Kazakh miner ENRC
The company said it 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of $500 million as part of the settlement with First Quantum, the former owner of Kolwezi until its licence was revoked by the DR Congo in 2009.
ENRC said on Thursday the deal would enable it to start developing copper-cobalt deposits at the Kolwezi Tailings project, while also raising its exposure to DR Congo through the acquisition of additional assets.
The London-listed company will hope the deal closes a tumultuous chapter after its controversial acquisition of the disputed Kolwezi project led to repeated reports of internal disagreements and prompted several directors to quit.
First Quantum launched legal claims against ENRC after it bought the expropriated asset in 2010. The dispute had been expected to go to trial after a court upheld First Quantum's $2 billion damage claim for the asset in September.
Shares in FTSE 100-listed ENRC jumped 5.9 percent to 703.5 pence at 3:33 p.m. after the deal was announced, topping Britain's bluechip leader board <.FTSE>, while First Quantum's
Analysts at Citigroup called the deal a win-win for both companies, seeing pure upside for First Quantum since analysts had attributed no value to the assets and a green light for ENRC to begin commissioning Kolwezi.
More importantly, it removes a legal overhang for ENRC, Citi's Anindya Mohinta said.
ENRC Chief Executive Felix Vulis said he was not worried about DR Congo's high political risk profile, illustrated by contract wrangles over China Minmetals Resources' <1208.HK> recent acquisition of Anvil Mining
We are pretty confident that this relationship (with the DR Congo) will have no problems in the future...there is obviously some risk involved, but as at this moment we are pretty comfortable, he said on an analyst call.
The DR Congo appeared to give its blessing to the deal.
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 South African ambassador Bene M'Poko, who acts as a government spokesman on mining affairs.
ENRC said it will need to invest between $100 million and $200 million, a figure which includes working capital and capital expenditure, over 12 to 18 months to bring the Kolwezi plant into operation.
The Kazakh company added that the deal involved it acquiring all of First Quantum's assets in the DR Congo, boosting its presence in the country through the acquisition of the Frontier Mine and the Lonshi Mine.
Vulis said that ENRC would be able to restart production at the Frontier Mine within 12 to 18 months at an estimated cost of $150 million, but conceded that it needs to acquire the mining licence before doing so, as it currently only owns the property.
The mining licence for these properties belong to a Hong Kong-based company. By closing this transaction it will allow us to discuss potential situations with the licence holder of these specific assets, he said on a call with analysts.
The identities of the owners and ultimate beneficiaries of the Hong Kong-based company are unclear.
Vulis also said that ENRC would clarify its ultimate plans for its copper assets in Africa upon completion of the deal.
First Quantum president Clive Newall called the deal a compensation agreement.
We have no idea what we are selling because we are not sure what is left of the assets, he told Reuters in an interview.
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.
(Additional reporting by Clara Ferreira Marques; Editing by Matt Scuffham and David Cowell)