Beijing-based Creat Group has come up with a counter offer, to that tabled by Camrose, for Africo, which apparently owns 75% of Kalukundi, situated in the Democratic Republic of the Congo's mineral-rich Katanga Province. Kalukundi ranks as one of the richest medium sized copper-cobalt deposits ever known.
Creat has offered to buy 35m units in Toronto-listed Africo for CAD 3.00 a unit, each unit comprising one common share of Africo and one-half of one warrant. Each whole warrant entitles Creat to buy an additional Africo common share at a price of CAD 4.00 for a period of 24 months from issue date.
The Creat offer clashes head on with a standing offer from Camrose, which on 17 April offered to subscribe for 40m common Africo shares and 20m common share purchase warrants, each warrant entitling the holder to acquire one common share of Africo at a price of CAD 3.50 for a period of 18 months. The aggregate purchase price payable by Camrose is CAD 100m, being CAD 2.50 for each common share and ½ of a warrant.
Behind Kalukundi lies one of Africa's greatest little stories, a would-be swindle that throws tons of cold water on every do-gooder promising to save the continent. The would-be swindle can be conveniently traced to February 23 2007, when Africo was advised that one of its former employees in the DRC, Alejandro Berardone, had ex parte and without proper notice to the company, obtained a default judgement against Africo for the payment of damages in the amount of USD 3,000,400.
In fact, this judgment was made many months before. Berardone had been previously laid off by Africo. Judge Laurent Kimukedi made a predated first judgement in favour of Berardone, according to DRC labour laws, awarding him around USD 30,000. In the DRC, only a maximum of three years' pay may be ordered to be paid in a labour dispute. The USD 3m judgment implied that Berardone earned USD 1m a year, which was simply not anywhere near the facts.
On April 18 2007 Africo said it had acquired the shares of H&J Swanepoel Famille Trust SPRL. Thus Africo now held an effective 75% interest in the Kalukundi Property, with the balance of 25% held by DRC parastatal Gecamines.
On April 27 2007 Africo was advised of a decision rendered by a court in Lubumbashi, capital of Katanga Province, in a matter between Akam Mining SPRL and Gecamines. A translation of the decision indicated that it contained a declaration by the court to the effect that it accepts the assertion by Akam that Akam (and thus not Africo through its subsidiaries) was the effective owner of 75% of Kalukundi.
The decision appeared to accept Akam's claim that it acquired 75% of Swanmines at a sale in execution pursuant to the Berardone judgment, for the sum of USD 600,000. In fact the public sale of Africo's shares shares to Akam Mining occurred months before, on December 17 2006. Africo was advised by DRC counsel that the purported sale was illegal.
The case has been kicked around in the courts for months, both in Lubumbashi, and in Kinshasa, the country capital. In Kinshasa, last month, the Supreme Court heard a case of alleged judicial misconduct again against three senior judicial officers: Judge Mungange Jimmy Muyambo, President of the Lubumbashi Court, regarding ordonnances 955/06 and 974/06; Judge Leon Inyongo Mboyo, for judgment RC16855, and Judge Christian Kalumba Ilunga, for judgment RC16195 and ordonnance 360/07. The judgments and ordinances mentioned all relate to the Akam-Kalukundi matter.
So far as is known, judgment on the matter has not yet been handed down. It is thought by some observers that the matter may be finalised, now that Benoît Lwamba Bindu, erstwhile Premier Président de la Cour Suprême de Justice, has been retired.
One interesting aside is that despite the unresolved legal issues, Akam (apparently owned by one Antoine Mununga, and his wife) recently changed hands. Camrose, a recently-established special purpose vehicle, incorporated and registered in the British Virgin Islands, owned by a trust for the benefit of the family of Dan Gertler, is also the sole shareholder of Kigala International Limited, which has purchased the entire share capital of Akam.
Camrose will cause Akam to assign all of its rights, title and interest in Swanmines sprl to a wholly-owned subsidiary of Africo in consideration of the issuance to Camrose of
5.4m Africo shares at a deemed price of CAD 2.50 a share. If all goes according to apparent plans, including the lapsing of the Creat offer, Gertler would end up with an indirect controlling stake of 71% of Africo, for a visible cash cost of CAD 100m.
The Creat offer is conditional, and ahead of today's annual and special meeting of Africo, Africo's management says that it is of the view that it cannot consider the proposal from Creat. Africo's management is further of the view that the injection in the short term of CAD 100m equity capital by Camrose at CAD 2.50 per unit as well as the potential project synergies provided through the adjacent Mashitu properties and the settlement of the Akam legal dispute, when taken together, are in the best interests of Africo and its shareholders.
Today, at Africo's annual and special meeting, shareholders will also be called to vote on the proposed sale of Comide, also known as Mashitu, 75% held by Camrose, to Africo. The Comide grounds are adjacent to Kalukundi. Africo's management has been advised by Camrose that, while the number of common shares to be issued cannot be known at this time, based on the work done to date on the concession, Camrose currently anticipates that no more than 120m common shares of Africo, representing a maximum valuation of CAD 300 million, would have to be issued. Should this deal proceed on this basis, Gertler would then control 93% of Africo, assuming no other stock issuance transactions take place.
Based on Kalukundi's stated reserves - as opposed to resources, which are far higher - the value of copper and cobalt in the ground at the deposit is USD 7bn at prevailing
metal prices. One veteran mining man based in Katanga Province says that Gertler would be getting into Kalukundi for a fraction of its value. As for Mashitu, he says that it's a small fragment that is not considered to be worth more that USD 10m.
As for Berardone, he last year bought a property in Colonia del Sacramento in Uruguay, listed as World Heritage. Berardone's pad is two blocks from the Historic Quarter of Barrio Historico. As for Judge Mungange Jimmy Muyambo, word is that he has been removed from office by order of his minister and relocated to a backwater office in Kinshasa. He is said to be very, very angry.
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