First Quantum copper/cobalt contract cancellation delays DRC debt deal

Canadian Govt. digs in its heels over FQM copper/cobalt contract cancellation delaying Congo debt rescheduling.

KINSHASA (Reuters) - 

Democratic Republic of Congo accused Canada on Tuesday of holding up a rescheduling of its foreign debt in a dispute over a cancelled mining contract in the country.

The International Monetary Fund (IMF) said this month the central African nation must arrange a rescheduling of its debt with the Paris Club of creditor nations before it could qualify to enter a global debt relief programme.

Congo is estimated to hold around $10-11 billion of foreign debt, the bulk of which is with the 19 developed countries who are members of the Paris Club.

Talks with them have been going on this week, but Congo said they had become snagged over its decision in August to cancel a copper and cobalt project in which Toronto-listed First Quantum Minerals (FM.TO: Quote) is the majority shareholder.

"They (the Canadians) have a problem with what's happened with a Canadian company, KMT," Information Minister Lambert Mende said of First Quantum's Kingamyambo Musonoi Tailings (KMT) unit.

"The Canadian government wants to use the Paris Club in order to resolve a particular problem. This is unacceptable."

Mende said Congo still expected its push for debt relief to go before the IMF next month. Separately, Deputy Mines Minister Victor Kasongo told Reuters Congo planned to make an official response to Canada on Wednesday.

Congo cancelled the $500 million KMT project in the Katanga mining heartland as part of a government review of contracts deemed to have been struck on unfair terms. The Congolese government has since said the deal could be renegotiated.

Court documents seen by Reuters late last month showed First Quantum must pay Congo $6 million in damages over three failed lawsuits it filed against the government and state agencies after the project was cancelled.

The company had earlier attempted to withdraw the suits and many analysts have said it could move the dispute to a court of international arbitration to defend its investment. ((Reporting by Joe Bavier; writing by Mark John; editing by Patrick Graham.)

© Thomson Reuters 2009 All rights reserved

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