DRC: Congo abandons mining-code changes amid industry gloomPublished by MAC on 2016-02-16
Source: Bloomberg (2016-02-10)
There have been copious consequences of the collapse in commodity prices, and the subsequent shrinking of mining capital.
One of those is an apparent reversal in the push of many mineral-dependent states for better deals from the industry in national legislation.
It appears the DRC is the latest jurisdiction to consider such a move.
Previous article on MAC: DR Congo nationalises one of its largest copper mines
Congo abandons mining-code changes amid industry gloom
In bid to attract more investors.
10 February 2016
The Democratic Republic of Congo dropped plans to revise its mining code in a bid to protect investment as lower prices and energy shortages drove down output in Africa’s biggest copper producer.
Copper production dropped 3% to 995 805 metric tons in 2015, the first drop in six years, the Chamber of Mines at the Federation des Entreprises du Congo said in an annual report distributed on Wednesday in Cape Town. Output in the fourth quarter slumped 12 percent from the previous year, it said.
“We can’t add to the crisis we are in,” Mines Minister Martin Kabwelulu said in an interview in Cape Town, explaining why the government won’t push through proposed changes to the mining code. “This whole year will be very difficult because of commodity prices and our energy prices.”
Congo began reviewing the 2002 mining code in 2014. Revised laws approved by the government in March included increasing profit taxes to 35% from 30%, raising the state’s free share of new mining projects to 10% from 5% and royalties on copper and cobalt revenue to 3.5% from 2%.
The chamber, an industry lobby group, had opposed revisions to the code because of the potential negative impact it could have on investment in mining. Randgold Resources chief executive officer Mark Bristow said in October the planned changes risked destroying the industry in Congo.
The chamber welcomed Kabwelulu’s announcement, though said that because the amendment bill was in parliament, it could still be revived at a later stage.
“The government agrees with us that it’s dangerous to touch the mining code,” chamber head Simon Tuma-Waku said in an interview.
Copper prices dropped 26% in 2015 to the lowest level in six years. The government in November lowered its growth forecast for 2015 to 7.7% from a previous estimate of 8.4% as commodity prices tumbled, though it has remained bullish about economic growth this year. The 2016 budget predicts a growth rate of 9%, above the World Bank’s 7.3% forecast.
The suspension of production at Glencore’s Katanga Mining copper project in southeastern Congo will further cut production of the metal this year to between 800 000 and 900 000 tons, Tuma-Waku said. The operation halted production in September as it sought to control costs. The decline will lead to more job losses, Tuma-Waku said.
“It’s not looking rosy, not at all,” Tuma-Waku said.
Congo’s energy deficit, which grew to 950 megawatts in 2015 from 542 megawatts the previous year, will further restrain growth and private companies need to be more involved in energy production, the chamber said.
“Inadequate and highly non-transparent management by state- owned electricity supply company SNEL is the single-biggest factor inhibiting the development of the mining industry,” the chamber said in its report. “Potential investors in the energy sector do not have the slightest confidence in the existing structure.”
Production of cassiterite, or tin ore, fell 18% last year, according to the chamber. Output of coltan, used in electronics, dropped 25%. Cobalt production grew 3.6% and diamond output increased 3%. Gold output jumped 30% to 25.5 tons, mainly due to an increase in production at Randgold Resources’s Kibali mine, the chamber said.
Congo government urged to pass new mining code
10 March 2016
Activists in the Democratic Republic of Congo are pressing the government to revive plans for a new mining code, claiming the country, which is Africa’s top copper producer, needs the higher revenues the revised legislation would generate.
Congo began reviewing the 2002 mining code in 2012 and last year it proposed hiking profit taxes to 35% from 30%, raising the state’s free share of new mining projects to 10% from 5% and royalties on copper and cobalt revenue to 3.5% from 2%.
However, the DRC dropped the planned changes last month as the move could have driven away investors at a time of historically low commodity prices and energy shortages that are driving down output in the country.
The chamber of mines, an industry lobby group, welcomed the decision. The association had opposed revisions to the code because of the potential negative impact it could have on investment in mining.
Randgold Resources Chief Executive Officer, Mark Bristow, even said last year that the planned changes risked destroying the industry in Congo.
But a group of 42 Congolese non-governmental organizations (NGOs) that have taken part in negotiations with the government and mining sector over the new code said on Thursday that difficult market conditions did not justify further delays, Reuters reports.
"Not doing it now is prolonging the bleeding of revenues in the sector which are needed to support our young democracy," they said in a statement quoted by Reuters.
Low copper prices have affected the country’s economy and driven some companies, such as Glencore, to suspend operations. As a result, copper production in DRC fell by 3% to 995,805 metric tons in 2015, the first drop in six years.