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Abu Dhabi, UAESunday 22 July 2018

Glencore tests US sanctions reach with Gertler deal

Dan Gertler, the heir to a diamond fortune, has attracted scrutiny for his friendship with President Joseph Kabila and allegations of bribery

Glencore’s logo. The Swiss-based firm's reach is global. Reuters
Glencore’s logo. The Swiss-based firm's reach is global. Reuters

Glencore, the world’s biggest commodities trader, is testing the limits of US sanctions.

The company has moved to resume payments to its longtime partner in the Democratic Republic of Congo, Dan Gertler, without public approval from US authorities, as part of an effort to keep access to valuable mining assets. The deal came days after a $150 million settlement with Congo’s state-owned miner and debt restructuring of Glencore’s local subsidiary.

Glencore called the payments to Gertler “the only viable option to avoid the material risk of seizure” of its Mutanda Mining Sarl and Kamoto Copper Company assets in Congo. The mines are among the richest in copper and cobalt and a key part of Glencore’s strategy of profiting from the rise of battery materials to supply electric cars.

The payments to Gertler will be made in euros through a non-US financial institution, according to a statement on Friday. A spokesman said Glencore discussed the matter with US and Swiss authorities, but declined to confirm whether the US Treasury had given assurances that it will not pursue secondary sanctions.

Glencore appears to have extinguished the immediate threat to its assets in Congo, according to Tyler Broda, an analyst at RBC Capital Markets.

“Should there be any residual risks from paying this, in effect,‎ Glencore has managed to move the dispute from Congolese courts to U.S. courts,” he said in a report.

The company’s shares slipped 0.6 per cent to 396.10 pence as of 9:16 a.m. in London.

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Mr Gertler, the heir to a diamond fortune, has attracted scrutiny for his friendship with President Joseph Kabila and allegations of bribery in mining asset sales. He was sanctioned by the US in December.

Through his elite connections and appetite for risk, Mr Gertler built a sprawling portfolio of assets, including many of Congo’s most valuable mines and oil licenses. Though he’s exited many of those investments, he continues to fly to Kinshasa most weeks from his home in Tel Aviv.

The UK’s white-collar crime prosecutor is preparing to open a formal bribery investigation into Glencore’s dealing with Gertler in Congo, people familiar with the matter said last month.

Glencore was in a difficult position of whether to deal with Gertler. It is contractually obliged to pay him mining royalties. In April, Gertler won a court ruling in Congo to freeze assets worth almost $3 billion, leading to speculation that he could disrupt and even take over Glencore’s operations in the country.

Gertler will now receive about 25.6 million euros ($29.7 million) in royalties from its Mutanda mining operation this year. Royalties from the Kamoto project, also known as KCC, will not be owed until 2019 due to previous advance payments.