursday the deal would enable it to start developing its operations at the copper-cobalt Kolwezi Tailings project.

ENRC will pay $750 million plus a deferred consideration of $500 million as part of the settlement with First Quantum, the former owner of Kolwezi until its license was revoked by the DR Congo in 2009.

The dispute had been expected to go to trial after a court upheld First Quantum's $2 billion claim for damages for the revoked Congo asset in September.

Shares in FTSE 100 company ENRC gained 4.7 percent to 695.5 pence at 1343 GMT after the deal was announced, topping Britain's bluechip leader board .FTSE, while First Quantum's FQM.L London-listed shares rose 6.6 percent to 1,400 pence.

"This is really a compensation agreement. We have no idea what we are selling because we are not sure what is left of the assets," Clive Newall, President of First Quantum told Reuters in an interview.

Under the deal, ENRC will also acquire First Quantum's other assets in DR Congo, including the Frontier Mine, an asset whose ownership is disputed, the companies said.

"We have gained material assets and clarified the ownership structures in order to facilitate maximum value creation for ENRC's shareholders," Felix Vulis, chief executive of ENRC, said in a statement.

Completion of the deal, which requires third party approvals as well as the settlement of three arbitrations, is expected by the end of February, said ENRC.

"The Government of the Democratic Republic of the Congo welcomes the transaction as it was announced today which should benefit the country through employment and increased revenues," said Bene M'Poko, DR Congo's South African ambassador who acts as a government spokesman on mining affairs.

(Reporting by Sarah Young; Editing by Matt Scuffham and David Cowell)