Doing business in the Democratic Republic of the Congo (DRC) is never easy, as Canadian miner First Quantum Minerals Ltd. knows well. Last year, the company could only watch as the government expropriated its Kolwezi copper project in a move that ignited cries of corruption.

But that was nothing compared to what First Quantum might now be facing in the politically-volatile DRC: a legal claim for an incomprehensible US$12-billion in damages. To put that number in perspective, it is roughly triple the DRC government's annual budget.

It sounds like a joke, and it might not be true — the company heard about it through an indirect source and has not been served with any official claim. But anything is possible in the DRC, and First Quantum is concerned enough about it that it disclosed the news in its fourth quarter earnings report, which came out Tuesday morning.

The report details the entire backstory around the Kolwezi situation, and it is truly a surreal read. Since the expropriation last fall, the DRC government and courts have made some bizarre decisions, usually out of nowhere, that give a glimpse into how little the rule of law in the country can be trusted.

The Kolwezi project was seized in September. Then a month later, First Quantum and its joint venture partners were ordered to pay US$3-million in damages to the government and Gécamines, its stated-owned mining company, on the grounds that there was "fraud" committed in the setting up of the Kolwezi joint venture, and thus it never really existed in law. Then in February, the government and Gécamines allegedly made the demand for up to US$12-billion instead.

The carrying value of the Kolwezi project is just US$786.8-million, so the demand for US$12-billion, if real, is hard to take seriously. But it does raise red flags for the many international mining companies that operating in the Congo. The copper and cobalt grades are so high that mining companies have been willing to invest billions in the country, despite the massive political risk.

First Quantum and its partners have launched international arbitration against the DRC to try and recoup their investment in their project. But at the same time, the company continues to operate its DRC-based Frontier mine without incident.

Peter Koven