A worker at the Katanga copper mine. Credit: Glencore.

Glencore, through its subsidiary Katanga Mining, has entered into a deal to write-off $5.6bn of debt to settle a legal dispute and continue its joint venture (JV) operation in the Democratic Republic of Congo (DRC) with the state-owned firm Gécamines.

Kamoto Copper Company (KCC) in the DRC is 75% owned by Katanga Mining with Gécamines holding the remaining 25%.

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In April this year, Gécamines approached the Kolwezi Commercial Court seeking to dissolve the JV company KCC and regain control of its mining licences due to mounting debt.

“We look forward to the next phase of development at KCC, which we believe will provide significant benefits to all stakeholders in the DRC.”

Under the terms of the settlement agreement, Katanga will convert $5.6bn of KCC’s total debt of around $9bn into new KCC equity and plug the capital shortfall.

Gécamines has agreed to withdraw all legal action against Katanga in view of the settlement, which will not alter the existing ownership structure of the JV.

Katanga will also make a one-time payment of $150m to Gécamines in response to older commercial disputes and a further $41m to cover outstanding expenses incurred as part of an exploration programme.

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Furthermore, Glencore has agreed to waive $57m owed by Gécamines for drilling costs incurred on its behalf and $285m entitled to KCC in relation to replacement reserves.

Katanga Board of Directors non-executive chairman Hugh Stoyell said: “We are pleased to have reached an agreement to resolve the KCC capitalisation issues and preserve and revitalise the partnership between KCC and Gécamines.

“Throughout the discussions and negotiations that resulted in this settlement, we have been well supported by our majority shareholder Glencore, and we look forward to the next phase of development at KCC, which we believe will provide significant benefits to Katanga and its stakeholders, as well as Gécamines and all stakeholders in the DRC.”

Glencore intends to tap into the DRC’s major cobalt resources. Katanga Mining’s copper-cobalt project in the DRC contains high-grade mineral reserves and integrated metallurgical operations.