Copper, Congo, and the Kazakh Oligarchs
The Democratic Republic of Congo is the third largest country in Africa. It sits on top of enormous reserves of cobalt, diamonds, copper, gold, and rare minerals. By any logic, this should be one of the wealthiest nations on the continent. Instead, it is one of the poorest countries on Earth. Only Zimbabwe has a lower per capita GDP. Chapter 35 of Torsten Dennin’s “From Tulips to Bitcoins” tells the story of how Kazakh oligarchs ended up controlling Congo’s copper riches through a chain of shady deals, corrupt middlemen, and a government that treated its country’s resources like personal property.
A Country Sitting on a Goldmine (Literally)
The African copper belt stretches from the Congolese Katanga province all the way into northern Zambia. This belt holds roughly 10% of the world’s copper reserves. In 2010, copper first traded above $9,000 per ton on the London Metal Exchange. That is serious money sitting in the ground.
And then there is the Kamoto Mine near the town of Kolwezi. More than 3 million tons of copper and over 300,000 tons of cobalt are buried there. Just the copper alone is worth over $30 billion. That is one mine. In one of the poorest countries on the planet.
How does a country with that kind of wealth end up with nothing to show for it? The answer is a long, ugly history of theft from the top.
Decades of Looting
Congo gained independence from Belgium in 1960. What followed was decades of dictatorship under Mobutu Sese Seko. Mobutu did not run the country so much as he looted it. Systematically. The state mining company Gecamines was once the largest company in all of Africa. Under Mobutu, it was hollowed out and left as a shell.
In 1997, Laurent-Desire Kabila overthrew Mobutu. Then in 2001, Kabila was murdered. His son Joseph Kabila took power. He was young, and he would stay in charge until the end of 2018.
Between all of this, the so-called Second Congo War happened. Some call it the African World War. Eight African states got involved. Twenty-five armed groups were fighting across the country. More than 5 million people died. That makes it the bloodiest conflict since World War II.
While all this was happening, the minerals stayed in the ground. And a new generation of deal-makers was circling, waiting for their chance.
The Three Sly Foxes
Dennin describes three key figures in Congolese mining, and he calls them the “sly foxes.” These are the men who figured out how to get access to Congo’s resources while the country was falling apart.
First, George Forrest. The old man of Congo mining. He had been in the country for decades and knew how to navigate the chaos.
Second, Billy Rautenbach. A Zimbabwean businessman and a friend of Robert Mugabe. If you needed someone who understood how to operate in corrupt African states, Rautenbach was your guy.
Third, and most important to this story, Dan Gertler. An Israeli investor. His grandfather founded the Israel Diamond Exchange. Gertler was friends with Prime Minister Ariel Sharon. More importantly, he became a close personal friend of young President Joseph Kabila. That friendship would turn out to be worth billions.
The Kolwezi License Grab
In 2007, the Congolese government reviewed more than 60 foreign mining agreements. The stated goal was to increase state ownership in the country’s mining sector. Sounds reasonable on paper. What it actually did was give the government a tool to cancel deals and hand licenses to people who were better connected.
In August 2009, the government terminated the Kolwezi mining license held by Canadian company First Quantum Minerals. First Quantum had already invested over $700 million into the project. That money was gone. License canceled.
Then in January 2010, Dan Gertler’s company Highwinds Properties received the Kolwezi license. Just like that. A Canadian company loses $700 million in investment, and the license ends up in the hands of the president’s friend. The details of how this happened were murky at best. Nobody was pretending this was a clean deal.
Enter the Kazakh Oligarchs
This is where the story gets even bigger.
ENRC stood for Eurasian Natural Resources Corporation. It was a $12 billion mining company listed on the London Stock Exchange. The company was controlled by three Kazakh oligarchs: Alexander Mashkevitch, Patokh Chodiev, and Alijan Ibragimov. Together they owned about 40% of ENRC.
ENRC had already been buying its way into Congo. In 2009, it acquired a company called Camec for $955 million. Camec happened to be 35% owned by Dan Gertler. So the connection was already there. Gertler was the bridge between Congolese resources and outside money.
Then on August 20, 2010, ENRC bought 50.5% of Camrose Resources for $175 million. Camrose held the Kolwezi mining licenses. The same licenses that had been taken from First Quantum and handed to Gertler’s company months earlier.
Follow the chain. First Quantum invests $700 million. Government cancels their license. License goes to Gertler. Gertler’s connected companies sell to ENRC. Kazakh oligarchs end up controlling one of the largest copper deposits in Africa. And the people of Congo? They get nothing.
The Unraveling
It did not end well for ENRC either, if that makes you feel any better.
In November 2013, ENRC was delisted from the London Stock Exchange. By April 2014, there was an official investigation into bribery and sanction-busting. By February 2014, the company needed to sell all its international assets just to repay its debts.
The Kazakh oligarchs got their mines. But the London listing, the respectability, the access to Western capital markets, that all fell apart. Turns out you can buy mines in Congo through shady deals, but eventually someone starts asking questions.
What Stays With Me
This chapter hits different than most in the book. In other chapters, you read about traders making wild bets and losing money. Speculators getting greedy. Markets going up and crashing down. Those stories are about financial risk and human stupidity.
This one is about something worse. This is about a country with $30 billion of copper in one mine, where people live on almost nothing, and every powerful person from every direction is there to take the resources for themselves. A dictator loots the state mining company. A young president hands licenses to his Israeli friend. Kazakh oligarchs buy the licenses through layers of shell companies. And the people who live on top of those copper deposits keep being the poorest on Earth.
Dennin does not editorialize much, but the facts speak for themselves. More than 5 million people died in the Congo wars. The country has some of the richest mineral deposits on the planet. And every time someone shows up to “invest” in Congo’s resources, the money flows out of the country, not in.
The copper price hit $9,000 per ton in 2010. Somebody got very rich from that. It was not the people of Congo.
Based on Chapter 35 of “From Tulips to Bitcoins” by Torsten Dennin (ISBN: 978-1-63299-227-7, River Grove Books, 2019).
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