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15 mars 2017 3 15 /03 /mars /2017 13:24

Why Glencore bought Israeli tycoon out of Congo mines

https://www.ft.com/content/8c4de26e-0366-11e7-ace0-1ce02ef0def9

Why Glencore bought Israeli tycoon out of Congo mines

Group distances itself from Dan Gertler after he was implicated in bribery
Tom Burgis, FT March 13, 2017

After years of doing business together in one of the world’s poorest countries, Glencore has dissociated itself from Dan Gertler, an Israeli mining tycoon implicated in the payment of bribes to the ruler of the Democratic Republic of Congo.

Glencore’s announcement last month that it would pay $534m to Mr Gertler to buy him out from their shared prize assets in the DRC — two giant copper mines — is designed to insulate the London-listed mining cum trading behemoth from the fallout of a widening corruption investigation involving the Israeli businessman, say people who have followed the saga.

The decision by Ivan Glasenberg, Glencore’s chief executive, highlights the risks of doing business in the resource-rich, war-torn central African country, where Mr Gertler wields influence by virtue of his close friendship with Joseph Kabila, the DRC president.

Settlement documents released in September by US authorities in a scandal involving Och-Ziff, the New York hedge fund, alleged that an “Israeli businessman” — whose description clearly matches Mr Gertler — had paid bribes to Mr Kabila in order to obtain special access to mining rights in the DRC.

One banker who does dealmaking in the mining sector and owns Glencore shares says the company’s purchase of Mr Gertler’s stakes in the two DRC copper mines is defensive. “Buying out Gertler is primarily about detoxification for Glencore,” he adds. “The Och-Ziff investigation in the US has made it very risky to have clear ties to him.”

Shareholders also say it makes sense for Glencore to buy out Mr Gertler from the two mines, partly because of the Och-Ziff case.

Mr Gertler has denied wrongdoing, and says his efforts to bring billions of dollars in investment to the DRC deserve a Nobel Prize.

The Financial Times has established a paper trail that shows how Glencore helped Mr Gertler maintain his shareholding in one large copper mine in the DRC — and how the Israeli went on to use that stock to raise funds for what US authorities say was a bribery scheme. The trail weaves through opaque offshore havens and the world’s leading mining bourses.
It begins with a takeover battle nine years ago, waged well before Glencore’s blockbuster initial public offering in London in 2011.

In late 2008, Toronto-listed Katanga Mining was on its knees. It controlled one of the planet’s highest-grade copper deposits, in the DRC’s Katanga province, but prices for the metal had tumbled. In the thick of the financial crisis, no one would lend the company money — except Glencore, which under Mr Glasenberg was hungry for high, and sometimes risky, returns.

Glencore’s largesse came in the form of a $265m loan to Katanga Mining in January 2009 that could be turned into stock.

With Katanga’s share price having collapsed, when Glencore converted the loan into equity, it amounted to a takeover. The other shareholders were all but wiped out — except Mr Gertler, whose interests the Swiss group’s actions helped to protect.

Mr Gertler had built up a significant minority stake in Katanga Mining, and Glencore’s “loan-to-own” arrangement would have heavily diluted his shareholding.

But instead, Glencore issued a loan of $45m to Mr Gertler in February 2009, which was channelled through Bermuda and the British Virgin Islands and enabled Mr Gertler to preserve his shareholding in Katanga, according to corporate records.

Glencore made no such loan to other Katanga shareholders. Its loan to Mr Gertler emerged only in 2014 when the campaign group Global Witness was leaked the paperwork.

By the time of this loan in 2009, Mr Gertler and Glencore had already had shared ownership of a mining business in the DRC — and the Israeli was well known as a controversial figure in the country.

As far back as 2001, UN investigators probing the role of the mining industry in funding civil war in the DRC had pointed a finger at Mr Gertler. They reported that, in exchange for a monopoly on trading the country’s diamonds, he had supplied the then-president Laurent Kabila with funds to buy weapons. Kabila was assassinated that year and succeeded by his son Joseph, with whom Mr Gertler had struck up a friendship.

 

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  • : Congo Panorama. Le blog du soldat du peuple: Par Antoine Roger Lokongo, le Soldat du Peuple engagé dans la bataille des idées pour un Congo meilleur. Un Congo qui s'assume et devient un parténaire clé de la Chine, hier un pays sous-développé, qui, en un lapse de temps, a changé son destin en comptant sur ses propres efforts et devenu une puissance.
  • Congo Panorama. Le blog du soldat du peuple: Par Antoine Roger Lokongo, le Soldat du Peuple engagé dans la bataille des idées pour un Congo meilleur. Un Congo qui s'assume et devient un parténaire clé de la Chine, hier un pays sous-développé, qui, en un lapse de temps, a changé son destin en comptant sur ses propres efforts et devenu une puissance.
  • : A partir des idées de mes héros, Patrice Emery Lumumba et Laurent Désiré Kabila, je suis l'actualité politique de mon pays, la République Démocratique du Congo en partuclier et de l'Afrique en général et je donne mes commentaires. Antoine Roger Lokongo
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