Repayments for a Loan? Required Disclosure – Dan Gertler and Glencor PLC

Bloomberg Markets March 2, 2017

Glencore Paid Gertler’s Firm $100 Million Congo Royalties

Glencore Plc paid more than $100 million previously owed to the Democratic Republic of Congo’s state mining business to a company controlled by billionaire investor Dan Gertler, according to advocacy group Global Witness.

It’s the first time the value of the payments made to Gertler have been made public, after London-based Global Witness reported in November that government-owned Gecamines signed over its royalties from the Kamoto copper project in southeastern Congo to Gertler in January 2015. Gertler’s privately held Fleurette Group said the payments were made on instruction from Gecamines to help repay a loan.

Glencore’s Katanga Mining Ltd. made the royalty and contractual bonus payments over the past four years to Africa Horizons Investments Ltd., a unit of Fleurette, Global Witness said in a report published Friday. Glencore confirmed the payments to Gertler’s company in a letter to the advocacy group. In previous filings, Katanga Mining either said the payments went to Gecamines or didn’t specify the recipients.

“The discrepancy between Katanga Mining’s filings and the real recipient of these huge payments runs the risk of misleading investors,” Pete Jones, a campaigner with Global Witness, said in the statement. “Investors need to ask Glencore why it felt comfortable making these payments and why it didn’t clearly disclose Gertler as the recipient.”

In Compliance

Glencore said in an emailed response to questions it complied with all disclosure obligations relating to Katanga Mining. Glencore made the payments to Gertler’s Africa Horizons at Gecamines’ request, it said.

Fleurette “always discloses anything that it is obligated to disclose,” it said in an emailed response to questions. Gecamines instructed Kamoto to make the payments to Africa Horizons in “partial-satisfaction” of a $196 million 2013 loan from Fleurette, it said.

Gecamines hasn’t yet responded to an emailed request for comment. It didn’t comment when the first Global Witness report was issued in November.

Katanga Mining paid royalties worth a combined $41.9 million to Africa Horizons in 2013 and 2014, according to Global Witness. In addition, Katanga Mining paid contractual bonus payments originally intended for Gecamines to Africa Horizons worth $60.5 million between 2013 and 2015, it said, citing company filings.

At the time of the payments, Gertler held a 10.3 percent stake in Toronto-listed Katanga Mining. Gecamines owns 25 percent of the Canadian company’s local operating unit, Kamoto Copper Co.

Gecamines Instructions

The transfers were made to Africa Horizons in accordance with payment instructions from Gecamines and a subsequent royalty agreement signed by Kamoto, Gecamines and Africa Horizons in 2015, Glencore said on Thursday.

The royalty payments underline Glencore’s successful but complicated relationship with Gertler. The pair began investing in mines in Congo almost a decade ago, acquiring stakes in Katanga Mining and combining assets to create Mutanda Mining, now the world’s biggest cobalt mine and a major copper producer. They announced the end of their partnership last month, when the commodities trader agreed to buy Gertler’s stakes in both projects for a combined $960 million. The deal came four months after Glencore said it was reviewingbribery allegations by U.S. authorities said to implicate the billionaire. Gertler denies any wrongdoing and hasn’t been charged.

Legacy agreements, including the Kamoto royalty arrangement, mean Gertler will continue to earn millions of dollars from the Glencore mines despite exiting the projects.

Underlying Basis

The Swiss commodities trader in November said it was satisfied there was an underlying basis for the assignment of the Kamoto revenue by Gecamines to Gertler, but has disclosed no further information on the particulars of the deal.

Africa Horizons bought the royalty-revenue stream from Gecamines, Fleurette said at the time, but declined to comment on whether it was linked to the earlier loan and made no mention of the contractual bonus payments that it has also received.

Gecamines has faced criticism in the past five years from the International Monetary Fund and advocacy groups including Global Witness for selling assets in non-transparent procedures.



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