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12/5/16

On the blackmailing of Ivanhoe Mines (IVN.to) by The Democratic Republic of Congo (from IKN394)

A few thoughts on the latest goings on at Robert Friedland's monster marketing vehicle. No, not the silly graves thing, but something that can really affect the stock price. From The IKN Weekly issue 394, out last night:

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Ivanhoe Mines (IVN.to): Once again this Friedland company is making the biggest news splashes in the exploration copper sector, but this time for a deal that can easily be called controversial. I’m a little late to this due to the travels and that, but I’d like to say something today because this issue got a few of our juices flowing last week. I shall explain.

On November 18th IVN announced (9) that it and its partner Zijin were giving an extra 15% of the Kamoa-Kakula copper project to the host country, the Democratic Republic of Congo (DRC) (insert irony joke), bringing its participation to 20% (with Zijin and IVN on 40% each, give or take a tenth or so). This report (10) in Mining Journal gives the Robert Friedland polished quote space

“This is a historically significant event for the people of the Democratic Republic of Congo,” he said. 
“We now are united as partners committed to working closely together toward our shared objective of ensuring that the major copper discoveries we have made at Kamoa and Kakula during the past eight years can be predictably, efficiently and expeditiously developed into a world-scale mining venture with a lifespan of multiple generations.”

But the grumblings and rumblings got louder, so on Monday November 28th (i.e. last week) IVN held a Conference Call (11) to explain about recent company developments and it was one of the phrases used by the company in the CC, about how the deal to hand over this large slug of Kamoa-Kakula would “safeguard” its future, that got the hackles up of certain people a little group to which your humble scribe belongs, a bunch of five or six reprobates who can collectively be called “mining professionals” (even I just about scrape in on that qualification these days). It started with one of them sending a group mail entitled “DRC Rolls Friedland”, it continued after November 28th with another asking the difference between this deal and a bribe (e.g. “no 20%, no permits”), then IVN was semi-defended by a couple of others on the string. I’m not in a position to quote any of my friends but I can reproduce here my additions to the debate. Here’s the first (grammar brushed up very slightly)

“Aside from any precedent set, this deal doesn't safeguard a thing inside IVN's suite of assets in DRC, including the one that's just been safeguarded. 

There is a difference between a bribe for a specific permit or "consultancy fee" and this, because the DRC "safeguard" is legal, but only because the country makes the laws! [Name] is 100% correct, this is a shakedown, extortion, blackmail, call it what you will. And if there's one constant about blackmailers over the course of history, it's that they'll never just shake you down once; when on the hook the victim will pay, pay and pay again.”

In other words, I too believe DRC is taking “Resource Nationalism” to a whole new level. The subject then turned to the difference between “legal” and “illegal” bribery, for example the US lobbying system in which it’s perfectly legal to give a large sum of money to a politician and in return expect tacit support for your cause. The thing is, what’s going on in DRC now isn’t mere bribery, it is in my opinion blackmail and I tried to make the distinction in a later mail to the group:

“I absolutely agree with your lobby group argument. However, there is a difference between common or garden corruption be it illegal (a million in banknotes for a permit) or legal (election campaign donation from NRA) and outright blackmail be it illegal ($20,000 or I tell your wife) or legal (DRC "safeguard"). The premise of blackmail is different, it's the threat of removing the asset from your life permanently (wife, copper project) if you don't do as I say. It's very different.”

Now be clear, mine is just one opinion and the others in the experienced groupette of mining people either agree with all, some or none of my position depending on their taste. But the episode recently recorded by IVN in DRC, and then watching the way it got spun by IVN to make it sound like a wonderful step forward instead of what it truly is, legalized theft, is another in the set of reasons why I prefer not to be exposed to that country.