Dispute puts spotlight on Zaire’s mineral wealth

Despite lingering controversy over the right of Consolidated Eurocan Ventures (KEU-T) to develop a giant copper-cobalt resource in Zaire, the junior is proceeding with financing for the project.

To raise $120 million, Eurocan has hired a group of underwriters to sell up to 23.5 million special warrants at $5.10 each. Each special warrant will be exchangeable into one common share.

Eurocan is one of several companies controlled by mining promoter Adolf Lundin, who says his group won the right to develop the Tenke Fungurume property from Gecamines, Zaire’s state-owned mining company.

Tenke Fungurume hosts two copper-cobalt deposits in Shaba Province. Resources are estimated to exceed 222 million tonnes grading 4.42% copper and 0.33% cobalt, including proven reserves of 92.6 million tonnes grading 4.59% copper and 0.36% cobalt. These reserves have been deemed minable by open-pit methods.

Eurocan believes further exploration could increase this resource to 1 billion tonnes.

Under the tentative agreement with Gecamines (expected to close by the end of August), Lundin will acquire a 55% stake in the 278-sq.-km concession in exchange for cash payments totalling US$250 million and a commitment to develop the property. Lundin will then assign his interest to Consolidated Eurocan in exchange for 30 million shares.

The payments include US$50 million upon signing of the deal, US$40 upon completion of a feasibility study within two years, and US$160 million upon startup.

Meanwhile, however, a consortium led by Cornucopia Resources (CNP-T) and including heavyweights such as Inco (N-TSE) Phelps Dodge (PD-NYSE), is competing for development rights.

Cornucopia President Andrew Milligan says his company was invited by the Zairean government to submit a development proposal. Kengo wa Dondo, the country’s prime minister, was said to be dissatisfied with the proposals that had been submitted thus far. At the end of July, the consortium completed due diligence on the property in preparation for a bid.

Lundin initiated discussions to acquire Tenke Fungurume in early 1994, when Gecamines was on the verge of collapse following years of mismanagement. He says his group was recently advised, in writing, that it had been selected to develop the property and that Zairean President Mobutu congratulated him on his success during a meeting in mid-August.

Zaire has always been considered one of the richest countries in the world in terms of mineral (especially copper) resources. But political and economic strife, compounded by alleged corruption in the government, have discouraged foreign investment in recent decades.

In the 1970s, a consortium, including Anglo American, spent US$286 million developing Tenke Fungurume, only to withdraw support for the project when the country became beset with political crises.

But in recent months, foreign companies have been snapping up Zaire’s deposits in surprising numbers. Barrick Gold, International Panorama Resources, American Mineral Fields and Anglo American have all signed agreements for exploration or development. Cornucopia and Inco, under a “strategic alliance” formed earlier this year, are investigating several concessions.

“Zaire has to have the greatest mineral potential of any country in the world,” says Milligan. “The recent interest developed because of a new and enlightened policy, supported by President Mobutu, that the country should now take advantage of foreign capital and foreign expertise to develop this potential.”

The prized Tenke Fungurume resource is a stratabound copper-cobalt deposit occurring in strongly folded and faulted Proterozoic shales and dolomites.

Economic mineralization in the oxide zone, which extends as far as 250 metres below surface, consists of malachite, pseudomalachite, chrysocolla and heterogenite. Economic sulphide minerals include chalcocite, digenite, bornite, carrollite and chalcopyrite.

The concession is served by paved roads and major railways, as well as an airstrip. Port facilities in Tanzania and South Africa are accessible by rail.

Still, one estimate suggests that capital costs for the project would be as much as US$2-3 billion, including US$300 million for initial development.