Congo Says Freeport-McMoRan Fine Reduced for ‘No Good Reason’

By Franz Wild

Sept. 1 (Bloomberg) -- Freeport-McMoRan Copper & Gold Inc.’s copper and cobalt unit in the Democratic Republic of Congo had a settlement for visa breaches cut by four-fifths without good reason, the country’s immigration authority said.

The subsidiary, Tenke Fungurume Mining Sarl, agreed in July to pay $16 million in fees and penalties after claims that at least three of its employees misused Congo’s visa and work- permit system. The amount was reduced to $16 million from $74 million, said Jerome Katende, economic adviser to the immigration authority’s director-general, Francois Beya.

“There was no basis for this” reduction, Katende said in an interview in the capital, Kinshasa, on Aug. 28. “When a company is in such flagrant violation of the law we should keep the maximum penalty.”

Tenke Fungurume is investing $1.8 billion to exploit what it calls one of the world’s largest undeveloped copper and cobalt deposits that the company takes its name from. The project will reach full capacity at 250 million pounds of copper and 18 million pounds of cobalt in the second half of this year, according to Freeport. The company plans to sell 100 million pounds of copper this year, it said in July.

Tenke Fungurume was asked to pay the $74 million by the immigration authority and Congo’s state revenue agency, known as the Direction Generale des Recettes Administratives, Judiciares, Domaniales et de Participations, or DGRAD. No immigration- authority representatives were present at the July 27 meeting when the DGRAD lowered the settlement amount, Katende said.

Phoenix, Arizona-based Freeport’s spokesman William Collier declined to comment on the reduction when e-mailed for comment.

Employees Arrested

Three employees of Tenke Fungurume, owned by Freeport, Lundin Mining Corp. and Congolese parastatal Gecamines, were arrested in August after immigration authorities found they had established a parallel system of documentation to replace resident visas and work permits for expatriate workers. The system was arranged with two unidentified officials in Katanga province, where the company’s project is based.

Lundin Mining didn’t immediately reply to a request for comment left at its office in Toronto via phone and e-mail. Gecamines Chief Executive Officer Paul Fortin didn’t immediately respond to a message left on his mobile phone seeking comment.

Tenke Fungurume issued 9,921 substitute documents for employees between February 2008 and April 2009, Katende said. The company paid $400 per document into the private account of the head of provincial immigration, rather than the $1,153 that was required to be paid into the agency’s account, he said.

Clarification Sought

Tenke Fungurume is trying to clarify Congolese labor law, Freeport’s Collier said in an e-mailed response to questions yesterday.

“The procedures associated with obtaining labor and immigration authorizations for short-term workers on a timely basis are not clearly established in the DRC,” he said.

The revenue authority reduced the settlement amount after Tenke Fungurume showed the figure was excessive, DGRAD Director- General Jean Elongo said in an Aug. 28 interview in Kinshasa.

“They were ignorant of the law,” Elongo said. “The company has already lost out as it was paying into the wrong account. Why should they be punished even more?”

Tenke Fungurume has already paid $6 million of the settlement amount, he said.

“Tenke continues to work proactively and cooperatively with the tax authorities to establish approved procedures for doing so consistent with its mining convention and local law,” Freeport’s Collier said.

To contact the reporter on this story: Franz Wild in Kinshasa on fwild@bloomberg.net.

Last Updated: September 1, 2009 06:29 EDT