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CONGO: Edmonds group in spin after miner is run out

by Ben LauranceSunday Times
July 22nd, 2007

The document in Billy Rautenbach's hands was uncompromising. He was accused of fraud, theft, corruption and violating commercial law, it said. He was persona non grata. He would have to leave.

It was last Wednesday evening. Rautenbach was in his hotel at Lubumbashi, the
capital of the Katanga province in the southeastern corner of the Democratic
Republic of the Congo.

The meaning of the document he held, from the DRC's ministry of the interior,
was clear: he wouldn't be returning in a hurry.

Rautenbach spent the night at his hotel, and the following morning was driven
under armed escort to Lubumbashi airport.

There, under the watchful eyes of a team of Congolese immigration officers,
Rautenbach walked across the asphalt in front of the low, single-storey airport
buildings and climbed into his private King Air plane for the 90-minute flight
to his home in Zimbabwe.

The aircraft took off at 9am and headed south. In his briefcase was Rautenbach's
Zimbabwean passport. Across one of the pages for visas, a DRC official had
scrawled "Entrée nonauthorisée".

The expulsion of Rautenbach marked an extraordinary climax to a bizarre and
tangled tale that takes in South Africa, the British Virgin Islands and some of
the richest mineral deposits on the planet. And it is a tale that could have a
crucial impact on an £800m bid battle involving one of Britain's most
controversial entrepreneurs.

Rautenbach has long been known as a kingpin in the mining world in southern
Africa. In the late 1990s, with the support of Robert Mugabe's Zimbabwean
regime, he was given access to the DRC's rich mining deposits in the south of
the country. Lau-rent Kabila, then president of the DRC, installed Rautenbach as
head of the state mining company, Gécamines.

The men fell out in 2000. Kabila accused Rautenbach of underreporting exports
and sales of huge quantities of cobalt - with the gains being diverted to a
Rautenbach company, Ridge-pointe, based in the British Virgin Islands.
Rautenbach denied any wrongdoing.

Kabila was assassinated in 2001 and his son Joseph took over as president.

For a time, Rautenbach seemed to be rehabilitated. But since the elections last
year, the new DRC regime has been trying to clean up its mining industry and
last week the government issued its declaration that Rautenbach was persona non
grata.

The papers ejecting Rautenbach from the country did not mention his activities
in the DRC itself. They said only that the authorities were ejecting him because
he was sought in South Africa in connection with a string of fraud and theft
charges.

These relate to his time spent in control of the South African arm of Hyundai.
Rautenbach has always denied the accusations, but he has not returned to South
Africa since the charges were filed in 2000.

There is no extradition treaty between the DRC and South Africa. As a result,
Rautenbach could not be sent to South Africa specifically. He could only be
ejected from the DRC.

But the DRC authorities are nevertheless investigating Rautenbach's conduct in
their own country. A government source in the capital, Kinshasa, said: "We are
very interested in how some of the assets of Gécamines were apparently moved out
of the Congo."

The whole affair might be dismissed as a small, if colourful drama in a country
more than 4,000 miles from London.

But Rautenbach has played a pivotal, if determinedly low-profile, role in the
building of Camec - short for Central African Mining & Exploration Company - the
latest corporate vehicle of Phil Edmonds, a man known not only for his eventful
business career, but also for his prowess as a spin-bowler until he retired from
the cricket field two decades ago.

With Edmonds at the helm, Camec last year acquired a bundle of DRC cobalt and
copper mining assets from Rautenbach. In return, Rautenbach became a shareholder
in the enlarged Camec.

The exact size of his current shareholding is not clear, but it is thought to be
about 18%.

Camec itself has tried to play down the significance of Rautenbach's involvement
in the company.

When it emerged last week that the DRC was going to try to deport Rautenbach,
Camec issued a statement. It disputed the authenticity of the document ordering
his removal.

But the statement then went on: "Even if it were authentic, it would not affect
any of Camec's operations in the Congo; Mr Rautenbach is not involved in the
operational management of the company's projects." The essence of Camec's stance
was clear: one of our shareholders may find himself kicked out of the DRC, but
so what?

Others are more willing to acknowledge the importance of having Rautenbach on
board - particularly if the company succeeds in clinching a huge takeover deal
that would create, in its own words, "one of Africa's largest copper and cobalt
producers".

Earlier this month, Camec signalled that it wanted to take over Katanga Mining,
a company quoted in Canada but run from London. The company's main asset is a
huge copper and cobalt mine in the south of the DRC that should start production
towards the end of this year. It is the third-largest known copper resource in
Africa.

Camec is in a strong position. It bought 22% of Katanga earlier this year. And
Camec claims that it has "lockup" deals with holders of a further 32% of Katanga
under which they have pledged their support for the bid.

Crucially, George Forrest, deputy chairman of Katanga and its biggest
shareholder with a 24% stake, has indicated that he is prepared to accept the
Camec offer: this accounts for most of the 32% covered by lockups.

But Camec's takeover is not yet a done deal. The company cannot formally make an
offer until the middle of next month. And the so-called lockups are not
completely watertight: if a rival bidder comes along with an offer 7% or more
higher than Camec's bid, then it will be free to accept the better deal.

Nevertheless, Katanga's chairman, Art Ditto, conceded this weekend that he now
had to "explore alternatives" - code for seeing if there was another company out
there that might be prepared to top Camec's offer.

One suggestion - although not one being advanced by Ditto - is that RP Explorer
Master Fund, which has a stake in Katanga, may try to engineer a merger with
another DRC copper miner, Nikanor, where it also has a significant holding.

Camec might want to play down Rautenbach's role. But in a recent research note -
written before the drama at Lubumbashi airport - Credit Suisse analyst Jeremy
Gray suggested Rautenbach would indeed have a significant part to play.

Gray said: "Having George [Forrest] on the ground in DR Congo alongside Billy
Rautenbach makes for a powerful combination."

For Edmonds, the Rautenbach affair is unfortunate. In particular, the DRC
government's clear unease about what Rautenbach has done in its country, let
alone in South Africa, will revive memories of controversy surrounding White
Nile, the exploration company floated on London's lightly regulated AIM market
by Edmonds in February 2005.

White Nile's shares listed just a month after the signing of a peace agreement
to end two decades of civil war in Sudan. Then, days after their market debut,
the shares were suspended. Edmonds said that the company had secured the rights
to a 60% stake in a promising oil exploration block in southern Sudan.

But there was a problem. White Nile had been granted its rights by the
government of southern Sudan. Meanwhile, Total, the French oil company, said
that it had been given the rights to explore as long ago as 1980: in other
words, the authorities in southern Sudan did not have the right to award the
block to someone else.

Authorities at the London Stock Exchange looked into the matter to satisfy
themselves that White Nile could substantiate its claims to the exploration
acreage, but allowed share trading to resume.

White Nile insisted then and continues to insist to this day that it has a legal
right to the Sudanese exploration territory. But the company was forced to
announce two weeks ago that White Nile's position was less than rock solid.
Indeed, the company had been asked to leave.

The announcement - from the southern Sudan authorities who had granted the
concession to Edmonds' company two-and-a-half years ago - came as a shock. White
Nile's operations manager pointed out that the company had already spent $18m
(£9m) on seismic testing alone. The company said it was "seeking urgent
meetings" with the government of southern Sudan to "clarify the situation".
Nothing further has since been said publicly.

White Nile's share price is now little more than half its level early last
month, but the company is still worth nearly £250m - although it has few
significant assets outside Sudan.

Total certainly has grounds to claim control over the disputed block. Sudan's
peace treaty between the north and south was signed in January 2005, a month
before White Nile announced its move into the country.

And the agreement could hardly have been more explicit. A section of the
240-page peace accord was devoted to "Existing Oil Contracts".

It said: "Contracts shall not be the subject of renegotiation . . . the Parties
agree that 'existing oil contracts' mean contracts signed before the date of
signature of the Comprehensive Peace Agreement."

On the face of it, that would seem to cover the Total concession: the French
firm secured its rights decades earlier. Naturally, lawyers are continuing to
argue over the exact interpretation of the agreement - hardly surprising, given
the importance of the block to White Nile's future.

Against this background, the murmurings from Kinshasa about Billy Rautenbach's
past activities in the DRC are striking uncomfortable chords for Edmonds and the
investors who have backed him.

The whole controversy about White Nile has turned on a dispute about its legal
rights to ownership of oil-exploration assets. Edmonds cannot afford any
controversy in another of his companies. Neither he nor Rautenbach was available
for comment this weekend.

Last month, the new DRC administration embarked upon an exercise to review 60
mining concessions, most of which were negotiated during a six-year war in the
country and the three-year transitional period that followed.

The exercise is more far-reaching than most observers had expected. The DRC
government has enlisted help from Rothschild in Paris and from the Carter Center
in an attempt to pin down exactly who owns what - and, more importantly, who
should own what.

The DRC clearly has Rautenbach in its sights. He has always denied wrongdoing.
But when the Kinshasa authorities announced his expulsion, they said: "Mr
Rautenbach has amassed a large number of mineral and other assets in the DRC
during the civil war and subsequently. The government of the DRC is making
strenuous efforts to clean up the mining sector."


For Camec, Rautenbach is looking like a liability.





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