CONGO: Edmonds group in spin after miner is run out

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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