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Glencore settles legal scrap over Congo joint venture

Glencore has settled a thorny legal fight in the Democratic Republic of Congo over a copper mining joint venture.
The FTSE 100 miner has agreed to recapitalise Kamoto Copper Company, which is 25pc owned by state-backed company Gecamines and 75pc by Katanga Mining, which is in turn majority owned by Glencore.
Under the plan, Glencore will forgive more than half of Kamoto’s $9bn (?6.7bn) debt, swapping $5.6bn into equity, and make a number of smaller payments to Gecamines. 
In return Gecamines will drop legal action that could have resulted in the dissolution of the company and Glencore losing Kamoto’s mining licence.
The ownership structure of the joint venture will remain the same.
The row erupted earlier this year when Gecamines accused Glencore of “draining, to its own benefit, the treasury and wealth of the joint company”. It said Kamoto’s debts to Glencore had built up over a decade, with the mining giant charging high interest rates on its loans, throttling the venture’s ability to pay dividends.
Glencore settles legal scrap over Congo joint venture

Mine workers at Katanga
The dispute was seen as a part of a wider attempt by the government in Kinshasa to tighten the freedom of foreign companies operating in the impoverished central African country. The DRC has also imposed new royalties and taxes on its minerals under a new mining code.
The country is a major source of copper, used in electric wiring, and cobalt, which is in high demand for batteries, and Kamoto operates one of its largest mines.
Analysts hailed the deal, which sent Glencore’s shares up 2.5pc to 393p, saying it resolved one of three problems the company faced in the DRC; in addition to the mining code, it is locked in a legal dispute with its former partner, Dan Gertler, who claims he is owed royalty payments from two of Glencore’s mines.
Paul Gait of Bernstein said it was “a great outcome for Glencore”, expelling fears that Kinshasa was looking to seize control of its assets.
Glencore
“It shows that Gecamines and the Congo are not just out to expropriate assets,” Mr Gait said. “[And] it shows that appropriate commercial negotiation can reach positive outcomes.”
Despite the size of the debt forgiveness, the cash impact to Glencore is likely to be minimal.
"While $5.6bn seems a lot to effectively write off to hold onto the asset, this is not cash Glencore has directly put into the asset. Much of it corresponds to debt held at the asset when Glencore purchased it," said analysts at Credit Suisse.
Glencore’s shares have underperformed its peers in recent months as investors have largely written off the value of its DRC mines while political uncertainty has dragged on.
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