(Yicai Global) July 19 -- Shares in CMOC Group surged as much as 4.5 percent in Hong Kong today after China’s biggest molybdenum producer said that it has reached a settlement with the government of the Democratic Republic of Congo and it will pay the minority shareholder in Tenke Fungurume Mining, operator of the copper-cobalt Tenke Fungurume mine, USD2 billion in compensation and dividends.

CMOC’s share price [HKG:3993] ended the day up 3.2 percent at HKD4.73 (USD0.60). Earlier in the day it hit HKD4.79. Its Shanghai-traded stock [SHA:603993] closed up 1.7 percent at CNY5.85 (USD0.81).

CMOC will pay Congolese government-controlled Gécamines, which holds a 20 percent stake in the mine, USD800 million in compensation over the next six years and at least USD1.2 billion in dividends during the current project period starting this year, Luoyang, central Henan province-based CMOC said, citing the deal recently penned between the two parties.

Both sides agreed that Gécamines would be entitled to 20 percent of the total value of subcontracting projects and the right to acquire products proportional to its 20 percent stake in Tenke Fungurume Mining on market terms and in compliance with Congolese laws, it added.

CMOC acquired an 80 percent stake in Tenke Fungurume Mining in 2017 for USD2.65 billion and invested USD2.5 billion in August 2021 to boost capacity. After copper and cobalt prices rose amid robust demand for electric car batteries, the Congolese government asked Tenke Fungurume Mining for compensation and the two sides reached an agreement in April.

Export restrictions were placed on the copper and cobalt produced by the Tenke Fungurume Mine, which has a mining area of over 1,500 square kilometers and has one of the largest reserves of copper and cobalt and the highest grade worldwide, during the negotiations but were resumed in May.

However very little of the metals were sold in the first half due to the local logistics cycle, CMOC said. This has had a big impact on CMOC’s performance and the company said on July 14 that it expects net profit to plunge as much as 84.7 percent in the first half from a year earlier to CNY633 million.

Last year, the Tenke Fungurume mine produced 254,200 tons of copper and cobalt compounds, equivalent to 20,300 tons of cobalt metal, according to CMOC’s 2022 annual report.

In addition to the Tenke Fungurume mine, CMOC is investing over USD1.8 billion in the neighboring KFM copper-cobalt mine, which is the world’s largest and highest-grade untapped copper-cobalt mine, and it will start operations soon. CMOC acquired a 95 percent stake in the mine from US-based Freeport Group for USD550 million in December 2020.

Battery giant Contemporary Amperex Technology holds a 24.6 percent stake in CMOC through a subsidiary and is its second-largest shareholder. They are also equity partners in the KFM copper-cobalt mine.

Editor: Kim Taylor