The Nov. 19 letter from Tullow Chief Executive Aidan Heavey,
whose company is battling licence woes in both Congo and
neighbouring Uganda, says it sought the advice of Uganda’s
energy minister and is now confident it can get the blocks back.

The disputed Congo blocks, scheduled to be explored by other
companies early in 2011, are on the Congo side of Lake Albert
and Tullow has said it wants to join them up with blocks it
already holds on the Ugandan side where it has agreed to partner
with Total and CNOOC (0883.HK: Quote, Profile, Research).

“Now we are confident that with the assistance of (Uganda
Energy Minister) Hon. Eng. Hilary Onek, this matter can at last
be put to rest,” said the letter, adding Tullow is ready to
consider dropping its legal challenges over the blocks.

“Tullow believes that it and its new partners in Uganda,
Total and CNOOC, can play a very strong role in the exploration
and exploitation of the whole of the Albertine Region.”

Tullow sought legal action after Blocks 1 and 2 of Congo’s
eastern Albertine Graben were awarded by presidential decree in
June to previously unheard of Caribbean-registered firms
Caprikat Ltd and Foxwhelp Ltd.

Tullow paid $500,000 for rights to the blocks in 2006, but
the deal was never ratified by the presidency.

“It’s normal for them to fight but now they are trying to be
more friendly,” Congo Energy Minister Celestin Mbuyu told
Reuters, without saying if he would meet the company for
negotiations. A Tullow spokesman declined to comment.

Despite Tullow’s attempts to block development of the
concessions during international arbitration, exploration of the
blocks is set to begin next month. [ID:nLDE6AO1RZ]

Giuseppe Ciccarelli, CEO and general manager of Oil of
Congo, a Congolese-registered company that will operate the
blocks and in which Caprikat and Foxwhelp will have 85 percent,
told Reuters exploration would start in January.

“I think that the bad time is over … Now we go at full
steam,” he told Reuters in an interview.

He said the first phase of exploration would start with
seismic and aerial surveys from Jan. 10 and would cost $10-15
million, and that the company would meet unnamed companies as
potential investor partners next week.

The offshore companies, whose shareholders via a
Swiss-administered fund have not been revealed, are also
advising the Congo government on plans for a $2.5 billion oil
pipeline running from Lake Albert to Kenya’s Mombasa port.

Minutes of a meeting held on Oct. 19 in Kampala, signed by
energy ministers from Congo, Uganda and Kenya and seen by
Reuters, show that Oil of Congo advocated the development of an
“inter-governmental company” to own the proposed pipeline.

“The peak production timing of the potential from the
Albertine Graben is predicted to be 2016 and by this time, the
pipeline infrastructure could be in place,” said the minutes.
(Editing by Richard Valdmanis and Jon Loades-Carter)

The polls for the presidency and parliament, due to start in
November 2011, will be the second since the official end to the
1998-2003 war, which drew in six foreign armies and resulted in
the deaths of 5 million. Here are some factors to watch.

POLITICS

President Joseph Kabila came to power when his father was
assassinated in 2001, winning presidential elections in 2006.
But he still relies on the support of other parties such as
PALU, a veteran opposition party, for a parliamentary majority.

Factions within the coalition have complained about Prime
Minister Adolphe Muzito, from PALU, while opposition parties in
parliament have repeatedly tried to topple the government.

Rather than pushing through steps towards decentralisation
set out in the constitution, analysts say Kabila’s rule has seen
a concentration of power and rising political oppression.

This perception was exacerbated in June when leading human
rights activist Floribert Chebeya was found dead in mysterious
circumstances, prompting the suspension and questioning of
police chief John Numbi, previously considered a Kabila ally. A
military trial of eight police officers, three of whom are on
the run, is due in December. Numbi is called only as a witness.

What to watch:

— Growing political instability. With politicians looking
to 2011 elections, factions within and outside the coalition
have already started jockeying for position. Vital Kamerhe, a
key Kabila ally in 2006 and a popular leader of the lower house
of parliament, has spoken of the need to change the old order.
Etienne Tshisekedi, based in Belgium and head of the UDPS
opposition party, has already said he will run.

–Jean-Pierre Bemba’s trial. Former vice president and
leader of opposition MLC party is being tried before the
International Criminal Court in The Hague accused of war crimes
in the Central African Republic. Many in Congo believe he would
be a strong presidential contender were he acquitted in time,
and any verdict could be incendiary on the streets of Kinshasa.

— Provinces seek more power. Congo missed a May 15 deadline
for decentralisation, which would see its 11 provinces divided
into 26 and receive more local funding. The failure to do so has
led some districts like oil-rich Ituri to declare as provinces.

— Political crackdown. Should the coalition waver or face
serious internal opposition, it could trigger unrest given the
the government’s track record of cracking down on dissent.

THE ECONOMY

Congo secured debt relief from most lenders this year,
despite concerns over governance, including $7.53 billion from
the Paris Club in November, leaving a total stock of $2.9
billion. It has taken measures to stabilise its economy and keep
in step with conditions for a three-year $550 million IMF loan.

Interest rates have come down to 22 percent, from 42 percent
at the start of July. Congo’s inflation is running at an
annualised rate of 8.35 percent, down from 69 percent in January
and beating a 15 percent target. The Congolese franc has
stabilised against the dollar, hovering at 910 Congolese francs
to the dollar after falling 40 percent in 2009, although Congo
forecasts it will depreciate to an average 962 in 2011.

Sustained economic growth is vital to a country where 80
percent of a population of 67 million live on less than $2 a day
and the country struggles with a budget of $5.69 billion. Congo
forecasts growth of 5.4 percent in 2010 and 6.83 percent in
2011, while the IMF forecasts 5.4 percent and 7 percent.

What to watch:

— Impact of debt relief. Congo says from 2011, $520 million
a year intended for debt service will be freed up as a result,
but the IMF warns against taking on more expensive debt.

— Macroeconomic policy. A looming election year may prompt
a hike in spending over the next 12 months.

INVESTMENT CLIMATE

Congo moved up four places in the World Bank’s 2011 doing
business rankings to 175 of 183 countries, short of a 20-place
hike targeted by the president. Investors still complain of high
risks and several are pursuing international arbitration.

Model contracts in accordance with the new mining and oil
codes have been drafted, but are yet to be decreed by
government.

What to watch:

— First Quantum case. The Canadian firm is seeking
international arbitration after its $750 million KMT project was
closed and rights handed to mining group ENRC (ENRC.L: Quote, Profile, Research, Stock Buzz), after
the Kazakh company said it would pay $175 million for five Congo
projects acquired through listed and offshore entities. On Oct.
26, First Quantum said an international court had failed to give
its assets protection during the dispute. First Quantum has also
been ejected from two other sites, over rights. [ID:nLDE68E05M]

— Mining ban. Congo banned mining in three eastern
provinces in September in an effort to clean up the trade, but
officials and U.N. experts say elements of the military are
involved, as well as armed groups. Several schemes aim to
improve traceability, and U.S. legislation kicks in in April.

— Congo’s nascent oil sector. Congo awarded two oil blocks
on the Uganda border to surprise new offshore entrants, claimed
by the South Africa president’s nephew Khulubuse Zuma.
London-listed Tullow Oil (TLW.L: Quote, Profile, Research, Stock Buzz) says it holds the rights to the
blocks, but lost its interim injunction to halt rivals’
activities at a Carribbean court. After buying into a block in
the west, Italian major Eni (ENI.MI: Quote, Profile, Research, Stock Buzz) would also like oil blocks
in the east.

SIMMERING CONFLICTS

Intervention by Rwanda in 2009 helped end fighting by
Rwandan Tutsi-led CNDP rebels, whose leader Laurent Nkunda was
arrested and is awaiting trial in Kigali.

CNDP have since officially been integrated into the army,
but rights groups and the U.N. say they maintain control of
swathes of land, extract taxes and mine cassiterite and coltan.

Congo’s army continues to try to oust Rwandan Hutu FDLR
rebels, whose numbers have reduced to 3,500 according to U.N.
experts, and several other rebel groups throughout the east.

Former government militias, known as the Mai Mai, have
splintered and mount random attacks. Attacks from Uganda’s
separate rebel LRA in the north underscore wider instability.

While backing an army that sometimes commits human rights
abuses, U.N. peacekeeping bases have twice been attacked in the
past four months, leaving three blue helmets dead.

Mass rapes of civilians carried out by predominantly Mai Mai
and FDLR rebels between July 30-Aug. 3 in North Kivu province
underlined Congo’s precarious security and raised questions over
the effectiveness of Congolese and U.N. forces. [ID:nN07254542]

What to watch:

— U.N. peacekeepers. The U.N. acquiesced to Congolese
demands and withdrew 1,494 troops in June, leaving 17,625 in
country. The U.N. says further withdrawals will depend on the
security threat, but Kabila wants them gone by end-2011.

— Crackdown on the army. Pressure on the army is rising as
more human rights abuses and illegal mining come to light, and
Congo may seek to launch investigations into criminal networks.

— CNDP ex-rebels. Current leader General Bosco Ntaganda is
wanted by the International Criminal Court for war crimes, but
says he is second-in-command of U.N.-backed army operations, and
the fragile alliance with the army is under strain.

— Land and ethnicity. These two issues remain at the heart
of Congo’s simmering conflicts, especially in the east.

— ADF-NALU rebels. U.N. experts say they are funded from
London, and around 600 well-trained rebels who want an Islamic
state in Uganda remain despite a Congolese army operation
against them that prompted more than 90,000 people to flee.

— FNL rebels. U.N. experts say Burundi rebel leader Agathon
Rwasa is amassing hundreds of fighters in South Kivu. The army
continues a U.N. special forces operation to clear armed groups.

— Intervention from neighbours. Relations with neighbouring
Uganda and Rwanda have warmed but both countries face a testing
year and trouble in either country could have repercussions.

Insecurity in Congo’s east has continued despite the end of a 1998-2003 war, displacing more than 1.27 million people and spurred on by competition for natural resources that has had a “devastating impact on security,” according to the report.

The Group of Experts, a five-member team tasked by the U.N. to investigate sanctions violations, noted “pervasive insubordination” throughout Congo’s national FARDC army.

“Officers at different levels of FARDC hierarchy jostle for control over mineral-rich areas at the expense of civilian protection,” it said of criminal networks within the army.

Referring to the rape of over 300 people in the Walikale district in July and August, the report said the local militia blamed for the attack had been created by the army.

“The Group has concluded that Mai Mai Sheka is a creation of a criminal network within FARDC,” it said, noting that repeated lootings by the group were aimed at the district’s main mines.

The report is based on information from the U.N. and local groups, plus the team’s “first-hand, on-site observations,” or information corroborated with at least three independent sources assessed by the Group as credible and reliable.

A national army spokesman did not respond to phone messages and calls for comment. A spokesman for the U.N.-backed Amani Leo operation in the east questioned the report’s credibility.

“They call themselves experts but it’s written on the basis of rumors,” Major Sylvain Ekenge said, noting a military tribunal was already pursuing some individuals.

He insisted report allegations that ex-CNDP officers are “the real decision makers” in most FARDC brigades are not true.

“There are no CNDP in the FARDC today — it’s all the FARDC, we are not a political institution,” he said.

In a resolution, the U.N. Security Council backed several of the report’s recommendations, including a request to investigate human rights abuses within the national armed forces and support for new “due diligence” guidelines for the minerals industry.

CHILD SOLDIERS

The resolution, which extended sanctions including an arms embargo on rebel groups and travel bans and asset freezes on people linked to illicit mineral trading for another year, also added a new expert to the panel to focus on natural resources.

The due diligence guidelines would require importers to tighten background checks on minerals. “If implemented, these guidelines could significantly limit the illicit minerals trade, which has for many years fueled violence in (Congo),” U.S. Ambassador to the United Nations Susan Rice said.

The experts say former rebels are poorly integrated into the army, headed by war crimes indictee Bosco Ntaganda.

The Group said CNDP had established at least three “hidden” battalions made up exclusively of their own officers, taxes local populations and is using Virunga National Park, home to rare gorillas, as a training ground for new recruits.

The report said the army benefited from everything from gold exports worth $160 million a year and tin ore mining to elephant poaching and charcoal and timber trades that destroy hundreds of thousands of trees, as well as continuing to recruit children.

Army commanders “have hidden children or even continued to recruit children,” said the report, noting 353 of 1,627 children released from combat in the first nine months of 2010 were from the FARDC and that the U.N. mission had been allowed to screen only one third of units it supports in joint operations.

The report said the FARDC had disrupted — but not defeated — any of the major armed groups, estimating Rwandan Hutu rebel FDLR numbers now stand at 3,500, down from 5,800 in 2007.

(Additional reporting by Patrick Worsnip at the United Nations; Editing by Maria Golovnina and Jackie Frank)

SOCO International and Dominion Petroleum were awarded a presidential decree to Block 5 of east Congo’s Albertine Graben in June. Plans for a seismic survey include exploding dynamite, despite the fact that the rebel-heavy area overlaps with the protected Virunga National Park.

In a letter seen by Reuters, UNESCO chief Irina Bokova warned Kabila of “extremely damaging repercussions” of oil activity and asked him to ensure no exploration took place in the park, which is also home to chimpanzees, lions, elephants, and migratory birds so rare it has special wetland status.

“I call on you to guarantee that no oil exploration or production will be committed at the heart of the Virunga national park,” she said in the letter dated August 6, which noted past commitments by Congo to protect the World Heritage site.

Local environmentalists argue that any exploration would be contrary to Congo’s own laws.

“Congolese legislation does not authorize mineral and petrol production in national parks,” said a November 15 letter seen by Reuters to Environment Minister Jose Endundo from the Congolese Institute for the Conservation of Nature (ICCN).

It noted SOCO’s environmental impact assessment, required by law, made no reference to the park’s status as a protected zone.

DONORS TO EXPRESS CONCERN

Separately, a World Bank official said it and other donors were planning to express concern to the government and question how oil development was compatible with Congo’s commitments.

Calls to Kabila’s office for comment went unanswered on Friday. However, Endundo played down the concerns.

“We’ll do everything to preserve the park but the Congolese people also have to benefit from the riches under the soil,” he told Reuters by telephone.

Endundo noted that if oil activities were excluded from the park, he might seek compensation along the lines of a pact signed by Ecuador in August, under which the Andean nation expects payments from rich nations in return for not drilling for oil in a wildlife reserve in the Yasuni National Park.

Operator SOCO, which has 38.25 percent of the block, and Dominion, with 46.75 percent, told Reuters in July they would start seismic exploration this year with a view to production after three years. Congo has the remaining share.

Company maps seen by Reuters indicate drilling will take place throughout the park and the companies have sent in teams.

“I don’t see any problem if it’s done correctly,” Roger Cagle, deputy CEO and chief financial officer for SOCO told Reuters by telephone, adding its partner Dominion was already working in Uganda’s Queen Elizabeth National Park.

“We’ve paid for the opportunity to explore a previously unexplored block; we’re not expecting it to be a moving feast because it hasn’t been sold to us as that,” said Cagle, adding the company’s presence could increase security of the park.

Tullow Oil was awarded rights to Blocks 1 and 2 of Congo’s
Albertine Graben in 2006. It is pursuing legal action against
Congo and two British Virgin Islands-registered companies to
which President Joseph Kabila re-awarded the rights in June.

A court ruling seen by Reuters said Tullow’s prospects of
regaining the blocks were “precarious” and refused to renew an
interim injunction first granted in September to prevent the
companies from developing the blocks.

“It is my view that the balance of convenience comes down
firmly in favour of refusing to continue the interim
injunction,” said Commercial Court Judge Edward Bannister in the
Eastern Caribbean Supreme Court in the British Virgin Islands,
where the two offshore firms — Caprikat Ltd and Foxwhelp Ltd –
are registered.

“Crudely put … Tullow has no obvious prospects of ever
reaching the position of being entitled to enjoy the fruits of
its PSC (Partnership Sharing Contract), yet is determined that
no other person shall be permitted to exploit the territory.”

In the judgment dated Nov. 19, Bannister said continuing the
injunction would interfere with the expressed will of the head
of a sovereign state.

DIVINE COMPENSATION

Kabila provoked widespread investor concern when he signed
over the rights to blocks 1 and 2 — already contested by South
Africa’s Divine Inspiration Group, which paid a $2.5 million
signature bonus for block 1 — to Caprikat and Foxwhelp.

The two companies paid $6 million in signature bonuses for
the two blocks, according to documents seen by Reuters which
show that President Jacob Zuma’s nephew Khulubuse Zuma has power
of attorney over Caprikat, while his lawyer Michael Hulley has
similar powers for Foxwhelp.

“I’m very happy … extremely happy,” Zuma told Reuters by
telephone, adding the injunction had held up exploration
development and a social works programme, for which the
companies have raised $7.5 million, by two months.

“Tullow lost and they didn’t appeal. It means that
everything goes ahead,” said Zuma.

Tullow has also initiated international arbitration against
Congo in Paris. The company, whose Vice-President Tim O’Hanlon
has previously said Congo took away the blocks in a “smash and
grab” move, did not immediately reply to requests for comment.

Congo itself has a 15 percent stake in both blocks.

Separately, Congolese Prime Minister Adolphe Muzito agreed
to a request from Divine, which lost rights to the disputed
Block 1 but was granted a presidential decree to Block 3 in
which it has a 42.5 percent stake, for $5.2 million in
compensation, according to a letter dated Nov. 16 seen by
Reuters.

The money represents $4 million already paid by the company
for a signature bonus and security payments, and a further $1.2
million charged as interest, according to the letter.

Divine previously told Reuters it is also seeking
presidential ratification for three blocks in central Congo,
following a 2007 partnership contract.

Shares in Tullow were little changed, up 0.3 percent at
1,199 pence by 1623 GMT.
(Editing by Mark John and David Holmes)

“People say I am bullet-proof, even my hat, but feel this,”
says the 45-year-old governor, a lean and muscled millionaire,
of his sartorial trademark, fingering first a floppy leather hat
and then a felt one.

“This is a fake story,” he says of the local yarn, a phrase
he repeats often throughout four separate interviews in which he
addressed accusations of graft, theft, tax evasion and undue
influence on the nation’s massive mining sector.

The top politician in Katanga, home to 55 percent of the
world’s cobalt production and five percent of copper, Katumbi’s
political career took off when elected local deputy in 2006 with
the highest score recorded in a Congolese parliamentary vote. He
was appointed local governor a year later with an overwhelming
98 percent backing from the provincial assembly.

Yet Katumbi has got used to taking the flak, whether from
political rivals or Congo’s business federation, whose members
struggle with steep local taxes they say are levied illegally.

Regularly touted as a presidential contender — a dangerous
destiny in Congo, where several past hopefuls have been toppled
or killed — Katumbi admits politics has won him many enemies,
even if he doesn’t actually sport body armour.

“People are saying ‘He’s getting money from the province,
he’s stealing left and right, he’s not paying duty’,” said
Katumbi, who says he no longer has a role in his family’s
trucking and heavy machinery businesses and has sold former
mining interests.

“I said I’m going to run this province like a private
company: that’s what I’m doing,” said Katumbi, the son of
Congolese royalty on his mother’s side and whose father was an
Italian Jewish emigre from the Greek island of Rhodes.

Congo’s richest province has long been divided between an
under-developed but politically influential north nicknamed
“useless Katanga”, and the “useful” mineral-rich south, whose
wealth and independent streak is seen as a threat to Kinshasa.

Katumbi says that copper exports are rising and Katanga will
this year supply 65 percent of national receipts.

“NO WORRIES”

Katumbi’s role has already proved pivotal for investors:
setting provincial taxes, managing investor relations and
grappling with Congo’s reputation for extensive corruption.

Congo has moved up four places in the World Bank’s Doing
Business rankings this year, but still comes 175 out of 183. The
country is ranked 164th most corrupt of 178 countries surveyed
by Transparency International.

The name of his family’s trucking business, “Hakuna Matata”,
might mean “no worries” in Swahili, but investors in the
province complain of mounting problems that threaten to put them
out of business, from local corruption to poor roads.

Canada’s First Quantum Minerals (FM.TO: Quote, Profile, Research, Stock Buzz) is in international
arbitration after the government withdrew rights to its $750
million mining project after a review and handed them to Kazakh
rivals ENRC, sending Congolese political risk premiums up 40
percent.

Yet Katumbi said investment is pouring in after resolution
of a separate dispute with U.S. miner Freeport-McMoRan (FCX.N: Quote, Profile, Research, Stock Buzz),
which last month conceded a share of its $2 billion Tenke
project and more than $70 million to the state last month.

“Tenke went for negotiation and Tenke got it,” said Katumbi,
underlining investors are welcome so long as they are open.

“CASH-STUFFED BRIEFCASES”

The keen tennis player lists his achievements as raising
road toll collection from $3.7 million a year to more than $60
million, building more than 1,000 kilometres of roads, boosting
mining taxes from $2 million to $150 million and cutting customs
fraud.

He wants to boost Congo’s share of profits from mining in
the province, noting only 200 of 32,000 trucks arriving every
month are Congolese-owned. Too many foreigners arrive with
“cash-stuffed briefcases” to bribe their way into the sector and
leave as billionaires, he says without elaborating.

Pictured driving a bus as poster boy for “November” in a
locally-produced 2010 wall calendar in his office, Katumbi said
he will step down as governor next year to preserve his family’s
reputation and return to business, particularly transport.

As chairman of Africa’s top football club, TP Mazembe, which
took the African Champions League this month after clinching
victory against Tunis, he has already secured fame.

His wealthy businessman brother Raphael Katebe also gave up
politics and now lives in Belgium, while previous governors of
Katanga have gone on to exercise great political and investment
influence, including in Kinshasa.

Katumbi said he remains “very sad” at losing out on what he
estimates could have been a profit of up to $800 million by
choosing to sell out his 30 percent stake of Toronto-listed
copper miner Anvil Mining (AVM.TO: Quote, Profile, Research, Stock Buzz) for $60 million in 2006-2007
to avoid a conflict of interest when he went into politics.

“Maybe I am supposed to be one of the billionaires in this
country (rather) than to stay as a poor governor,” he mused.

The report by the U.N. Children’s Fund UNICEF said 6,621 people arrived in two territories of Luiza and Tshikapa/Kamonia, in Western Kasai province, in two waves during October.

“The conditions of expulsion are still terrible. In many cases, sexual violence is reported and even cases of torture,” said the report, citing 657 instances of sexual violence based on evidence collated by welcome committees in the two areas.

Separately, the U.N. Office for the Coordination of Humanitarian Affairs (OCHA) said doctors confirmed 35 other women had been raped, after examinations conducted in the Congolese town of Tembo near the Angolan border, adding that humanitarian workers believed the true figure was close to 100.

“We are not in a position to confirm in which country they (the rapes) happened, but we do call on the authorities of the two countries to investigate these accusations to find out whether the rapes took place and where,” said OCHA spokesman Maurizio Giuliano.

Neither Giuliano nor the UNICEF report mentioned who was behind the violence. Congolese Information Minister Lambert Mende said authorities had not received any such reports.

“We’re not informed. We don’t know, these figures are not confirmed,” he told Reuters by telephone.

“There are expulsions, perhaps there are rapes but we have received no complaints and we don’t want to launch a dossier.”

The report comes after the international outcry prompted by the rape of at least 303 civilians in eastern Congo between July 30 and August 3 by rebel militiamen in the town of Luvungi.

The UNICEF figure for the total number of expulsions is likely to arouse fears of new tit-for-tat expulsions between Angola and Congo which reached an estimated 211,000 people in 2009.

Angola helped Kinshasa’s government fight off Rwandan- and Ugandan-backed rebels during fighting between 1998 and 2003, which drew in several neighboring countries.

Deteriorating relations between the two countries followed disputes over border demarcation, offshore oil ownership and closer Congolese relations with Rwanda and Uganda, its neighbors to the east.

(Editing by Mark John)

The proposed deal — involving refurbishment of a copper
mine and construction of an Atlantic deepwater port — would
bolster South Korea’s bid to secure long-term access to metals
while speeding Congo’s development, South Korean ambassador to
Congo Kim Sung-chul said.

“We were more poor than Congo in the 1960s, now we are
chairing the G20. This change was possible only thanks to
support from outside and we think it’s high time we repay that,”
he said.

Kim is leading a delegation of executives from South Korean
firms Samsung (005930.KS: Quote, Profile, Research, Stock Buzz), Hyundai (005380.KS: Quote, Profile, Research, Stock Buzz), Bosco, Daewoo,
and Taejoo Synthesis Steel to Congo mining sites.

He said a consortium of South Korean companies, including
Taejoo, was seeking to form a joint-venture with Congo’s
state-owned miner Sodimco to refurbish the disused Musoshi
copper mine at a cost of $300 million.

He said the deal would also involve South Korea’s Eximbank
loaning $150-$200 million to South Korean firms to fund a
wastewater treatment plant in Kinshasa to serve 2 million people
– the cost of which would be recouped from future revenues from
the mine.

DEEP-SEA PORT

He added that South Korea had also selected Hyundai, Bosco
and STX to build a deep-sea port at Banana on Congo’s Atlantic
coast, which would cost $500 million and take four years to
complete once work starts.

Some $370 million of the cost of the port would be recouped
by a build-operate-transfer deal, he said, and South Korea is
also asking Congo to provide mineral resources to cover the
remaining $130 million.

The governor of Congo’s minerals-rich southern Katanga
province confirmed the mine deal proposal.
“They so far have Musoshi mine. It’s a very good mine, a
very big mine,” Governor Moise Katumbi told Reuters.

Katumbi said the mine — now waterlogged and in ill-repair
– was once run by a Japanese consortium and closed during the
global financial crisis that sent copper prices tumbling and put
300,000 Congolese out of work.

Seul Chul-hee, head of Taejoo in Congo said Congo’s Sodimico
was likely to take a 35 percent stake in the mine, and South
Korean companies the remainder.

“Now we are making the consortium – it is a big group,” he
said, adding he hoped Congo would also suggest other mine sites
in future in exchange for which South Korea could build
small-scale hydroelectric plants.

He said a study due in two weeks was likely to show the mine
contained less than previous reserve estimates, which stood at
1.4 million tonnes — a factor that could affect coming
negotiations over the deal.

The group also visited Anvil Mining, in which Swiss metals
trader Trafigura has a 36 percent stake, and Glencore-controlled
Katanga Mining, but officials gave no details of any potential
deals with the two.

The talks come after Congo agreed a $9 billion
infrastructure-for-mines deal with China in 2008 that was later
reduced to $6 billion following concern the country was taking
on too much debt.
(Editing by Richard Valdmanis)

“I have to submit as I don’t want to be raped,” she said,
her baby wrapped to her back in a camp for thousands of
displaced people in Kitchanga in Congo’s troubled east.

Congo’s 1998-2003 conflict was known as Africa’s World War,
in which more than 5 million people are estimated to have died
from violence, hunger and disease.

Joyce is just one of over 1.27 million in Congo’s east
unable to return home due to violence that continues despite the
presence of the world’s largest U.N. peace force and a March
2009 deal meant to bring peace to this central African country.

“Attacks against civilians increased … Human rights
violations were also perpetrated by elements of the security
forces,” United Nations Secretary General Ban Ki-moon told the
Security Council in a report this month.

The causes of Congo’s insecurity are legion. Analysts blame
poverty, the failure of President Joseph Kabila to impose the
rule of law, the poorly organised army, myriad rebel groups and
the constant battle for resources including everything from
charcoal and grazing land to tin ore and gold.

Even a ban on mining in Congo’s east, which exports gold and
minerals including 5 percent of the world’s tin, has failed to
bring security or stop smuggling, including by the army,
according to mines minister Martin Kabwelulu.

“PEOPLE DIE VERY FAR AWAY”

While Congo’s mineral-rich east is beset by dozens of armed
groups — many of which spring up in the hope of securing
resources, rank or revenue rather than any political bent — its
greatest threat to peace may come from within the army itself.

“(The U.N. mission) MONUSCO has an almost impossible task –
to protect citizens but support an army where elements of it are
abusing those citizens,” Marcel Stoessel, head of Oxfam in
Congo, told Reuters in an interview.

Ban said the army was recruiting children and had
perpetrated human rights violations so serious that the U.N.
mission had to suspend support from one operational zone. It had
also lost several areas to largely Rwandan Hutu FDLR rebels.

He added the peace deal was at “near standstill” and that
reform of the army, into which Rwandan-backed Tutsi-led former
CNDP rebels have been patchily integrated, was largely stalled.

U.N.-backed operations meant to end in March have once again
been extended, as Congo’s intractable conflict takes its toll,
largely hidden in remote, jungled areas unreachable by road.

“Two years ago the people displaced by conflict were more
accessible, but now…people die very far away,” said Stoessel,
emphasising the unseen human cost and remoteness of the war.

One sticking point is the refusal of integrated former CNDP
rebels to redeploy outside the east, laid out in a September
memorandum seen by Reuters, making army reform impossible and
leaving swathes of territory prey to abuses.

“It is flagrant CNDP is still collecting taxes,” one UN
official told Reuters of the widespread practice in the east of
fighters taking illegal taxes on virtually everything.

“ELEPHANT COUNTRY”

The CNDP is fighting for the return of Congolese Tutsi
refugees and the defeat of the FDLR — neither likely soon.

Nearly 159,000 Congolese refugees are registered in Congo’s
eastern neighbours Rwanda, Uganda and Burundi, according to the
UN’s refugee agency UNHCR, which does not make public how many
of these are Tutsi.

Rwanda and Uganda both have rebel leaders from Congo under
house arrest, and some argue that ending the conflict cannot be
achieved in Congo alone, suggesting Rwanda should negotiate with
FDLR rebels implicated in perpetrating its 1994 genocide.

“Many people have been pushing for the Rwandan government to
be more forthcoming in their dealing with the FDLR,” said Congo
expert Jason Stearns, characterising Congo’s conflict as a
free-for-all for those intent on securing power.

“I don’t think Rwanda is really ready to negotiate with the
FDLR,” China’s ambassador to Congo, Wu Zexian, told Reuters.

The atrocities continue unabated. In the latest example,
rebel militiamen held the town of Luvungi between July 30 and
Aug. 3 and raped at least 303 civilians.

For Kabila, while continued violence undermines the
credibility of his promises to bring stability to the region,
analysts doubt it will be enough to jeopardise his bid for
re-election in November 2011.

The insecurity means that prospective investors on Congo
have two choices — either they steer well clear, or they enter
in full awareness of the risks and additional costs involved in
securing their business interests.

“If you want to hunt elephants, you have to go to elephant
country,” Randgold Resources CEO Mark Bristow, whose company is
developing a $1 billion gold mine in the northeast, told a news
conference in Congo this month.

While some see riches despite the troubles, for Joyce and
millions of Congolese like her, the misery is set to last.

“If current trends are not reversed … efforts may prove
insufficient to stem the violence,” warned Ban.

First Quantum said it had failed to secure complete court
protection for its $750 million investment in a copper tailings
project in Congo while it seeks to defend it, but no ruling had
yet been given and the case is not due to be heard until 2012.

“We sought a series of measures to protect the asset and
not all of these have been granted and that is not a surprise,”
a spokesman for First Quantum said on Tuesday.

“The tribunal has not made a ruling on the merits of the
arbitration. In fact, the hearing of the arbitration is not
scheduled until 2012,” the spokesman added.

The Paris-based International Court of Arbitration (ICA)
said it could not comment on the case.

Court documents obtained by Reuters dated Oct. 26, however,
said First Quantum’s requests — to block Congo and state
mining company Gecamines from selling or transferring the
assets until arbitration is concluded — were rejected because
they were “too large” and “unspecific.”

First Quantum has already lost two other concessions, and
the battle over rights to the Kolwezi project, now partly owned
by Kazakh-based mining group ENRC (ENRC.L: Quote, Profile, Research, Stock Buzz), has dented investor
confidence in the country.

Congo officials welcomed the court’s decision.

“I’m in heaven,” Bene M’Poko, Congo’s spokesman on the deal
with ENRC and ambassador to South Africa, told Reuters by
telephone. “They (the court) rejected their request. It means
that we can now proceed with whatever we have started without
any legal hindrance.”

A First Quantum spokesman told Reuters the decision was
“academic” as Congo was already in the process of liquidating
the assets, and added the company was “happy” the court ruled
that Congo and Gecamines could not enforce a separate $12
billion damages claim against it.

TRANSFER OF TITLES

First Quantum sought international arbitration in February
after its Kolwezi project was closed by Congo’s government late
last year following a protracted mining contracts review.

A Congolese court also ordered First Quantum to pay Congo
$12 billion in damages.

M’Poko said he couldn’t comment any further but Martin
Kabwelulu, Congo’s mines minister, said the court move meant
that a company called Metalkol, a Congolese firm that ENRC has
an interest in, could take over the project.

“The court has confirmed the transfer of titles to
Metalkol; for the factory the parties were recommended to work
with the liquidator,” he told Reuters in a text message,
referring to a $400 million processing plant tied to the
project.

“The court asked Congo not to execute the (Congolese) court
ruling that required KMT (the Kolwezi project) to pay $12
billion,” he said.

The Canadian miner says it has invested $750 million in the
project and said in August the Paris-based court had ruled
against Congo “taking any action to transfer or allow the
transfer of the Kolwezi tailings exploitation permit.”

Congo also stripped First Quantum of its licence for the
Frontier mine, contributing to an 18 percent fall in the
company’s third-quarter copper production. [ID:nSGE69I0KY]

The dispute between Congo’s government and First Quantum
led to a delay in Congo’s efforts to secure debt relief –
eventually approved without Canadian backing — and unsettled
investors targeting the vast central African nation.
(Additional reporting by John Irish in Paris; Writing by David
Lewis; Editing by David Holmes, Gary Hill)