QUESTIONS OF COMPLIANCE The Conduct of the Central African Mining & Exploration Company (CAMEC) plc and its Nominated Adviser, Seymour Pierce Limited Submission to AIM Regulation by Rights & Accountability in Development (RAID) May 2011 QUESTIONS OF COMPLIANCE The Conduct of the Central African Mining & Exploration Company (CAMEC) plc and its Nominated Adviser, Seymour Pierce Limited © 2011 Rights & Accountability in Development. All rights reserved. Rights & Accountability in Development PO Box 778 Oxford OX1 9GU United Kingdom http://www.raid-uk.org RAID is a private company limited by guarantee, no. 4895859. Outline List of Abbreviations ............................................................................................................................ v The Democratic Republic of the Congo.............................................................................................. vii Introduction .......................................................................................................................................... 1 The United Nations Group of Experts on the Democratic Republic of the Congo: AIM and ‘insufficient due diligence’ ...................................................................................................................1 Companies with DRC mining assets traded on the Alternative Investment Market .................................2 Business conduct and the legacy of war in DRC .......................................................................................3 The blocking from AIM admission of a company named by the UN Panel..............................................5 A knowledge of events in DRC: the context for an assessment of CAMEC’s admission to trade on AIM .......................................................................................................................................................6 Structure of the submission and sources of information............................................................................7 1. CAMEC’s corporate structure and DRC acquisitions....................................................................... 9 Incorporation and AIM admission..............................................................................................................9 Seymour Pierce Limited – CAMEC’s nomad and broker........................................................................10 CAMEC’s mining concessions in the Democratic Republic of Congo...................................................10 2. The AIM rules applicable to CAMEC’s DRC acquisitions............................................................. 21 Introduction...............................................................................................................................................21 AIM Rules for Companies........................................................................................................................21 Additional requirements on AIM companies that are incorporated in Great Britain, including Northern Ireland: the disclosure and transparency rules ....................................................................21 Substantial transactions.............................................................................................................................22 Guidance for Mining, Oil and Gas Companies: ongoing obligations......................................................23 AIM Rule 39 and the introduction of AIM Rules for Nominated Advisers: relevance for CAMEC’s Congolese transactions........................................................................................................................23 3. CAMEC’s DRC acquisitions: principal concerns for AIM............................................................. 25 I. The provenance of the DRC concessions ...........................................................................................26 II. Significant shareholders......................................................................................................................57 III. Managerial conduct: information of import on the suitability of management and opaque subcontracts in the predecessor companies.........................................................................................60 IV. Incompleteness of accounts: a disregard for accountancy rules and a lack of financial transparency in the predecessor companies ........................................................................................71 V. License review and the CAMEC concessions: information of import and the effect of transactions..........................................................................................................................................77 VI. Notification of price sensitive information without delay..................................................................86 Supplement......................................................................................................................................... 98 War, weak governance and post-war contracts: the context for due diligence in DRC ..........................98 Annexe 1........................................................................................................................................... 108 The AIM disciplinary process ................................................................................................................108 Annexe 2........................................................................................................................................... 113 Overview of Changes in Ownership Structure of Centre Group Concessions ......................................113 Annexe 3........................................................................................................................................... 115 First Quantum, ENRC and disputed DRC mining assets.......................................................................115 Annexe 4........................................................................................................................................... 120 White Nile...............................................................................................................................................120 Annexe 5........................................................................................................................................... 122 CAMEC’s acquisition of DRC Resources Holdings shares from Prairie: organisation charts .............122 Annexe 6........................................................................................................................................... 124 PTM’s disputed concession PE469 ........................................................................................................124 Endnotes ........................................................................................................................................... 125 i Detailed contents List of Abbreviations ............................................................................................................................ v The Democratic Republic of the Congo.............................................................................................. vii Introduction .......................................................................................................................................... 1 The United Nations Group of Experts on the Democratic Republic of the Congo: AIM and ‘insufficient due diligence’ ...................................................................................................................1 Companies with DRC mining assets traded on the Alternative Investment Market .................................2 Business conduct and the legacy of war in DRC .......................................................................................3 War in DRC...........................................................................................................................................3 A war over natural resources.................................................................................................................4 The legacy of wartime contracts ...........................................................................................................4 Moving forward: domestic review of the wartime mining contracts ...................................................4 The blocking from AIM admission of a company named by the UN Panel..............................................5 A knowledge of events in DRC: the context for an assessment of CAMEC’s admission to trade on AIM .......................................................................................................................................................6 Structure of the submission and sources of information............................................................................7 1. CAMEC’s corporate structure and DRC acquisitions....................................................................... 9 Incorporation and AIM admission..............................................................................................................9 Seymour Pierce Limited – CAMEC’s nomad and broker........................................................................10 CAMEC’s mining concessions in the Democratic Republic of Congo...................................................10 Purchase of the marketing company...................................................................................................11