First Quantum Minerals Ltd. (TSX:FM) has launched legal action against a mysterious British Virgin Islands company, Highwinds Group, after its $400 million investment in the Democratic Republic of Congo (DRC) was seized.
In a release Wednesday, the Vancouver-based copper miner said “interests” within the DRC government and third parties orchestrated the unlawful expropriation of its Kolwezi project.
The legal action targets Highwind Properties Ltd., Pareas Ltd., Interim Holdings Ltd. and Blue Narcissus Ltd., together known as the Highwinds Group, which are subsidiaries of London-based Eurasian Natural Resources Group (LSE:ENRC).
The dispute is centred on a highly prospective copper project that First Quantum had the rights to and invested more than $400 million in before the DRC government sealed it off last year, effectively throwing 700 Congolese miners out of work.
In February, the company commenced international arbitration against the DRC for the seizure.
But the fight heated up August 20 when London’s ENRC said it had bought 50.5% of Camrose Resources Ltd., which, through its ownership of the Highwinds Group, had a 70% stake in Kolwezi.
First Quantum argues the sale violates an order handed down the day before that prohibits the DRC from taking any action to transfer or allow the transfer of Kolwezi to another party.
According to a source, the man behind the Highwinds Group is Israeli businessman Dan Gertler, who is known for his high-level connections within the DRC.
Media sources have reported that Highwinds’ involvement is part of a government “grab-and-flip” strategy that allows insiders to profit from the transfer of the rights to the project.
In a September 9 release, ENRC said its purchase of Camrose, and effectively Kolwezi, was part of an “extensive due diligence process.”
It also said that the DRC’s state-owned mining company, Gecamines, had the right to transfer the Kolwezi permit, which it did in a January agreement with Highwind.
In an interview with BIV, First Quantum president Clive Newall said the company is prepared to play the “long game” of international arbitration to win its fight against the DRC. He maintained the company has been transparent and honest in its dealings with the DRC government.
“Corrupt practices tend to come up afterward, once you’ve already invested your money,” Newall said. “I don’t know how you guard against that, I really don’t.”