04 06 14 Global itness – Glencore and the Gatekeeper
Glencore, the world’s largest
commodities trader, enriched a friend of the Democratic Republic of Congo’s
president by tens of millions of dollars and structured deals to protect his
interests as it gained control of one of Africa’s biggest copper miners, new
research by Global Witness reveals.
The company—now
Glencore-Xstrata— made secret loans to Dan Gertler and knowingly entered
loss-making deals with him from 2007 to 2010. Together Glencore and Gertler took
over one of Congo’s biggest copper producers, Toronto-listed Katanga Mining. In
the process, Glencore enriched Gertler by $67million in cash and shares
channelled through secretive offshore firms.
Gertler first courted
controversy in 2000 when his ties to the presidency helped secure him a monopoly
on Congolese diamonds. Since 2007 he has been Glencore’s chosen partner as it
strengthens its grip on prize mining assets in a country ranked by the UN as the
least developed in the world. All in all, Glencore has advanced Gertler’s
companies more than half a billion dollars and agreements between them
are set to earn Gertler hundreds of millions more in the years ahead. 1
On 28 April, Och-Ziff Capital
Management Group, a New York-based hedge fund firm, saw its shares crash by as
much as 11 per cent following reports of its financing oil and mining deals
involving Gertler.2 Eurasian Natural
Resources Corporation, one of Glencore’s competitors, is being investigated by
the UK’s Serious Fraud Office for suspicious transactions, including at least
one with Gertler. In 2010 ENRC’s lawyers even identified Gertler as a corruption
risk in a leaked report to Britain’s Serious Organised Crime Agency.3 Despite these concerns, Glencore insists its
deals with Gertler are problem-free.4
Global Witness last wrote about
Glencore’s Congo mining deals in May 2012, in a memo warning shareholders of
potentially corrupt transactions with Gertler. At the time, Glencore ignored
calls for an independent examination of its Congo investments.5 Meanwhile, Gertler’s controversial ventures
continue. In January 2014, Global Witness reported on an opaque oil deal that
alone netted him nearly $150 million.6
Our new analysis shows how
Glencore funded Gertler’s purchase of shares as their interests coincided during
the merger between Katanga Mining and London-traded Nikanor plc. Together they
won control of some of Congo’s most lucrative mineral assets. The deals were
carefully constructed in a manner that concealed transactions with no apparent
purpose other than protecting the interests of the president’s friend.
“All the transactions Glencore
has concluded with companies associated with Mr Gertler have been conducted on
arm’s length terms and all public disclosure requirements applicable to us have
been complied with,” Glencore told Global Witness in a 14 May email. “Glencore
has not afforded companies associated with Mr Gertler preference over other
shareholders.”
Gertler’s spokesman, the UK’s
Lord Mancroft, said any suggestion that Glencore offered Gertler preferential
treatment was “wholly misconceived” and that “there are legitimate commercial
reasons for every transaction we are involved in”.
Gertler has become central to
almost every major copper mine sale in Congo, a gatekeeper for the country’s
number one export. Just five of his deals have resulted in the Congolese state
losing out on some $1.4 billion, almost twice the country’s annual spending on
health and education combined, the Africa Progress Panel reported last
year.
It was his partnership with
Glencore that helped him get there. With the London-listed giant behind him, he
was able to knock out the most powerful men in Congo’s mining sector. Global
Witness’s findings show how the Glencore-Gertler relationship runs much deeper
than either has admitted.
The alignment
In 2007 President Joseph
Kabila’s government needed cash to rebuild as Congo emerged from a decade of
war. Copper prices were nudging record highs.7
And Glencore, with its fearless investment record in Ivory Coast,
Equatorial Guinea and Colombia, was hungry for expansion.
On offer was Katanga Mining
which, in 2005, had tied up with Belgian-Congolese businessman George Forrest to
gain rights to a massive copper deposit. The Kamoto mine in Congo’s mineral-rich
Katanga province had potential to yield 150,000 tonnes a year8—twice Congo’s entire output at the time.9
It wasn’t just Glencore that
had spotted Kamoto’s potential. Camec, a rival miner with ties to Zimbabwean
President Robert Mugabe,10 was lining up a
takeover. Zimbabwe had been a firm military backer of Kabila’s side from its
days as a rebel force to its early years in power—a gamble rewarded with
Congolese mining concessions and even the brief instalment of Billy Rautenbach,
a Zimbabwean businessman, as head of Congo’s state mining company. Rautenbach
now owned part of Camec, which had gained the backing of Forrest – now Katanga
Mining’s biggest shareholder – for its takeover plans.11
In outmanoeuvring Camec and
Forrest, Glencore would find its interests aligned with Dan Gertler, the young
trader whose personal friendship with Joseph Kabila had helped him win lucrative
deals. Kabila succeeded to the presidency when his father was assassinated in
2001. The friendship remained and Gertler expanded from diamonds into copper,
floating Nikanor plc in London in mid-2006. Nikanor’s key asset was the KOV open
pit mine—right next door to Katanga Mining’s Kamoto.
KOV and Kamoto had always gone
together. Historically, they had been part of they same concession. Reuniting
them made obvious sense—not least because Katanga Mining’s concession held a
150,000-tonne per year copper refinery. Nikanor would need this to process it
own mine’s output—and so Gertler’s eye was soon on Katanga Mining too.12
But if Gertler hoped for a deal
to share the refinery, he was disappointed: Forrest refused to cooperate, saying
the plant couldn’t handle ore from both Nikanor and Katanga, according to two
sources with knowledge of the deal, both of whom requested anonymity.
The dispute that followed would
help lay the ground for a bitter takeover battle that pitched Forrest and Camec
against Glencore and Gertler. In the end Camec proved no match for Glencore’s
financial clout.
As the deals unfolded, it
became clear that a series of transactions had been carefully constructed to
shield Gertler from risk, helping to protect his shareholdings from dilution and
earning him millions in the process.
The insiders
By the summer of 2007, Art
Ditto, Katanga Mining’s embattled chief executive, was in a last-ditch fight to
hold off the takeover onslaught from Camec. Rautenbach and his partners—former
England cricketer Phil Edmonds and Zimbabwean businessman Andrew Groves—had been
sucking up Katanga Mining stock since early in the year, forcing Ditto to take
special measures to block a “creeping takeover”.13
“The deal didn’t make any
sense,” Ditto, now retired, told Global Witness by phone. “The value wasn’t
there.” He declined to answer any more questions on Katanga.
Another reason for Ditto’s
caution at the time may have been Rautenbach: the 18 per cent Camec shareholder
was a fugitive from South Africa, wanted on fraud charges related to a vehicle
import business.14 A 2006 UN report
described him as a person of “unknown or questionable standing”15 and in July 2007 he was expelled from Congo,
accused of “fraud, theft, corruption and violating commercial law”.16 He was later added to EU and US sanctions lists
– measures that were only fully lifted earlier this year.17
Camec’s aggressive stock-buying
also brought it into confrontation with Gertler, who already held shares in
Katanga Mining through an offshore trust run by a London-based investment firm,
RP Capital.18
As Camec’s challenge gained
momentum, Gertler launched his own challenge for Katanga Mining as a two-pronged
assault—taking advantage of the stake he already held in the company via RP
Capital, and building up an army of co-investors and cash within his main copper
firm Nikanor. What he needed next was some serious muscle to contrive a merger
of the two.
Enter Glencore. In May 2007,
Gertler formed a consortium with other Nikanor shareholders, including diamond
trader Beny Steinmetz and two UK-based property investors, the brothers Mendi
and Moises Gertner.19 The plan was to club
together with Glencore and buy out Nikanor. When Nikanor’s executives resisted,
they were undeterred. Acting together, they had the required majority20 to issue new shares and sell them to
Glencore.21
Whatever the method, the result
was the same: Glencore became a significant shareholder in Nikanor.22 Not only that—it effectively ran the company:
as part of the same deal, Glencore gained the right to appoint or dismiss
Nikanor’s top officials and rights to market all Nikanor’s minerals.23
On 1 June 2007, Glencore took
its stake in Nikanor by purchasing 50 million newly issued shares. Half of them,
it said, were bought on behalf of a company called Ruwenzori . Dan Gertler was
“not participating” in the transaction, Nikanor told the stock exchange in a
lunchtime announcement.24
By mid-afternoon, the
mysterious Ruwenzori sale was raising hackles. In a conference call, Nikanor
Chairman Jonathan Leslie faced angry investors. “So you treated insiders in a
preferential way and gave shares to RP Capital but you don’t know where they
are. Where’s the corporate governance?” said one, according to the news website
Miningmx. In response, Leslie acknowledged that Gertler had an “indirect
interest” in Ruwenzori. 25
At 6pm, Nikanor filed a revised
statement: Ruwenzori was owned by the Gertler Family Trust.26
What Nikanor didn’t say is that
Gertler’s newly acquired shares were entirely funded by a £150 million ($297.15
million) Glencore loan. That emerged only later, when Glencore disclosed the
arrangement to the Toronto Stock Exchange.27
By that time, Glencore and
Gertler’s ambitions for Katanga Mining were close to realisation.
Battle for Katanga
Gertler had used RP Capital to
manage some of his shares in both Nikanor and Katanga Mining. Because RP Capital
bought the stock on his behalf, he was able quietly to increase his stake
without sparking fears of a takeover. By August 2007, he and Glencore held a
combined 42 per cent of Nikanor.28 Gertler,
through RP Capital, held 16 per cent of Katanga Mining.
He was now ready to make his
play for Katanga. Nikanor wasn’t the only player in the market, however. On 29
August, Camec formally launched its own hostile bid.
Camec already owned 22 per cent
of Katanga and had lined up support from insiders holding 32 per cent more—a
clear majority.29 But within hours of
formalising its offer, what should have been the prelude to a daring corporate
raid ended in disarray. Without warning, Congo’s Attorney General stepped in and
declared all the firm’s Congolese mining licences invalid.30
In London, Camec’s stock
immediately tumbled, at one point plummeting to 36 per cent below the opening
price. The company had offered to pay for Katanga Mining in shares and as its
share price collapsed, so did the bid. A week later, Camec formally withdrew its
takeover offer.
Within a month, on 5 November
2007, Glencore stepped in to save Katanga Mining with a $150 million loan,
repayable in Katanga shares.31 And within a
week of the loan deal being signed, Glencore and Gertler pushed through a merger
of Katanga Mining with Nikanor.
Just why Camec’s licences were
suspended isn’t clear. Congo’s justice ministry said there were “serious
irregularities” with the permits and the deputy mines minister called them
“fraudulent”.32 Camec cried foul, saying the
suspension was “clearly timed to impact the offer" and argued that it was
illegal.
Glencore and Gertler both say
they had no role in the revocation and did not profit by it.33 Yet Camec eventually got its permits back after
it agreed a settlement that handed 40 per cent of its shares to Gertler.34 "It's clear that Dan Gertler is a
well-connected and influential person in the DRC within the mining sector," a
Camec spokesman said at the time.35
Clandestine deals
1. Secret loan
Glencore bails out Katanga
Mining to save it from bankruptcy. Other shareholders are diluted but Glencore’s
secret loan to Gertler saves his stake.
Glencore’s November 2007 loan
bailed out Katanga Mining—for the time being. But less than a year later, the
global financial crisis was in full force. Mining stocks crashed, copper prices
went through the floor and Katanga Mining was on the cusp of insolvency.
As Katanga searched fruitlessly
for investors to stave off liquidation, Glencore upped the stakes. In December
2008, it increased its loan from $150 million to $265 million—this time on much
harsher terms. 36
Glencore’s loan was
convertible, meaning Katanga Mining would have to repay it in shares by May
2009. At the time of the original 2007 loan, these were worth more than $16
apiece, meaning the company would have to give Glencore about 9 million
shares—roughly 10 per cent of the company—to pay the loan back.37
But by December 2008 the stock
was almost worthless, trading at just $0.28.38
To repay the increased loan, Katanga would now need to create nearly a
billion new shares, giving Glencore roughly 70 per cent of the company.39 The bail-out had become a takeover.
De-Forrestation
What that meant in practice was
that Katanga Mining’s minority shareholders would see their control of the
company almost completely wiped out—all except Gertler. Because Katanga would
need to issue a huge quantity of stock to repay the loan, shareholders who
couldn’t get their hands on the new shares would find their holding
diluted.
That’s what happened to George
Forrest, who before the merger with Nikanor had been Katanga Mining’s largest
shareholder with 24 per cent. That fell to 9 per cent when the companies joined
and repayment of the loan left him with just 1.6 per cent. The Gertner brothers,
who had been Nikanor’s second largest shareholder, had 8.3 per cent of Katanga
Mining before the loan. Repayment reduced their share to just 1.5 per cent.40
The only way to avoid dilution
was to take part in the lending. Just one minority shareholder did: Dan
Gertler—and it was a secret deal with Glencore that allowed him to do so.
Total control
Stock exchange filings show
that one of Gertler’s companies—Lora Enterprises, registered in the British
Virgin Islands—lent Katanga Mining $45 million or 17 per cent of the total $265
million convertible loan. 41
What the filings don’t mention
is that Lora’s loan was entirely funded by Glencore. This was only revealed by
chasing a paper trail through the British Virgin Islands. Corporate records from
there show that on 3 February 2009, six days before the loan was finalised,
Lora’s parent company, Zuppa Holdings, borrowed around $45 million from Glencore
Finance (Bermuda). 42
Normally, shareholder equality
rules would have forced Glencore to offer the same terms to all of Katanga’s
shareholders. In this case Glencore didn’t have to, for two reasons. First, it
invoked financial hardship rules designed to speed transactions for distressed
companies. Second, by using a convertible loan, it ensured that what may have
looked to outsiders like a takeover was classified by regulators as a debt
transaction. Those loopholes, though they may be legal, meant Glencore could
avoid giving small shareholders a say.
Glencore told Global Witness by
e-mail in September 2013 that “no other parties whatsoever elected to
participate in the convertible facility”. 43
Yet Global Witness spoke to one minority shareholder who said he asked
Glencore for a loan like the one given to Gertler and was refused.
“Glencore was able to favour
one particular Katanga shareholder over all others,” said independent lawyers
commissioned by Global Witness to analyse the deals. “This process undermined
the spirit of the [Toronto Stock Exchange] regulations by failing to protect—and
facilitating manifestly unequal treatment of—existing Katanga
shareholders.”44
When the dust cleared, Glencore
and Gertler had Katanga Mining under almost total control.
Meanwhile, Gertler’s rivals for
Katanga Mining were simply melting away. Rautenbach had been summarily thrown
out of Congo shortly before Camec’s failed bid. Forrest had been diluted to
insignificance and he and his son, Malta, resigned from Katanga’s board.45 By late 2009, Edmonds and Groves were gone too
as Camec sold its Congolese interests to ENRC.
Only Gertler—thanks to
Glencore—was left standing.
2. Optional extras
Glencore gives Gertler an
option on preferential terms. He uses it to buy shares cheaply. Almost
immediately, Glencore buys them back at full price.
Alongside the $45 million loan
to Lora in February 2009, Glencore issued a “call option” to Gertler’s offshore
company Ellesmere Global, registered in the British Virgin Islands. No other
shareholders were given this.
A call option gives one company
the right to buy shares in another at a fixed future date at a price set today.
In Ellesmere’s case, it would have the right until 9 February 2010 to buy $16
million of Katanga Mining shares at the price they were trading at in December
2008, when the $265 million convertible loan was made.46 Stock options normally cost money. There is no
evidence that Gertler paid anything for his.
What the Ellesmere option
amounted to was a free gift. Gertler could wait a year before deciding whether
to buy shares at the December 2008 price and would only do so if that guaranteed
him a profit. It was an offer no other shareholder would have refused. But none
got the opportunity.
Ostensibly, Glencore was once
again protecting Gertler from dilution, on generous and flexible terms. In the
event, it seems Gertler wasn’t interested in boosting his stake. He just cashed
in—at Glencore’s expense.
A month after selling them to
him, Glencore bought the shares back at full market price, effectively just
handing him cash (see box 4 for the figures).47
3. Cut-price shares
Glencore sells Gertler more
cheap shares—and again buys them back at full price.
While Gertler was waiting for
his option to mature, Glencore was consolidating its hold on Katanga Mining. In
May 2009, it was time for Katanga to repay Glencore’s $265 million loan by
issuing new shares. The cost was high.
Under the loan agreement, the
repayment would be triggered when Katanga raised an additional $250 million in
cash. It tried to borrow the money. But after being knocked back by 12 different
lenders, the company said it had no option but to turn to Glencore once
again.
To raise the cash, Katanga
Mining had to create yet more new shares for Glencore—on top of the shares it
already needed to issue to repay the $265 million loan.48 At the time, Glencore held 8.5 per cent of
Katanga, Gertler 23 per cent. The deluge of new stock would increase the total
number of Katanga shares nearly 10 times over.
On 7 July 2009, Katanga Mining
issued the $250 million of new shares, priced at $0.35 apiece, to Glencore and
its London-registered subsidiary, Jangleglade. Combined with the stock Katanga
had already issued to repay the $265 million loan (see box 1), the new shares
would see Glencore’s stake leap from 9 per cent to 78 per cent.49
Once again, Gertler was unable
to take part in the offering. Until three months later, that is, when on 13
October 2009 Glencore mysteriously sold 99 million shares, or around 5 per cent
of Katanga Mining, to Breton Global, yet another Gertler entity in the British
Virgin Islands.50
What was strange about the sale
is that Gertler paid $0.35 a share—the same price Glencore had paid at the time
of the July rights offering.51 Yet by now
Katanga Mining stock had rocketed: Gertler was getting the shares at a 60 per
cent discount.52
On 24 March 2010—the same day
Gertler sold his Ellesmere shares back to Glencore (see box 2)—Gertler also
cashed in on his Breton shares. Having sold them cheap, Glencore obligingly
bought 42 million of these shares back at $0.76, more than twice what Gertler
paid for them. 53
Gertler had spent $34.6 million
on his 99 million Breton shares and sold less than half of them back for almost
the same amount. He had almost entirely recouped his investment—and ended up
with 57 million Katanga Mining shares practically for free.
The structure of the deal made
it look as if Gertler was just exercising an option—and that is how Glencore
described it in response to questions from Global Witness.
“Glencore wrote a call option
for Breton, written at market price with a payment of interest, for a short
period of time,” Glencore wrote on 2 May 2012. “This was effectively a
fully-secured loan.”
In fact, no such option
existed. Glencore handed shares to the president’s friend, bankrolling his
risk-free investment in Katanga Mining. The Breton deal and the Ellesmere option
combined earned Gertler a total of $67 million cash and shares (see Box 4).
4. Number crunching: How
Glencore earned Gertler his $67 million
Gertler buys cheap shares
from Glencore
On 13 October 2009, Glencore
sold Breton, a company associated with Dan Gertler, 99 million shares at $0.35
each, a total price of $35 million.54
On 26 February 2010 Ellesmere,
another of Gertler’s offshore companies, exercised an option and bought 58
million shares for $0.297, a total price of $17 million.55
Adding those two together,
Gertler spent $52 million to buy 157 million Katanga Mining shares from
Glencore.
Glencore buys some back at
full price
On 25 March 2010, Glencore
bought 100 million shares (58 million from Ellesmere and 42 million from Breton)
at $0.756, total price $76 million.56
(Katanga Mining stock has since fluctuated, peaking at $2.17 a share on
27 April 2011 and hitting a low of $0.37 on 19 December 2013.)
Subtracting the amount he spent
from the amount Glencore paid leaves a cash profit of $24 million.
Gertler keeps some
shares
But Glencore only bought back
100 million of Breton and Ellesmere’s shares, leaving these Gertler companies
with another 57 million shares. At the 25 March 2010 price, those shares were
worth $43 million.57
Adding that to his cash profit
gives a total of $67 million in cash
and shares.58
More secrets
Global Witness has unpicked
some of Glencore’s lending to Gertler. Yet much of their relationship remains
mysterious. Records for Lora Enterprises retrieved from the British Virgin
Islands registry reveal another undeclared loan to the gatekeeper. They show
that on 15 June 2010 shares in Lora were offered as security for a loan from
Glencore to a related offshore firm, Triways Investment.
Glencore won’t say how much the
loan was for or what it was for but the shares it was secured against were worth
$145 million at the time of the transaction.59
“Glencore has at various times made loans to companies associated with Mr
Gertler, fully secured and at commercially attractive terms,” the company told
Global Witness in a September 2013 response to questions on Triways.
5. Number crunching II: how
Glencore financed Gertler
i. $297,150,000 to
Ruwenzori for the purchase of Nikanor shares in June 2007
ii. $30,000,000 for
Kipushi in February 2008 (for details of this loan, see Global Witness’s
questions to Glencore, 5 April 2012, and Glencore’s 2 May response)
iii. $61,000,000 to Lora
and Ellesmere in February 2009 (Glencore said the arrangement with Ellesmere –
accounting for $16,000,000 of this – was “effectively a loan” but structured as
an option)60
iv. $34,575,695 to
Breton in October 2009 (also “effectively a loan”, according to Glencore)
v. $145,015,000 to
Triways in June 2010
TOTAL KNOWN GLENCORE LOANS
TO GERTLER: $567,740,695
Paying the
Gatekeeper
It is 17 years since Gertler
arrived in Kinshasa to obtain a diamond trading monopoly by courting the
president’s son. In the years that followed, his bond with the Kabila family
would help establish him as a gatekeeper to Congo’s mineral riches.
But in those early years he
wasn’t the only one. In the chaos that followed Congo’s civil war, there were
many paths to the country’s mines, with many gatekeepers to guard them: Billy
Rautenbach and George Forrest—both former chiefs of the state mining company,
Gecamines—commanded powerful fiefs. New challengers like Phil Edmonds and Andrew
Groves were snapping at their heels.
Until 2007, that is. Glencore’s
entry changed everything. In the battle for Katanga Mining, no one could match
the commodities giant’s firepower. And Glencore’s chosen gatekeeper—the one with
the best ties to the president—shared in the victory.
Katanga Mining wasn’t always a
surefire investment. Before Glencore’s takeover, poor management had squandered
its cash reserves and the financial crisis nearly ended the project. But while
many of its backers were knocked out, Gertler had Glencore’s help to stay
in.
By the time another mining
giant, ENRC, targeted Congo in 2009 there was only one partner that mattered:
Dan Gertler.
ENRC’s mine
purchases—completely separate from the Glencore deals—were a windfall for
Gertler, netting him a profit of at least $725 million.61 Compared with Gertler’s transactions with
Glencore, they were straightforward: in one case, the government simply
confiscated mines from another firm and sold them at a discount to Gertler, who
resold it for a huge gain. The ENRC deals were so simple, in fact, that the
obvious corruption risks help spark an investigation by the Serious Fraud
Office.
Glencore’s deals with Gertler,
by contrast, are nuanced and convoluted. They involve intricate financial
arrangements and secret transactions through offshore companies. Yet in both
cases, the outcome is the same. The mining giant gets its assets and the
gatekeeper’s interests are taken care of. It may worry Glencore’s shareholders
that the man who has stirred controversy at ENRC and hedge fund manager Och-Ziff
is also the vital link in their own Congo investments.
Gertler’s influence is now so
great in Congo that in almost every sale of copper or cobalt assets by the state
in the past five years, he has taken a cut. He has also expanded into oil. As
the gatekeeper continues to profit, Congo continues to lose.
Notes to Editors
1. All dollar figures US unless otherwise
stated
2. All the relevant Early Warning Reports to the
Toronto Stock Exchange are available here http://bit.ly/RHWxWM
3. A 14 May response from Glencore to Global
Witness’s most recent questions can be found here: http://bit.ly/1gaBjMv.
4. A response from Lord Mancroft, on behalf of
Dan Gertler’s holding company Fleurette, can be found here:
http://bit.ly/1gaBqrx.
1
As an example, Gertler’s Fleurette Group owns 31 per cent of the Mutanda
and Kansuki mines, whose operations were merged by Glencore in July 2013 (see
Fleurette press release of 25 July 2013: “Fleurette and Glencore Complete Merger
of Mutanda and Kansuki Mining Operations”:
http://www.prnewswire.com/news-releases/fleurette-and-glencore-complete-merger-of-mutanda-and-kansuki-mining-operations-216882021.html).
The mines are already in production, with the merged Mutanda-Kansuki producing
150,600 tonnes of copper in 2013 (See: Glencore-Xstrata’s 2013 production
report:
http://www.glencorexstrata.com/assets/Investors/GLEN-2013-Q4-ProductionReport.pdf
). Glencore has an option to acquire half of the Fleurette Group’s interest in
Mutanda-Kansuki in July 2016 and the remainder in July 2018. See p. 32
Glencore’s June 2013 half-yearly report:
http://www.glencorexstrata.com/assets/Investors/GLEN-Half-Yearly-Report-2013.pdf.
These purchases would earn Gertler’s companies hundreds of millions of dollars,
as is evident from Glencore’s deal to buy a 20 per cent stake in Mutanda from
Groupe Bazano in May 2012 for $340 million plus $140 million in debt – see Dow
Jones, “Glencore lifts stake in Congolese copper, cobalt mine”, 23 May 2012:
http://www.theaustralian.com.au/business/mining-energy/glencore-lifts-stake-in-congolese-copper-cobalt-mine/story-e6frg9df-1226364167316#.
2
See Wall Street Journal, 28 April 2014, “Och-Ziff Loans Financed
Controversial Congo Deals”: .
http://online.wsj.com/news/articles/SB10001424052702304788404579523772144953130
. Also: Bloomberg News, 28 April 2014, Och-Ziff Falls on Report Saying Firm
Financed Africa Deal :
http://www.bloomberg.com/news/2014-04-28/och-ziff-falls-on-report-saying-firm-financed-africa-deal.html
3 A
copy of the ENRC report to the Serious Organised Crime Agency is online here:
http://cf4.100r.org/media/2012/06/SAR.pdf. To read Global Witness’s
previous reports on the sale of Congo’s mineral assets, see:
http://www.globalwitness.org/library/secret-sales
4 “Companies associated with Mr
Gertler are investors in projects in which Glencore is also
a shareholder,” Glencore told
Global Witness in a 2 May 2012 letter. “Glencore does appropriate due diligence
as required to ensure that it acts in line with its principles under Glencore
Corporate Practice.”
5
Global Witness wrote in its 9th May 2012 memo to Glencore shareholders:
“Shareholders should call for a comprehensive external audit of Glencore’s
activities in the Democratic Republic of Congo since it first entered the
country in 2007. The audit should detail the beneficial owners of all companies
partnered with Glencore in the country’s mines or linked in any way to its
activities in the country. The audit should consider whether companies
associated with Mr Gertler have posed a corruption risk or not. The results of
this inquiry must be made public in printed form. The board must play no
intermediary role.”
6
In 2006, Nessergy, a company owned by Dan Gertler’s Fleurette Group,
acquired Congo offshore exploration rights for $500,000 and in 2013 resold the
same rights for $150 million. Almost all of this was profit: Nessergy spent
little on developing the oil block. “In order to aid the progression of the
block and prevent further delay, Nessergy has agreed to hand the rights back in
return for a fee to compensate it for not being able to progress development,” a
Nessergy spokesman told the Wall Street Journal on 24 January 2014. See:
blogs.wsj.com/riskandcompliance/2014/01/24/israeli-billionaires-company-defends-congo-oil-deal/
7
See: http://www.infomine.com/investment/metal-prices/copper/all/
8
See Katanga’s 16 February 2006 press release: “Arthur Ditto, President
and Chief Executive Officer, reports from sites in Africa where the feasibility
study is being prepared that “the study being prepared under the direction of
Hatch’s Johannesburg office is defining work and capital required to retrofit
the mines and plants of the Kamoto JV. The retrofit will take place in four
stages such that copper output is able to increase steadily during a four year
period to a sustained 150,000 tonnes per year.”
http://www.katangamining.com/media/news-releases/2006/2006-02-16.aspx
9 According to the US Geological
Survey, the DRC produced 73,300 tonnes of copper in 2004 (see: www.minerals.usgs.gov/minerals/pubs/country/2004/cgmyb04.pdf)
10
Billy Rautenbach, a Zimbabwean businessman, held shares in Camec since at least
3 February 2006, when the company bought part of his International Metal
Factors, with part of the payment in Camec stock (see:
http://www.investegate.co.uk/central-afr–min–38-exp–cfm-/rns/interest-in-copper-cobalt-jv/200602031446489173X/
). See also “Addendum to the report of the Panel of Experts on the Illegal
Exploitation of Natural Resources and Other Forms of Wealth of the Democratic
Republic of the Congo”, November 2001: “Although Australian, United States,
Canadian, Belgian and South African companies have established joint ventures in
Gécamines' concession areas, the Government of the Democratic Republic of the
Congo has primarily relied on it as a means to ensure the continued support of
Zimbabwe. Zimbabwean Billy Rautenbach was named the Managing Director of
Gécamines in November 1998 during a visit to Harare by President Laurent-Désiré
Kabila. According to this deal, some of Gécamines’ best cobalt-producing areas
were also transferred to a joint venture between Mr. Rautenbach’s Ridgepoint
Overseas Development . and the Central Mining Group, a Congolese company
controlled by Pierre-Victor Mpoyo, then Minister of State. Mr. Rautenbach also
acted as Managing Director of the joint venture, a blatant conflict of interest.
The Panel has information that President Kabila’s decision to appoint Mr.
Rautenbach—a man with no mining experience but with close ties to the ruling
ZANU-PF party in Zimbabwe—was made at the request of President Robert Mugabe
during that visit.”
11
Camec’s takeover bid circular, filed with the Toronto Stock Exchange on
27 August 2007, says that George Forrest is among shareholders who have entered
“lock-up” agreements with Camec and agreed to back the offer: “ ‘Lock-Up
Agreements’ means the agreements dated July 10 and 11, 2007 between the Offeror
and the
Locked-Up Shareholders pursuant
to which the Locked-Up Shareholders have agreed to deposit the
Locked-Up Shares to the Offer
and not withdraw them, except in limited circumstances, as described in
Section 3 of the
Circular…‘Locked-Up Shareholders’ means, collectively, George Forrest, New Star
Asset Management Limited, Pendragon, North Sound, The Resource and Energy Fund,
The Wildhorn Master Fund and Amber Master Fund (Cayman) SPC.”
12 Once the mines and processing
facilities are fully rehabilitated, KCC hopes to produce approximately 150,000
tonnes of copper and 5,000 tonnes of cobalt per year, Katanga Mining said in a 9
August 2005 stock exchange filing.
13
Katanga Mining enacted a shareholder rights plan to block any attempt to
acquire more than 20 per cent of the company’s shares, it said in a 10 May 2007
filing: “The rights issued under the rights plan entitle the holder to acquire
0.162 of a common share for CDN$100.00 (the “Exercise Price”). The rights will
trade together with the common shares of the Company until the “Separation Time”
and will not be exercisable until the “Separation Time”. The Separation Time
occurs on the tenth business day following the date a person, together with any
parties related to it, acquires or announces its intention to acquire 20% or
more of the Company’s outstanding common shares without complying with the
“Permitted Bid” provisions of the rights plan or without approval of the Board
of Directors of the Company. A “Permitted Bid” is one that has been made to all
shareholders of the Company by a takeover bid circular.”
14
See `The Supreme Court of Appeal of South Africa, matter between the
National Director of Public Prosecutions and Conrad Muller Rautenbach, 146/2003,
19 August 2004: “The principal accusation made against Rautenbach was that he
was a party to defrauding the South African Revenue Service in the course of
operating a business that imported vehicles into southern Africa and into South
Africa in particular. Rautenbach was also accused of having stolen money from
one of the companies with which he was associated, and of contravening s 86(e)
of the Customs and Excise Act 91 of 1964" See also: Bloomberg, 21 September
2009, Rautenbach to Pay S. African Fine to End Legal Battle (Update1) :
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aINXh9QhQiyQ
15
UN document S/2006/525: ‘Letter from the Chairman of the Security Council
Committee established pursuant to resolution 1533 (2004) concerning the
Democratic Republic of the Congo addressed to the President of the Security
Council’, 18 July 2006
16
See the July 2012 report by Rights and Accountability in Development
(Raid): “Asset laundering and AIM:
Congo, corporate misconduct and
the market value of human rights”, p. 12: “According to a statement distributed
on behalf of the Katanga provincial government, the Congolese Interior Ministry
informed Rautenbach on 17 July 2007 that he was barred from the country. The
statement read: ‘Mr Rautenbach had amassed a large number of mineral and other
assets in the DRC during the civil war and subsequently’. The statement
continued: ‘The Government of the DRC is making strenuous efforts to clean up
the mining sector in the country, and has taken seriously South African charges
of fraud, corruption and other crimes against Rautenbach’. The Raid report cites
Mining Weekly’s 9 July 2007 article as the source: ‘CAMEC’s Rautenbach arrested
in DRC, deported to Zimbabwe”. Rautenbach received a document from Congo’s
Ministry of the Interior detailing the reasoning behind his expulsion, according
to The Sunday Times, 22 July 2007, ‘Edmonds group in spin after miner is run
out’: http://www.corpwatch.org/article.php?id=14578
17
Details of the sanctions are available on the website of the US
government’s Federal Deposit Insurance Corporation. See:
http://www.fdic.gov/news/news/financial/2008/fil08136a.html
18
Before Katanga Mining merged with Nikanor in November 2007, RP Explorer
owned 12,275,000 Katanga Mining shares or 15.7 per cent of the company,
according to a 29 January 2008 early warning report filed with the Toronto Stock
Exchange. Another report from 28 June 2007 states: “Pursuant to existing or
future arrangements between the Offeror [RP Explorer] and entities managed by RP
Capital Partners Cayman Islands Limited (or its subsidiaries), a discretionary
trust in which Dan Gertler’s family interest is a potential ultimate
beneficiary, has or will have an indirect interest in the shares currently held
by the Offerer.” RP Explorer is described as the “flagship fund” of RP Capital
UK , a UK-based provider of investment/advisory services run by Rafael Berber,
according to RP Capital’s 2007-08 annual report and financial statements, p.
3.
19
Details of the bid by the consortium, Cosaf, appeared in Nikanor’s 16 May
2007 stock exchange filing: “On 15 May 2007, after market close, the Company
received a non-binding indicative proposal in the form of a letter from a
special purpose vehicle, Cosaf Limited ('Cosaf'), whose shareholders will be: •
the three existing major shareholders of the Company (Oakey Invest Holdings
Inc., Pitchley Properties Limited and New Horizon Minerals Limited
(collectively, the 'Major Shareholders'), who together own, in aggregate,
approximately 72% of the existing issued share capital of Nikanor); and • two
entities wholly owned by RP Capital Partners Cayman Islands Limited and Glencore
International AG, respectively.” See:
http://www.investegate.co.uk/nikanor-plc–nkr-/rns/update-for-shareholders/200705160730036715W/
Oakey Invest and Pitchley properties were owned by Beny Steinmetz Group
Resources and the Gertner brothers respectively, according to a 1 June 2007
filing. “BSGR (the Beny Steinmetz Resource Group) and the Gertner
family…currently own 36 per cent. and 22 per cent. respectively of the Company
(through Oakey and Pitchley respectively)”. See:
http://www.investegate.co.uk/nikanor-plc–nkr-/rns/issue-of-equity/200706011223236297X/
20
See Nikanor’s 12 July 2006 filing: ““Following the offer, the company's
three existing shareholders, BSG Resources Limited (through Oakey Invest
Holdings Inc.), Pitchley Properties Limited and the DGI Group of Companies
(through New Horizon Minerals Limited), will continue to be the majority
shareholders of Nikanor, with a combined ownership of 73.4% prior to any
exercise of the over-allotment option, or 71.5% in the event the over-allotment
option is exercised in full.”
http://www.investegate.co.uk/nikanor-plc–nkr-/rns/offer-price-announcement/200607120700360617G/
21
Nikanor directors resisted the consortium initial effort to take over the
company: “The Board excluding those directors representing the Major
Shareholders (the'Unconnected Directors') consider that the non-binding
indicative proposal from Cosaf [the consortium of major investors] does not
reflect the true value of the Company,” they said in a 16 May 2007 statement.
See:
http://www.investegate.co.uk/nikanor-plc–nkr-/rns/update-for-shareholders/200705160730036715W/
22
See Nikanor’s 8 June 2007 filing: “Nikanor PLC has received notification
from Glencore International AG on 6 June 2007 of its interest in 50,000,000
Nikanor shares to be registered in the name of Glencore Finance (Bermuda). The
notification was given on behalf of Glencore Finance (Bermuda) and each
intermediate holding company between Glencore International AG and Glencore
Finance (Bermuda) . This holding represents 24.21% of Nikanor's outstanding
share capital as enlarged by the company's share placing of last week.”
http://www.investegate.co.uk/nikanor-plc–nkr-/rns/holding-s–in-company/200706081327400543Y/
23
Nikanor said in a 1 June stock exchange filing: “In addition, Glencore
will have a right under its Relationship Agreement to appoint, remove and
re-appoint the Executive Chairman (if the roles of Chairman and Chief Executive
are combined) and the Chief Financial Officer, or the Chief Executive Officer
(if the roles of Chairman and Chief Executive Officer are not combined) and
Chief Financial Officer (provided that no more than two Glencore appointees may
be on the Board at any one time)…The Company and Glencore have agreed legally
binding heads of terms for off-take arrangements which provide that Glencore
will buy from the Company 100% of its annual copper and cobalt production on
market related terms.” See:
http://www.investegate.co.uk/nikanor-plc–nkr-/rns/issue-of-equity/200706011223236297X/
24
See Nikanor’s 12:23pm filing on 1 June 2007:
http://www.investegate.co.uk/nikanor-plc–nkr-/rns/issue-of-equity/200706011223236297X/
25 See Miningmx, ‘Nikanor
grilled over "unusual" financing,’ 1 June 2007: http://www.miningmx.com/news/archive/927287.htm
26
For Nikanor’s 6pm announcement on 1 June 2007, see:
http://www.investegate.co.uk/nikanor-plc–nkr-/rns/issue-of-equity/200706011800396774X/.
This screenshot shows the timings for the two announcements
http://bit.ly/1nWf4dt
27
Glencore’s loan to Gertler for the Ruwenzori shares can be seen by
comparing filings for Nikanor and Katanga Mining: “Glencore has a security
interest in 25,000,000 Nikanor shares in connection with a loan to a party
related to RP Explorer, which loan proceeds were used for the purchase of such
Nikanor shares,” Glencore disclosed in a 29 November 2007 Early Warning Report
to the Toronto Stock Exchange. Nikanor stock exchange filings from 1 June 2007
show that Glencore “intends to participate in the bookbuild for 50,000,000
placing shares (50 per cent of which will be applied for on behalf of Ruwenzori
Limited, an SPV managed by RP Capital). Ruwenzori is an “entity controlled by
Cosaf”, which in turn is “an entity managed by RP Capital and owned by a
discretionary trust for the benefit of the Gertler family”, according to a
January 29 2008 Early Warning Report filed by Glencore in Toronto. On 1 June
2007 the shares were sold to Glencore/Ruwenzori at an issue price of £6.00
apiece, giving the Glencore-funded Ruwenzori shares a value of £150 million
($297.15 million at the 1 June 2007 rate of $1.981).
28
See Katanga Mining’s stock exchange announcement of 6 November 2007:
“Recommended Merger of Katanga and Nikanor to Create a Leading African Copper
and Cobalt Company”. The document lists the stakes of all the major shareholders
in Katanga Mining and Nikanor.
29
See Camec’s 29 August 2007 statement on its proposed Katanga takeover:
“CAMEC owns 22% and has reached agreement with certain shareholders representing
approximately 32% of the outstanding shares of Katanga pursuant to which such
shareholders have agreed to accept the Offer”
http://www.marketwired.com/press-release/central-african-mining-exploration-company-plc-camec-offer-purchase-katanga-mining-764847.htm
30
See Raid’s report “Asset laundering and Aim”, p. 10-11:
http://www.miningwatch.ca/sites/www.miningwatch.ca/files/AIM_Report_2012.pdf.
31 Katanga Mining Early Warning
Report to Toronto Stock Exchange, 5 November 2007
32 See ‘Camec’s shares tumble as
DRC plans to revoke mining licence’, The Times, 31 August 2007 http://www.thetimes.co.uk/tto/business/industries/naturalresources/article2180943.ece
33
In a 13 May 2014 email to Global witness, Fleurette Group spokesman Lord
Mancroft said it would be “preposterous” to suggest that Gertler’s companies may
have benefitted from suspension of the licence to Camec’s Mukondo mine, as
Gertler’s Fleurette was a 50 per cent partner in the project. However, Camec
stock exchange filings show that at the time of the suspension, operations at
Mukondo had been shut down for more than year because of a dispute between Camec
and Fleurette. “With regard to Mukondo, Camec has been prevented from mining on
the property by the joint owner of the concession,” Camec told the stock
exchange on 10 May 2007. “Camec has been exerting considerable pressure to
resolve the situation and recommence mining.” Camec only resolved the dispute
and secured its licence after agreeing to sell 40 per cent of the company to
Gertler. “"There's no doubt that having a strong partner like him arguing our
case and supporting us through the JV should help rather than hinder us in
resolving those (licence) issues,” a Camec spokesman told Reuters on 7 November
2007. See: http://www.investegate.co.uk/article.aspx?id=200705101239203813W and
http://uk.reuters.com/article/2007/11/07/camec-jv-idUKL0771390120071107
34
Camec was able to continue operations at its Mukondo Mountain concession
after forming a joint venture with Prairie International , “a company in which a
trust for the benefit of members of the family of Dan Gertler is a major
shareholder,” Camec said in a 7 November 2007 stock exchange filing. “Under the
terms of the Proposed Transaction, Prairie will receive 815,000,000 new ordinary
shares in CAMEC, representing approximately 39.9% of its enlarged share capital,
as consideration for Prairie's 50% stake in the JVC,” Camec said in a 7 February
2008 stock exchange filing.
http://www.investegate.co.uk/central-afr–min–38-exp–cfm-/rns/drc-update/200802070729074872N/
35
See ‘UPDATE 2-CAMEC shares soar after agrees Congo joint venture’,
Reuters, 7 November 2007
http://uk.reuters.com/article/2007/11/07/camec-jv-idUKL0771390120071107
36
See Katanga Mining’s 24 December 2008 press release
http://www.katangamining.com/media/news-releases/2008/2008-12-24.aspx
37
See Glencore’s Early Warning Report to the Toronto Stock Exchange on 5
November 2007: to repay the loan, Katanga would issue 9,157,509 shares to
Glencore to give it a 10.4 per cent stake
38 See Glencore’s Early Warning
Report to the Toronto Stock Exchange on 30 December 2008
39
See Glencore’s Early Warning Report to the Toronto Stock Exchange on 12
June 2009: following conversion of the loan on 12 June 2009: Jangleglade’s (a
Glencore subsidiary) participation on the loan was exchanged for 735,178,633
shares plus 58,400,760 shares (the latter amount being for repayment of
interest) – this represented approximately 64% plus approximately 5% (i.e. a
total of 69%). In addition, Glencore’s already had 17,580,483 shares. In total,
this gave Glencore about 70 per cent of Katanga Mining’s total shares of
1,177,344,131.
On the “nearly a billion”
figure, see Glencore’s 12 February 2009 Early Warning Report to the Toronto
Stock Exchange, saying that prior to conversion of the increased convertible
loan Katanga Mining had 206,320,802 shares. Katanga Mining’s 2 June 2009 news
release (http://www.katangamining.com/media/news-releases/2009/2009-06-02.aspx)
says that to repay the loan Katanga Mining issued 971,023,329 shares, increasing
its total issued and outstanding common shares to 1,177,344,131.
40
According to Katanga and Nikanor’s merger recommendation announcement of
6 November 2007, George Forrest held 18,800,000 shares in Katanga Mining out of
a total of 78,887,743 before the merger (23.83%). After the merger, the total
rose to 206,320,802, of which Forrest’s stake then made up 9.1% . The Gertners
held 17,170,130 following conversion of their 28,010,000 Nikanor shares at a
rate of 0.613, as set out by the merger agreement, giving them 8.3% of Katanga
post-merger. Following repayment of the loan, there were a total of
1,177,344,131 Katanga Mining shares, according to Glencore’s 22 May 2009 Early
Warning Report to the Toronto Stock Exchange. Both Forrest and the Gertners
would see their stakes diluted still further in a rights issue linked to the
loan deal and concluded within days of repayment (see Box 2).
41 See Glencore’s 12 February
2009 Early Warning Report to the Toronto Stock Exchange: “Lora’s participation
in the New Facility is US$45 million or 16.9% of the New Facility.”
42
Details of Glencore’s loan to Zuppa can be found on p. 32 of the
company’s British Virgin Islands corporate filing, available here
http://bit.ly/1loZ9l8 . Post-incorporation transactions filed in the BVI contain
details of a charge over Zuppa’s shares of Lora in exchange for the loan on 3
February 2009. The release document for this loan stipulated that Zuppa would be
liable for a net repayment of $45.9m at a later date. A spokesman for Mr Gertler
said that Lora and Zuppa are companies owned by Fleurette Group which took a
“pro rata participation” of $45m in the syndicated loan and “agreed terms with
Glencore to borrow such amount on commercial terms”.
43
Glencore wrote to Global Witness in September 2013: “At the peak of the
financial crisis in 2008, Katanga Mining needed to raise urgent funding. The
company appointed Credit Suisse as their financial advisor who conducted a
roadshow to raise funding either as debt or equity and not one investor could be
found. As no alternative sources of funding were available to Katanga Mining,
the company requested financing from Glencore to address its serious financial
predicament. Negotiations resulted in Glencore providing Katanga Mining with a
second convertible loan facility. Katanga Mining required that it be capable of
approaching certain other investors and potential investors with a view to them
participating in both facilities up to an aggregate amount not exceeding 75% of
the issue, with Glencore’s participation being reduced proportionately to a
minimum of 25% of the issue. No other parties whatsoever elected to participate
in the convertible facility other than those documented in the Early Warning
Reports.”
44
According to independent lawyers who analysed the transactions: “One
principled criticism that may be leveled at Glencore is that it abused the
financial hardship exemption by deploying the New Facility agreement to benefit
one specific shareholder while diluting the rights of all others. The OSA is
designed for two ends: (1) “to provide protection to investors from unfair,
improper or fraudulent practices”; and (2) “to foster fair and efficient capital
markets and confidence in capital markets.” [Ontario Securities Act, s. 1.1].
Rule 61-101, Protection of Minority Security Holders in Special Transactions, is
designed to promote these ends, particularly in the context of related-party
transactions. The Companion Policy provides that interpretation of the Rule is
premised on shareholder equality: “The definitions of business combination,
collateral benefit and interested party, as well as other provisions in the
Instrument, include the concept of identical treatment of security holders in a
transaction.”
45 See Glencore and Katanga
Mining’s joint press release, 10 June 2009: http://www.katangamining.com/media/news-releases/2009/2009-06-10.aspx
46
“February 9, 2009 (the "Second Closing Date")… Lora Participation and
Ellesmere Call Option On the Second Closing Date, Lora Enterprises Limited
("Lora"), whose ultimate owner is the Trust (and therefore an affiliate of
Cosaf), purchased a US$61 million participation in the New Facility. Of this
US$61 million participation amount, US$16 million (the "Call Option Amount") was
transferred to Glencore Finance, and Glencore Finance issued a call option (the
"Call Option") to Ellesmere Global Limited ("Ellesmere") over the Call Option
Amount. Ellesmere is a company whose ultimate owner is the Trust and therefore
an affiliate of Cosaf and Lora. The Call Option is exercisable, in whole or in
part, for one year following the Second Closing Date at an exercise price
equal to the par value of the Call Option Amount, plus interest accrued from the
Second Closing Date at LIBOR plus 7%.” – Glencore Early Warning Report to
Toronto Stock Exchange, 12 February 2009. Page 2 of the Early Warning Report
says that the conversion price of the convertible loan and of the Lora and
Ellesmere participations was $0.2783 per Katanga share plus interest at Libor
plus 7%.
47
On 26 February 2010 Ellesmere, another of Gertler’s offshore companies,
exercised an option and bought 58,400,760 shares for $0.297, a total of price of
$17,347,483.64 (see Katanga Mining Early Warning Report, 1 March 2010). On 24
March 2010, Glencore bought 58 million shares back from Ellesmere for $0.756
each (see Early Warning Report, 26 March 2010, which announces the repurchase;
and, for more detailed figures, Katanga Mining’s Insider Trading reports to the
Toronto Stock Exchange http://bit.ly/1lHF1wk).
48
See Katanga Mining’s 28 April 2009 press release: http://www.Katanga
Miningmining.com/media/news-releases/2009/2009-04-28.aspx
49
Katanga Mining’s 28 April 2009 announcement shows that before the loan
conversion and rights offering, Glencore owned 17,580,482 of 206,320,802 Katanga
Mining shares, or 8.5 per cent. See Katanga Mining’s 28 April 2009 press
release: http://www.Katanga
Miningmining.com/media/news-releases/2009/2009-04-28.aspx After completion of
the rights offering, Glencore and its subsidiary Jangleglade together controlled
77.9 per cent of Katanga Mining. See, Katanga Mining and Glencore’s 7 July 2009
joint press release: http://www.Katanga
Miningmining.com/media/news-releases/2009.aspx
50
Glencore sold Breton 98,787,701 shares, or 5.2 per cent of the company,
according to a Glencore Early Warning Report filed with the Toronto Stock
Exchange on 15 October 2009. Breton paid $34,575,695 “plus an agreed amount of
interest”. Gertler’s interest in Breton is described in Glencore’s Early Warning
Report of 26 March 2010, which says: “Each of Breton Global, Ellesmere and Lora
Enterprises Limited are wholly-owned, directly or indirectly, by the Trust.” It
describes the Trust as being “for the benefit of family members of Dan
Gertler”.
51
See Glencore’s Early Warning Report to the Toronto Stock Exchange on 8
October 2009: “Glencore International has, through its wholly-owned subsidiary
Jangleglade, agreed to sell an aggregate of 98,787,701 common shares of Katanga
Mining Limited pursuant to a share purchase and sale agreement dated October 6,
2009 with Breton Global Limited, as purchase, for an aggregate base purchase
price of US$34,575,695 (or US$0.35 per share), plus an agreed amount of
interest.”
52 On 13 October 2009, Katanga
Mining shares were trading at CAN$0.88, or US$0.906. US$0.35 is 39% of
US$0.906.
53
See Glencore’s Early Warning Report to the Toronto Stock Exchange on 26
March 2010: “On March 24, 2010, Glencore International (through Jangleglade)
entered into an agreement for the sale and purchase with Breton Global Limited
and Ellesmere Global Limited pursuant to which Glencore International agreed to
purchase 100 million common shares of Katanga Mining Limited for US$75.6
million, or US$0.756 per Katanga share. This share purchase closed on March 25,
2010.” Regarding the breakdown of these 100 million shares, insider trading
reports show that Breton had originally bought 98,787,701 shares on 13 October
2009 and sold 41,599,240 of these on 25 March 2010.
54
See Glencore’s Early Warning Report to the Toronto Stock Exchange on 8
October 2009
55
See Glencore’s Early Warning Report to the Toronto Stock Exchange on 1
March 2010. Glencore sold 58,400,760 shares in Katanga Mining for $17,347,483.64
or $0.297 per share.
56
See Glencore’s Early Warning Report to the Toronto Stock Exchange on 26
March 2010: “On March 24, 2010, Glencore International (through Jangleglade)
entered into an agreement for the sale and purchase with Breton Global Limited
and Ellesmere Global Limited pursuant to which Glencore International agreed to
purchase 100 million common shares of Katanga Mining Limited for US$75.6
million, or US$0.756 per Katanga share. This share purchase closed on March 25,
2010.”
57
Insider trading reports show that Breton was left with 57,188,461 shares.
At the 25 March 2010 price of $0.756 a share, the total value comes to
$43,234,476.52.
58
The figures in this section have been rounded for the sake of simplicity.
The exact numbers are as follows: On 13 October 2009, Glencore sold Breton
98,787,701 shares at $0.35 each, total price $34,575,695. On 26 February 2010
Ellesmere exercised an option and bought 58,400,760 shares for $0.297, total
price $17,347,483.64. Adding those two together, Gertler spent $51,923,178.64 to
buy 157,188,461 Katanga Mining shares from Glencore. On 24 March 2010, Glencore
bought 100 million shares from Ellesmere and Breton at $0.756, total price $75.6
million. (Katanga Mining stock has since fluctuated, peaking at $2.17 a share on
27 April 2011 and hitting a low of $0.37 on 19 December 2013.) Subtracting the
amount he spent from the amount Glencore paid leaves a cash profit of
$23,676,821.36. Glencore only bought back 100 million of Gertler’s shares,
leaving him with 57,188,461. At the 24 March 2010 price, those shares were worth
$43,234,476.52. Adding that to his cash profit gives a total of $66,911,297.88
in cash and shares.
59 Katanga Mining was trading at
CAN$0.91 on 15 June 2010, at which time Lora owned 164,252,139 shares, giving
them a total value of CAN$149.5 million or US$145.015 million using the exchange
rate at that date (CAN$1=US$0.97).
60
The Ellesmere transaction was “in effect a fully-secured loan at a
commercially-attractive rate of
interest for Glencore”, Glencore told Global Witness in May 2012. See:
http://www.globalwitness.org/sites/default/files/library/Responses%20by%20Glencore%20to%20Global%20Witness.pdf
61
For analysis of ENRC’s deal with Dan Gertler, see the 2013 report of the
Africa Progress Panel, ‘Equity in Extractives” p101
(http://www.africaprogresspanel.org/wp-content/uploads/2013/08/2013_APR_Equity_in_Extractives_25062013_ENG_LR.pdf)
and Global Witness’s letter to ENRC shareholders, 12 June 2012
(http://www.globalwitness.org/sites/default/files/library/Global%20Witness%20memo%20to%20ENRC%20shareholders%2012.6.12_0.pdf)