Anglo bids farewell to Kolwezi (July 11, 2002)

As part of a wider plan to restructure its base metals portfolio, global mining giant Anglo American (AAUK-Q) has decided to sell of its half-interest in Congo Mineral Developments (CMD), the joint venture that holds a 60% interest in the Kolwezi copper-cobalt tailings project in the Democratic Republic of Congo.

Anglo has agreed to sell its stake in CMD to joint venture partner America Mineral Fields (AMZ-T) for about US$3.5 million. The deal also includes a cross-licensing agreement, which will provide CMD with technical know-how to implement the project.

Anglo is repositioning its base metal holdings to contain only, “major interests in larger scale projects.”

Last summer, CMD renegotiated the terms of an agreement to develop Kolwezi. Under the revised agreement, CMD will pay Gecamines US$25 million before building a mine, followed by another US$10 million once the project is commissioned. Under the old deal a payment of US$130 million was required before commercial production.

At that time, the partners also agreed to renew their joint-venture agreement before May 31, 2002, to allow time to conclude documentation with Congolese authorities, thereby removing uncertainty with respect to the project’s future development.

The revised Kolwezi agreement is based on a phased project, with initial annual production of 42,000 tonnes of copper and 7,000 tonnes of cobalt. The tailings are held in two dams (Kingamyambo and Musonoi) that contain 112.8 million tonnes grading 1.49% copper and 0.32% cobalt. Some 97% of the resources are classified as measured, the balance fall in the indicated resource category.

Kingamyambo contains about 42.3 million tonnes and is 20 metres high. Another 70.5 million tonnes of tailings were discharged into the Musonoi river valley, causing significant environmental degradation.

Work done to date includes the proving up of reserves, successfully operation of a pilot plant and the development of a process flow sheet.

AMZ says it considers Kolwezi a core asset and it welcomes a larger stake in the project. The company also notes that it is entertaining new prospective investors in CMD.

State mining company Gecamines owns the remaining 40% of Kolwezi.

AMZ still needs to secure “unequivocal title” to Kolwezi through amendments to the DRC’s mining code, and through presidential and constitutional decrees ratifying the commercial terms of the agreement with Gecamines.