By Scott Patterson
Swiss mining giant Glencore PLC unveiled a sweeping $5.6 billion restructuring of its troubled Congo copper company, Katanga Mining Ltd., resolving a heated dispute with Congo's state-run mining company about a massive debt load it has built up over the past decade.
Glencore said Katanga Mining will issue $5.6 billion in stock, which it will use to retire debt. The company had been saddled with $9.2 billion in high-interest debt, most of which is owed to Glencore.
The move is the latest in a long-running saga involving Katanga Mining, one of Glencore's flagship Congolese copper mines. The operation has been plagued with recurring spills and power outages as it struggled to meet ambitious production targets. Glencore suspended operations at Katanga in 2015 to revamp its infrastructure and boost production.
Along the way, Katanga Mining ran up a staggering debt load that Congo's state-run mining company, Gecamines, said created a shortfall in capital that violated Congolese law.
In April, Gecamines brought Katanga Mining to court in Congo, seeking to dissolve its Kamoto Copper Co. subsidiary, known as KCC, for its failure to resolve the capital deficiency. Katanga Mining owns 75% of KCC, which operates a giant copper and cobalt mine in Congo's southeastern copper belt. Gecamines owns the remaining stake. Glencore owns 86% of Katanga Mining.
Glencore said Gecamines will receive a one-time payment of $150 million to resolve a number of "historical commercial disputes." Glencore will also waive a $285 million payment Gecamines had agreed to make several years ago.
Gecamines, in return for the concessions, has agreed to withdraw from its lawsuit, Glencore said.
Glencore has faced numerous headaches involving Katanga Mining in recent years. In November, Glencore shuffled Katanga's board following an internal review that found weaknesses in Katanga's controls over financial reporting. Three Katanga directors stepped down from the board following an internal review that found "material weaknesses" in the company's controls over financial reporting, according to a Glencore announcement at the time.
The move came amid an investigation by Canada's Ontario Securities Commission, or OSC, into governance practices at Katanga Mining. The Wall Street Journal reported last July that Glencore is subject to an investigation by Canada's OSC regarding payments Katanga Mining made to a company owned by an Israeli businessman.
Write to Scott Patterson at [email protected]