UPDATE 1-ENRC secures licence for controversial Congo mine
* Buys Frontier mine licence from Congo govt for $101.5 mln
* Says will produce in 9-12 months, cost of $150-180 mln
* Frontier has been Congo's third-largest copper mine
LONDON, July 31 (Reuters) - Miner ENRC has bought a licence to operate the Frontier mine in Congo, a deposit held by Canada's First Quantum until it was confiscated two years ago and which has since been at the centre of controversy over the role of offshore companies in mining.
The $101.5 million deal, which allows ENRC to press ahead with plans to restart production at what was once Congo's third-largest copper mine, is part of the Kazakh group's efforts to simplify its Congolese assets and capitalise on its strength in the country.
It is also trying to leave behind the transparency and governance storms that have battered its share price.
But Tuesday's announcement offers little explanation as to how the miner secured a licence that Kinshasa, having expelled First Quantum, had itself sold to three shell companies for some $60 million. The ultimate beneficiaries of the shells, based in Hong Kong and the British Virgin Islands, were never identified.
"This specific mine is very significant for the Democratic Republic of Congo - historically it was one of the biggest tax contributors," said ENRC Chief Executive Felix Vulis.
He added ENRC had had "no contact whatsoever" with the unnamed private owners who previously held the licence for the expropriated mine, and that the government agreed the deal with the owners.
London-listed ENRC found itself at the centre of a raging debate over expropriated assets two years ago, after it bought the coveted Kolwezi project in Congo, a mine that had been owned by First Quantum until the licence was abruptly revoked.
First Quantum battled the Kinshasa government and ENRC, but eventually suspended its operations in Congo in 2010.
ENRC's settlement with First Quantum in January 2012 over Kolwezi, for $1.25 billion, included the purchase of the Canadian miner's operations and equipment at its other assets in Congo - Frontier and Lonshi, both in the Congo's south.
The deal did not include the mining licence for the two mines, however, as these were held by the offshore companies.
The purchase of the licences has been closely watched, as ENRC battles to clear up its reputation and to counter accusations that partners working through offshore companies, including Israeli entrepreneur Dan Gertler, could shelter corrupt local politicians. Gertler has denied the accusations.
The new licence, which will include the area previously granted to First Quantum but also adjacent areas, will be granted by the Congolese government "in the coming weeks".
Frontier, with an enviable copper grade of 1.2 percent, was Congo's third-largest mine when it was producing, employing 1,657 workers at its height, and with an annual output of 90,000 tonnes. It was one of Congo's most significant taxpayers, paying up $55 million in 2009.
First Quantum's expulsion in 2010, according to some local accounts, saw hundreds of its workers being forced out of the mine's perimeter, some at gunpoint, abandoning belongings to escape over the border to Zambia.
ENRC will now develop the mine over the next 9-12 months at a cost of $150 to $180 million.
Vulis said ENRC was still in discussions over the licence for Lonshi, a depleted mine eyed for underground development.
ENRC shares were up 0.5 percent at 0915 GMT, broadly in line with the broader UK sector, as the market reserved judgement.
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