DR Congo says Canada mining hitch holds up debt deal

By Joe Bavier and Anna Willard

KINSHASA/PARIS, Nov 24 (Reuters) - The Democratic Republic of Congo (DRC) on Tuesday accused Canada of holding up progress toward rescheduling its foreign debt in a dispute over a canceled mining contract in the Central African country.

The International Monetary Fund (IMF) said this month the nation must make arrangements on the rescheduling of its debt with the Paris Club of creditor nations before it could qualify to enter a global debt relief program.

However, a source from the Paris Club said a deal could be reached in the coming days and that it was not the correct forum for a discussion on the business climate of any particular country.

Congo is estimated to have $10 billion to $11 billion in foreign debt. At the end of September 2008, it owed $6.1 billion to the 19 developed countries who are members of the Paris Club and had fallen behind on its repayments.

Talks with the Paris Club creditors have been held this week, but Congo said they had become snagged over its decision in August to cancel a copper and cobalt project. Toronto-listed First Quantum Minerals (FM.TO) was the majority shareholder in the project.

The Canadians "have a problem with what's happened with a Canadian company, KMT," Information Minister Lambert Mende said of First Quantum's Kingamyambo Musonoi Tailings (KMT) unit. "The Canadian government wants to use the Paris Club in order to resolve a particular problem. This is unacceptable."

The Canadian government did not address the Congolese allegations directly, but spokesperson Me'shel Gulliver Belanger told Reuters that the Canadian mission in Kinshasa has been in active dialogue with the authorities there regarding commercial relations.

"For many years Canada has been an active development and investment partner with DRC. However, some Canadian firms have been having significant issues in a challenging investment environment," Belanger said in an e-mailed statement.

The statement said the issue was a confidential matter for First Quantum Minerals as well as Lundin Mining (LUN.TO), which also is active in the country.

Congo still expected its push for debt relief to go before the IMF next month, Mende said. The source said the Paris Club's members could reach a decision soon.

"The Paris Club is in the process of putting together financing commitments from its members. A decision should be taken in the next few days," the source told Reuters.

The source added that Paris Club creditors should take decisions based only on matters relating to the debt strategy of a debtor country.

"It is not the job of the Paris Club to discuss subjects relating to the business climate," the source said.

"These subjects should be discussed on the boards of the IMF and World Bank and in the case of Congo, the IMF program and the conditions for reaching the completion point (of the debt relief program) contain commitments taken by the Congolese authorities to improve the business climate."

Separately, Deputy Mines Minister Victor Kasongo told Reuters Congo planned to make an official response to Canada on Wednesday.

Congo canceled the $500 million KMT project in the Katanga mining heartland as part of a government review of contracts deemed to have been struck on unfair terms. The Congolese government has since said the deal could be renegotiated.

Court documents seen by Reuters late last month showed First Quantum must pay Congo $6 million in damages over three failed lawsuits it filed against the government and state agencies after the project was canceled.

The company had earlier attempted to withdraw the suits. Analysts have said First Quantum could move the dispute to a court of international arbitration to defend its investment. (For more Reuters Africa coverage and to have your say on the top issues, visit: af.reuters.com/) ((Writing by Mark John; editing by Patrick Graham, Gary Crosse; e-mail: mark.john@thomsonreuters.com; +221-33-864-5076))