First Quantum lobbies to reinstate Congo contract

By Joe Bavier

KINSHASA, Aug 11 (Reuters) - Toronto-listed mining firm First Quantum Minerals has urged the Congolese government to review and reverse a decision to cancel one of its copper and cobalt mining project in the central African nation.

Last week, Democratic Republic of Congo concluded a long-delayed review of 61 mining contracts signed mostly during the chaos and corruption of a 1998-2003 war and the three-year transitional government that followed.

The government cancelled a contract with First Quantum's Kingamyambo Musonoi Tailings (KMT) unit, saying among other things, the company had failed to begin commercial exploitation within an agreed timeframe.

In a letter from Congo Minerals Development (CMD), a wholly owned subsidiary of First Quantum and a partner in the joint venture with state miner Gecamines, the company called on the government to take a second look at the deal.

"We are seeking a re-examination by your government of the decision to dissolve the KMT partnership," read the letter addressed to Congolese Prime Minister Adolphe Muzito and President Joseph Kabila and seen by Reuters on Tuesday.

The contract review, launched in early 2007 following landmark elections the year before, was intended to boost revenues from the country's potentially lucrative mining sector and bring contracts up to international minimum standards.

Four of the last remaining contracts were approved in last week's decision, but the flagship Tenke Fungurume project was not given the final go-ahead. [ID:nL6230685]

CMD argued it had lived up to the agreements outlined in the contract used by the government as grounds for its cancellation.

"It clearly appears that the government was not informed of the erroneous character or of the very weak legal and economic arguments invoked in regards to the project," the letter, dated Aug. 6, read.

CMD signed its joint venture agreement with Gecamines in March 2004. Its partners in the project include the World Bank's International Finance Corporation and the Industrial Development Corporation of South Africa.

In the letter, the company claimed a 44-month timeframe for the project, cited by the cabinet decision as the period during which KMT should have entered into commercial exploitation, was a non-binding guideline.

The issue of the timeframe was among five points, which also included the failure to pay royalties, given by the government as reasons for the contract's termination.