UPDATE 2-DR Congo says Canada mining hitch holds up debt deal

Thomson Reuters






(Adds Canadian reaction, paragraphs 7-9)

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 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 , 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
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((Writing by Mark John; editing by Patrick Graham, Gary
Crosse; e-mail: mark.john@thomsonreuters.com;
+221-33-864-5076))