MAC: Mines and Communities

DRC to discuss mining code changes with companies

Published by MAC on 2012-11-11
Source: Mining.com, Reuters (2012-11-07)

Congo to discuss mining code changes with companies

Cecilia Jamasmie

Mining.com

7 November 2012

The Democratic Republic of Congo's intentions to increase the government stake in mining projects by 35% will first be discussed with mining companies, the World Bank and the IMF, a source from the country's ministry of mines told Reuters on Wednesday.

Mines Minister, Martin Kabwelulu, announced last month that a proposed reform of the country's mining code would seek to raise the state owned stakes from the current 5% to 35% or more.

The proposal, reported by Bloomberg News, upset foreign miners with operations in the central African nation and had to be later clarified by the authorities. In an interview with Reuters, Kabwelulu said the DRC government would not apply the mining code changes, if implemented, retroactively.

Mining controversy is not foreign to the DRC.

Last June Kabwelulu went on the defensive about allegedly granting mining licenses to companies with close connections to the government, qualifying those accusations as uninformed and a "double standard."

He said that the government had not benefited some firms over others, as a report from Global Witness exposed.

According to that organization, Eurasian Natural Resources Corporation, one of the largest mining groups listed on the London's stock exchange, acquired stakes in mining concessions at prices that delivered considerable - and quick - profits to an Israeli businessman with links to the DRC government.

The country's resource sector had already been thrown into turmoil in February with the death of the country's go-to mining guy.

Congo is the world's number one cobalt producer and it also holds vast deposits of diamonds, copper, tin and gold.

The DRC is the sixth largest producer of diamonds behind No. 1-ranked Botswana and followed in descending order by Russia, Australia, Canada and South Africa according to 2009 figures by Geology.com. The country produced 5.2 million carats that year, compared to Botswana's 32 million.

The nation is among a number of developing countries trying to increase revenue from their mineral wealth by increasing taxes and the state's share in profits.


Congo to negotiate mining code changes, official says

By Pascal Fletcher and Ed Stoddard

Reuters

7 November 2012

JOHANNESBURG - Democratic Republic of Congo's plans to sharply raise the state stake in mining projects is a proposal that will be negotiated with mining companies and also consulted with the World Bank and the IMF, a senior mines ministry official said on Wednesday.

Mines Minister Martin Kabwelulu announced last month that a proposed overhaul of the country's mining code would seek to increase the government stake to 35 percent from the existing 5 percent, in a proposal that rattled foreign mining firms working in the central African nation.

Congo holds rich deposits of copper, tin, cobalt and gold and is among a number of developing countries trying to increase revenue from their mineral wealth by boosting taxes and the state's share in profits.

Miners active in Congo include Australia's Tiger Resources, Randgold Resources, AngloGold Ashanti, Freeport McMoRan and Glencore-owned Katanga Mining.

Dona Kampata Mbwelele, coordinator of Congo's Mines Ministry who was representing the minister at an iron ore conference in Johannesburg, stressed the state stake increase proposal would be discussed with all participants in the national mining sector, including civil society representatives.

"We are in discussion with all the actors," Mbwelele told Reuters on the sidelines of the conference organised by Metal Bulletin.

"Up to this point in time, you can't talk of the revision of the mining code as if it was already signed by the president of the republic," he added.

Mbwelele said that while the ministry was seeking a 35 percent stake for the state in projects, civil society organisations had proposed a 20 percent government stake and mining companies preferred the state to have no stake at all.

"It's a negotiation ... we haven't yet held the meeting with the mining operators and civil society. We're going to have this meeting in December," he said. "We'll all meet together in December to find the balance."

Mbwelele was clearly anxious to offer reassurance to worried investors about the proposed overhaul of the 2002 mining code by suggesting there was room for flexibility and negotiation.

"The government can't impose itself and just say 'that's my mining code', no," he told Reuters.

"Investors Should Not be Afraid"

Mines Minister Kabwelulu has already said the proposed overhaul of mining laws will not be retroactive and so will not affect existing contracts.

A draft of the proposed changes in the mining law seen by Reuters shows Congo is seeking a 35 percent stake in projects that is "free of charges and ... non-dilutable." It also includes a proposal to double royalties on some minerals and introduces a 50 percent levy on miners' "super profits".

The draft revision defines "super profits" as made when a commodity's price rises exceptionally over 25 percent compared with its level at the time of the project's feasibility study.

Mbwelele said the Mines Ministry also intended to consult its proposals for the revised code with the World Bank and the International Monetary Fund (IMF).

"We'll bring them in too ... It's they who will tell us whether it's a good idea to hold out for the 35 percent, or not," he said.

The Congolese mines official recalled that in previous years a review of mining contracts had also generated alarm and concerns among the companies operating in the Congo.

"But afterwards, we didn't chase anyone away, they're all there and I think that's what will happen this time too," Mbwelele said.

"The investors should not be afraid," he added.

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