Glencore’s Katanga mine to pay $22m to settle Canadian claims
CEO Johnny Blizzard has resigned, and he and the seven executives named in the Canadian probe will pay additional penalties
Toronto — Glencore-controlled Katanga Mining said on Tuesday it agreed to pay more than $22m to settle Canadian allegations of inadequate historical disclosures of its finances and activities in the Democratic Republic of Congo (DRC).
Johnny Blizzard, CEO of the Toronto-listed company, will resign and leave its board, which includes three new directors, the miner said in a filing on Tuesday.
Katanga's shares closed up 5.3% at 60 Canadian cents, compared with the local stock benchmark's 0.4% gain. Katanga stock is down 68% this year.
Shares of Glencore, which owns 87% of Katanga, closed 1.6% lower at £288.20 pounds in London. It is the worst-performing stock among major miners in London this year, partly because of geopolitical risk.
Its share rose 0.21% to R52.48 on Tuesday, taking its annual loss on the JSE to 16.3%.
"Glencore is disappointed by the conduct that has led to today's settlement," the company said in a separate statement on Tuesday, adding it was working with Katanga to improve reporting.
Katanga said it would pay the Ontario Securities Commission (OSC) C$28.5m ($21.22m) plus a further C$1.5m to reimburse costs.
In a separate settlement agreement published on Tuesday, the OSC said each of the seven executives and/or directors named in its staff investigation, including Blizzard, would pay additional penalties and costs and be prohibited from serving as directors or officers of any Canadian public company for between two and four years.
The OSC had alleged that there were misleading disclosures about Katanga's operations from 2014 to the first quarter of 2017, unreported compensation to some executives, failures of internal controls and risks associated with its business in DRC.
In 2017, after an internal review identified weaknesses in Katanga's financial reporting controls, three Glencore executives, who were among those named by the OSC, stepped down from Katanga's board.
Katanga said it acknowledged it had misstated its financial position and failed to meet Ontario's disclosure laws. It also admitted some directors and its CEO had gone along with, or authorised, that noncompliance. A Katanga spokesperson said the CEO was not available for comment.
The company added it had failed to disclose risks in DRC, including its relationship with Israeli billionaire businessperson Dan Gertler. He is accused by Washington of using his friendship with DRC President Joseph Kabila to secure sweetheart mining deals. He denies any wrongdoing.
Katanga said it would enter into a management agreement with Glencore to manage its operations more effectively.
"This ruling is a welcome first step towards holding Katanga Mining to account, but the payment made by the company is relatively small for the mega-rich Glencore group," Peter Jones, who heads corruption investigations at nongovernmental organisation Global Witness, said in an emailed statement.
He called for the UK's Serious Fraud Office to investigate Glencore's activities in DRC, which have faced a series of legal problems.
DRC is home to almost 60% of the world's supply of cobalt, a mineral expected to be in increasing demand for batteries used in electric vehicles.