On Anvil Mining in DRC: too many eggs in one basket?

Anvil Mining’s most recent financial statement, which declared an increase of $6.1 million in net earnings, suggests the company is unfamiliar with the idiom of not putting all your eggs into one basket.

Yet this is just what the copper mining company is doing in the Democratic Republic of Congo in central Africa. Anvil is diverting all their finances into one mining venture at Kilsevere, in an infamously volatile part of the world.

Robert La Vallière, vice president of Anvil’s corporate affairs, confirmed this strategy.

“Kilsevere is a $400 million project,” La Vallière stated. “Currently this is the only asset that we have. The mine at Kilsevere is the company at the moment.”

“When Kilsevere will work at maximum capacity, it will generate a lot of cash, and start to fill the pipeline of Anvil Mining. We need to deliver Kilsevere on time and on budget.”

Mining Watch Canada’s Jamie Kneen was less optimistic. He stated, “Anvil’s management is saying they have Kilsevere’s financing under control, but they’ve spent most of their cash, and sold off a few odds and ends that they had lying around.”

Kneen said, “Anvil has a low level of current production, which is barely keeping them in the black at this point and, as an investment, it sounds a bit risky.”

Digging deeper into a recent financial statement unearthed a worrying trend of Anvil over-investing in one mining asset, confirming Kneen’s concerns.

In the past year, the company’s readily available cash assets dropped by over $90 million, whilst their development costs rose by nearly $30 million. The company also took a $200 million loan from a company called Trafigura to ensure completion of the Kilsevere mine.

Anvil also sold its Dikulushi mine for just $12 million, whilst its other mine at Mutoshi sat idle and recorded a loss of $600,000.

The company’s stockpile of processed, ready to sell copper ore has also dwindled in the past year.

The statement also shows that whilst Anvil’s shares doubled to over 150 million in the last year, their dollar value did not increase. The dilution of these shares’ worth is critical at a time when the company is banking on Kilsevere becoming a lucrative venture.

La Vallière stressed, “we have to manage our risk and reward in Congo.” He stated, “shareholders are not concerned about the investment in Kilsevere because of the high grade copper there. They are more concerned about the political risks in Congo.”

And shareholders have good reason to be concerned. Anvil has already experienced legal and political difficulties as a result of its investments in the Democratic Republic of Congo.

The company currently has a class action suit being brought against them in Montreal by a coalition of five non-governmental organisations. They allege that Anvil provided logistical support to the Congolese army in 2004, which resulted in the deaths of 70 unarmed civilians.

A separate dispute in 2006 resulted in the deaths of two Anvil employees at the company’s Kulu mine, during clashes with artisanal miners illegally working at the property.

Hidden at the back of the financial statement is a single paragraph noting that artisanal miners have moved back onto Anvil’s Mutoshi property.

Anvil needs Mutoshi to be operational this year to supply the copper needed for the new Kilsevere processing plant. La Vallière stated Anvil will be creating new jobs in the area, but Kneen is concerned by the apparent lack of any plan to resettle the illegal miners.

Fearing a repeat of Kulu, Kneen stated, “the company is not making any commitment to compensate or support these artisanal miners.”