Glencore’s (GLEN) lawyers have been working overtime. Last week, in the space of three days, the commodities giant appeared to have settled two of its multiple headaches in the Democratic Republic of Congo (DRC), home to two copper-cobalt mines at the centre of the FTSE 100 company's vision for long-term trends in metal markets.
First came a deal to plug a capital shortfall at the Katanga mine, via the conversion of $5.6bn (£4.3bn) of debt owed by DRC state miner Gécamines into $9bn of fresh equity. In exchange for the deal, Gécamines agreed to drop legal action that threatened to dissolve the joint venture and take control of its mining licences.
Two days later, Glencore said it would resume payments to Israeli billionaire Dan Gertler. In doing so, Mr Gertler agreed to drop a $3bn damages claim against royalties Glencore had failed to pay since the mining tycoon was added to a US sanctions list in December. The executive order against Mr Gertler alleges he amassed a fortune “through hundreds of millions of dollars’ worth of opaque and corrupt mining and oil deals” through his close relationship with DRC president Joseph Kabila. Mr Gertler denies the charge.
The settlement, which Glencore has concluded is “the only viable option to avoid the material risk of seizure”, will be made possible by paying royalties owed to Mr Gertler’s associated companies in euros, rather than dollars. In addition to a €44m (£39m) outstanding payment, Glencore will pay Mr Gertler €10m per quarter this year, rising to €16.5m per quarter in 2019. In doing so, the company could find itself on a collision course with the Office of Foreign Assets Control – the US Treasury department responsible for enforcing economic sanctions abroad.
Peter Jones, of natural resource campaign group Global Witness, called Glencore’s settlement “a brash test of the resolve of US authorities to uphold their sanctions”. The group has previously investigated a 2009 loan made by Glencore to Mr Gertler, and Mr Gertler’s subsequent sale of his stakes in the Katanga and Mutanda mines to Glencore.
