Melbourne — The Democratic Republic of Congo’s state-owned mining company has begun legal proceedings to dissolve one of Glencore’s subsidiaries because of a capital shortfall, the Swiss miner and commodities trader says.
Glencore says it has several options to remedy the deficit at Kamoto Copper Co (KCC), according to a statement issued on Sunday.
Possible courses of action include the conversion of a portion of existing debt owed by KCC to Katanga Mining, the Toronto-listed company that controls KCC, or forgiving that debt, it said.
“Any such outcome would impact the distribution of future cash flows earned by KCC,” Glencore said.
Heavy levels of debt at mining companies are becoming an increasingly heated issue in Congo, the world’s largest source of cobalt and Africa’s biggest copper producer.
Gecamines, the state-owned mining company, plans to renegotiate partnerships with international companies to give the company a greater stake in mining revenue and profit.
Katanga, a joint venture between Glencore and Gecamines, last year flagged a $3.9bn capital deficiency and Glencore warned last month that the unit faced legal action because of the shortfall.
A court hearing was scheduled in a Congolese court for May 8 and “may grant KCC a maximum period of six months to regularize the situation”, Katanga said on Sunday.
If Katanga took the necessary steps to “regularise” KCC’s capital deficiency and action was confirmed by KCC’s statutory auditor before a court judgment was made, the court could not issue a dissolution order, it said.