Heavy machinery at First Quantum's Frontier copper mine in Fungurume, southern Democratic Republic of Congo.KATRINA MANSON
Canada is holding up a plan to write off billions of debt issued by the Democratic Republic of the Congo amid a dispute between a Canadian miner and the Congolese government.
The Canadian government has waded into a conflict over a mining property held by Vancouver-based First Quantum Minerals Ltd., voicing concern about the Congo's treatment of the company in recent months.
A Congo court recently annulled mining rights for First Quantum's Frontier and Lonshi mines, ruling they were awarded illegally and should revert to state-owned Sodimico.
First Quantum, which has been operating in Congo since 2000, has said the ruling was in retaliation for its decision to go to international arbitration over Congo's decision to stop construction of its Kolwezi copper-and-cobalt project last fall.
Congo had hoped a World Bank decision on whether to relieve about $8-billion in debt would come before its 50th independence jubilee on Wednesday. But Canada asked for a delay on the decision earlier this week, according to sources familiar with the matter.
The dispute between First Quantum and the Congolese government highlights the risks miners increasingly face as they delve into the deeper corners of the world to find mineral resources.
Miners that operate in Africa in particular are considered more volatile for investors, who are often required to factor in what's known as the "Africa discount" on the company's share price.
Canada's role in delaying the debt decision may be to send a message to countries that any moves to nationalize assets held by Canadian companies would face consequences.
"We will continue to work with our international partners to ensure Canadian investment in the DRC is protected, while empowering those within the country as they work towards peace and sustainable economic development," a spokesman for Finance Minister Jim Flaherty told Reuters.
The World Bank is scheduled to discuss Congo's debt at its board meeting on Thursday. If the debt relief does come, it will cut Congo's annual debt service burden to $194-million from $920-million.
Canada weighed in on the Congo issue "due to ongoing concerns related to governance, rule of law, and preoccupations about what these realities mean for sustainability of the debt relief program," said a Canadian official who requested anonymity.
First Quantum has declined requests for comment.
Though most mining companies operate abroad largely without ownership disputes, some have suffered through protracted battles.
Toronto miner Crystallex International Corp. struggled for years to get approvals from the Venezuelan government to develop the Las Cristinas gold project in that country, amid reports the government has taken over the development.
Last month, Crystallex said it would cede majority control over the project to a subsidiary of China Railway Engineering Corp., one of the world's largest companies with multibillion-dollar connections to Venezuela in the oil business.
There have also been reports that the Pakistan government is pursuing plans to cancel a licence for the Reko Diq gold-copper project in the country, now held by Toronto-based Barrick Gold Corp. and Chilean partner Antofagasta, and to develop the mine itself. Barrick has said it is unaware of such a move by the government in Pakistan.
With files from Reuters