(Bloomberg) -- Randgold Resources Ltd. moved to cut ties with Israeli billionaire Dan Gertler, its partner in a gold project in the Democratic Republic of Congo and who has been sanctioned by the U.S. over alleged corruption.
Randgold has told Gertler's Fleurette Group that it can't continue with the joint development of the Moku-Beverendi project in Congo's northeast, Chief Executive Officer Mark Bristow said. Randgold, which in 2016 agreed to fund and conduct exploration at the project, is awaiting a response from Fleurette.
“We've called force majeure and given them notice that in our view they are in default because we cannot continue to operate under these terms,” Bristow said in an interview in Cape Town. “We cannot entertain transacting in any form. We are a global company and we're just not going to compromise that.”
The U.S. in December sanctioned Gertler, one of the top individual mining investors in Congo, over his role in allegedly corrupt mining deals in the country. That prevents U.S. individuals or entities from dealing with Gertler and blocks his access to the American financial system and any dollar-based banking.
Bristow had initially said that Randgold didn't see its venture with Gertler breaching sanctions, but would consult with lawyers. A spokesman for Gertler has declined to comment on the sanctions.
New Rules
Separately, Randgold is in talks with Congo's government over changes to a mining law that will financially hurt producers in the country. In a last minute change, producers such as Randgold and Glencore Plc will immediately be subjected to higher royalties on metals as well as a new 50 percent tax on so-called super profits. That overrides existing rules that protected license holders from complying with fiscal and customs' changes for 10 years.
Read more: Miners face sudden cost rises after Congo law overhaul
“This code has picked a fight with every major commodity investor in the world," Bristow said. The changes, particularly the super profit tax, would discourage investment across the sector, he said.
Randgold is still lobbying President Joseph Kabila -- who needs to sign the legislation for it to become law -- to roll back the changes and reopen talks with the industry. If he refuses, the company will resort to international arbitration to protect itself, Bristow said.
“The whole concept that you can use a revenue stream to dictate a tax, rather than the revenue and cost” is flawed, Bristow said. “You end up with an industry that's stillborn.”
To contact the reporter on this story: Tom Wilson in London at twilson128@bloomberg.net.
To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net, Nicholas Larkin
©2018 Bloomberg L.P.
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