Gecamines to slash $2bn in debt (Source: Miningmx)

Allan Seccombe

[] -- GECAMINES, the Congo’s state-owned base metals company, would reduce $2bn in debt this year involving cutting thousands of jobs and lifting its own copper production, said CEO, Paul Fortin. Gecamines would aim for 27,000 tonnes of copper, the 2007 forecast it failed to reach.

Gecamines would call for tenders on copper and cobalt exploration tenements near Kolwezi, Lubumbashi and Likasi within four months, Fortin told Miningmx on the sidelines of the Africa Mining Congress in Livingstone, Zambia.

Gecamines was also weighing an initial public offering and a listing on a Canadian or European bourse, but this is a long way off still, he said.

Gecamines missed its 2007 copper production target of 27,000 tonnes, reaching just 22,000 tonnes. This was despite spending $60m on refurbishing equipment in Likasi in southern Congo.

“If I’m very lucky, I will get to 30,000 tonnes this year,” said Fortin. “But my production chain is very insecure and that’s what’s killing me. It’s too fragile for me to make reliable predictions.”

Gecamines will spend a further $10m from cash flow in improving the plant and equipment this year.

$1bn in debt

“I’m not satisfied that we’ve optimised the investment we made last year and this year production and workforce motivation will come under a lot more focus,” he said.

Gecamines has reduced its debt levels “a little”, but this would be the year it will receive close attention because the management team has been freed up from negotiating a $9bn Chinese transaction to bring a 400,000 tonne copper mine into production from 2011.

There is $1bn in sovereign debt, which Fortin needs to engage the London Club to reduce. A further $400m lies in inter-company debt between Gecamines and state rail and power utilities for example. Fortin said he wanted to negotiate a cancellation of that debt as well as the credit it had extended to those entities.

The final $600m lies in commercial debt and Fortin wants to negotiate a “significant discount” in repayments of it.

“It’s all very easy to say, but it’s not that easy to organise,” he said, adding talks on the three debts had not yet started.

The workforce will be reduced to 5,000 people this year from about 8,800 currently.

As part of the Chinese deal, which included that country’s railway, power and bank, Gecamines will be paid $100m, about half of which will go towards setting unpaid salaries accumulated over the years.

Fortin hopes that when workers are up to date with salaries, some will migrate to the better paid private sector.

“When I compare production and number of employees to other companies operating in Congo, I’m way off line. It can continue continue for a little while longer, but not much. Now we are a social service, but we must become a business.”

The proposed listing of Gecamines was in the early stages, and would have to be formalised within Gecamines management before it is presented to 100% shareholder, the government, Fortin said.

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While the government could continue to hold a majority stake in Gecamines it would have to be independently managed to secure investor trust, he said.

Asked about the value of Gecamines, its assets and partnerships with a host of mining companies, Fortin pointed out the company was able to raise $9bn on the strength of its orebodies and the appetite from China for metal.

The three Chinese partners will pay $3bn towards infrastructure development in the Congo and another $3bn for building a mine at Kolwezi.

Once the mine is in production, a further $3bn will be spent on infrastructure around the country. In exchange, the Chinese receive an orebody with some 10 million tonnes of copper.

The joint venture vehicle is 68% Chinese owned and the remainder held by Gecamines.

To invite tenders

Gecamines will issue an invite to tender for exploration tenements held by Gecamines, Fortin said. “I don’t have the cash. If I did, I wouldn’t put these out to tender,” said Fortin.

“We are putting out to tender tenements where there are good indications of mineralization,” he said.

Gecamines wants the joint venture exploration partnerships to be different to what had been agreed in previous agreements. “I want these joint ventures to be more 50/50 and joint management. That kind of this,” he said. The tenements are virgin ground.

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