THE commodities giant Glencore has tightened its grip on mining assets in the Democratic Republic of Congo (DRC) after it injected an emergency loan into one of the war-torn country’s biggest operators.

Under a deal quietly announced on Christmas Eve, Glencore extended $265m (£182m) in convertible debt to Katanga Mining. This will keep the company afloat for the first half of the new year and could lead to Glencore taking control.

For Katanga, the terms are harsh. The injection extends a previous $165m Glencore loan and adds $100m in fresh capital to tide it over through the start of 2009.

Katanga hopes new investors will be found to stump up 75% of the new $100m instead of Glencore. Anu Dhir, vice president of corporate development at Katanga, said the company is in talks with strategic and financial investors.

Katanga has until February 9 to sign up other backers. If it does not, Glencore will be issued new shares, giving it a total holding of 83.7%, handing it control of the group.

Dhir said the deal was the company’s only option. “Glencore has stepped in to provide a lifeline. When there aren’t a lot of options out there and our company may not continue as a going concern, we’re very fortunate to get this,” she said.

Glencore, a Swiss commodities trader whose stakes in other miners like Xstrata have plummeted in value, is already heavily involved in Katanga. Interim chief executive Steven Isaacs, a Glencore managing director, has been running the company since October, when his predecessor stepped down as its problems worsened.

Katanga will hold an investor meeting on January 12 to authorise an increase in the number of shares it can issue to allow the financing to go ahead. In addition, the company said it needs to raise an additional $250m within the first six months of 2009 to fund the business.

The terms of the cash injection reflect the difficulties that have hit many small and mid-sized miners that not long ago were riding high.

Both cobalt and copper prices have nosedived in recent months, taking the share price of Katanga and other mining groups with them. In the past year 98% of Katanga’s stock-market value has evaporated. It halted cobalt-concentrate production in November because the low price meant it no longer made economic sense.

Just over a year ago it took over rival Nikanor in a $3.3 billion deal to create the world’s largest cobalt miner and the biggest copper producer in Africa.

This came after the DRC government stymied a hostile offer for Katanga by Camec, a rival miner run by Phil Edmonds, the former England cricketer.

The company has also been hobbled by the slow pace of talks with the DRC’s state-owned Gécamines. The government ordered a review of 61 mining contracts this year, seeking a greater share of the spoils, including those from the Kamoto copper mine, one of the world’s largest.

Katanga is not alone. Coal producer Cambrian Mining, which is listed on London’s Alternative Investment Market, last week agreed a merger with rival Western Canadian Coal. The deal values Cambrian at only £29m, less than 10% of what it was worth in June.

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