Camec withdraws bid for Katanga

Central African Exploration and Mining Co. (Camec) (CFM-L) did the expected on Thursday when it withdrew its all-share offer for Toronto Stock Exchange-listed Katanga Mining (KAT-T).

We have decided to withdraw our offer for Katanga following consultation with (Congolese businessman) George Forrest and our other partners. We are confident that we will be able to reconfirm our rightful ownership of our mining permits in the DRC, said Andrew Groves, chief executive of Camec, in a statement.

The company was forced into the decision after its shares dropped dramatically following news that the government of the Democratic Republic of the Congo had revoked two Camec copper-cobalt operating licences: one for area C19, host to the companys Luita solvent extraction-electrowinning facility; the other for Mukondo.

The drop in Camec’s share price and a corresponding rise in the price of Katanga’s paper, meant that Camec’s original bid was worth a touch more than half of Katanga’s market cap on Thursday.

Camec says it was aware that the DRC government is reviewing certain mining leases, including those held by Camec and Katanga.

Camecs licences were granted in 2004 after a 6-year civil war

For its part, Camec believes there is no legal valid basis for any revocation, and that the announcement of this potential action was clearly timed to impact CAMEC’s Offer for Katanga.

The company also blamed commercial forces in the DRC who oppose Camec’s acquisition of Katanga.

Camec has appealed the decision and is allowed to continue work on both properties until a local court renders a decision on the appeal.

Moreover, Camec says it will launch international arbitration proceedings against the government of the DRC — including various government agencies and individuals personally involved – to recover any losses which Camec could suffer as a result of the licences being revoked.

The DRC government is currently reviewing about 60 mining licences, which were granted as far back as 1998.