KEY POINTS
- Congo disputes royalty payments from the Glencore unit to Gertler.
- Western firms avoid Congo investments due to Gertler sanctions.
- Congo demands part of the royalties be paid to the state Treasury.
A dispute between a unit of Glencore Plc and the Democratic Republic of Congo involves a deal struck years ago by Israeli businessman Dan Gertler
Royalties dispute and Glencore’s ties to Gertler
Congo’s mines minister stated that the dispute between authorities and a Glencore-owned copper and cobalt mine revolves around royalty payments made to Gertler, whom the United States sanctioned in 2017 for alleged corruption. Congo now claims that the state should have received part of those funds instead.
Bloomberg reported last week that the tax agency says Kamoto Copper Co. owes the state hundreds of millions of dollars in royalties. Gertler, who continues to receive royalties from Congo projects including Kamoto, serves as a reminder of the challenges his ongoing involvement poses in one of the world’s key producers of minerals needed for the energy transition.
Western investors hesitate amid Congo’s sanctions and Gertler’s influence
Gertler’s involvement also explains why Western companies have resisted U.S. efforts to encourage investment in Congo, where Chinese firms own many mines. Washington urges Western firms to finance projects there to counter Beijing’s dominance in critical metals, but several issues have hampered progress. These include Congo’s history of demanding large one-off payments and the continued presence of Gertler, which makes some investors wary due to the sanctions.
Kamoto is one of Congo’s largest mines. A tax agency, known by its French acronym DGRAD, says Kamoto owes the state more than 800 million euros ($885 million), according to people familiar with the matter. After the unit’s local bank accounts were frozen earlier this year, tax collection staff also briefly sealed a warehouse where the company was storing metal, the people said.
The payments at the centre of the dispute relate to transfers Kamoto makes to Gertler, Mines Minister Kizito Pakabomba said in an interview Friday in New York. Kamoto also pays a different set of royalties on sales directly to the government.
“These are Dan Gertler’s royalties,” Pakabomba said, declining to elaborate further on the dispute. He said the impasse is moving in the right direction and an agreement between the parties “has almost been reached.”
A Glencore spokesman declined to comment. A spokesman for Congo’s finance ministry, which oversees DGRAD, did not respond to questions from Bloomberg, including why it was requesting the funds from Kamoto rather than Gertler, according to a report by mining.com.
Congo tax authorities press Kamoto over Gertler’s payments
Gertler’s Ventora Group said it was aware of a dispute but that it is a matter between the tax agency and Kamoto. “It does not involve Ventora Group. We do not know what it relates to, any other details, or the merits of such claim,” the group said.
Gertler retained royalty rights in Kamoto and another nearby Glencore mine — equal to about 2.5% of revenue — after selling his minority holdings before he was sanctioned by the United States. He also benefits from a similar arrangement at another project owned by Eurasian Resources Group.
In 2022, Gertler reached a deal with Congo’s government to return some assets in exchange for support in lobbying the United States to lift sanctions. Despite this agreement, he retained the rights to receive royalties from these mining operations.
Gertler acquired the Kamoto mining rights from Congo’s state miner Gecamines about a decade ago but has never faced criminal charges.
This current dispute with tax authorities is not the first instance where Gertler’s royalties created issues for Glencore. The company initially halted royalty payments due to U.S. sanctions but resumed payments to Gertler in 2018 after he filed a lawsuit.
Glencore explained at the time that resuming these payments was the “only viable option to avoid the material risk of seizure” of its Congolese mines.
