MAC: Mines and Communities

Ups and downs of DRC mining

Published by MAC on 2009-04-27
Source: Northern Miner

Miners with operations in the Democratic Republic of the Congo (DRC) continue to be at the mercy of a market that has proven incredibly reactive to any rumblings from the mineral rich but economically challenged country.

The latest stock market volatility came on the heels of deputy mines minister Victor Kasongo's words to journalists in the country.

Kasongo was reported as saying the six western mining companies going through the mines review process were still far off the mark in their proposals and that if things didn't improve within six months their operations would be shut down.

Predictably, the news put immediate downward pressure on the stocks of all six companies still under review: AngloGold Ashanti ,Banro, First Quantum, Gold Fields, Freeport McMoRan and Mwana Africa.

And while the words of the deputy mines ministry might carry the semblance of final authority, as with most things in the DRC, authority over the mining review process is more complex.

That fact was underlined by deputy prime minister Emile Bongeli's more investor friendly words that a decision on the mining contracts under reveiw will be issued shortly - likely in May - and that while "little problems" with the contracts still exist, positive advances have been made.

Bongeli's comments, issued so closely after Kasongo's point to the bifurcated nature of the review process, with Bongeli representing the pragmatists who want to get the contracts done, pitted against the likes of Kasongo who is pushing for all the government can get.

Given the global economic downturn, and the massive cut backs to the mining industry in the country, Kasongo may find his position untenable.

Many miners, such as London-based Katanga Mining have already scaled back or shut down projects in the once booming copper district of the south east. That has made for an emerging bleak picture in the region for a country that was pinning much of its hope for economic revival on the back of mining.

Reuters reports that local authorities say some 300,000 mining jobs have been lost since the financial crisis struck, and economic growth for 2009 is expected to drop to 2.7% from 8% last year.

As for copper production, the country's overall forecast for copper exports for 2009 dropped to 365,000 tonnes, down from a previous projection of 410,000 tonnes. Cobalt exports are expected to be cut in half.

Negotiations with the six companies who could breathe economic life back into the area is part of larger review of that was initiated back in late 2007. The process called for the review of 61 contracts -- of which only these final six remaining unresolved - aimed at getting the government a more favourable share of the country's deposits.

Some of the contracts had been negotiated while the country was still in a state of upheaval thanks to a brutal civil war - casting doubt on the fairness of some of the deals.

Despite the mostly negative news associated with the review process, there has been some positive signs.

In February Toronto-based Banro -- whose gold project is located much further north of the copper district -- announced that after its negotiations with the government it was told its contracts were compliant with Congolese law.

The company is choosing to put more confidence in the outcome of those meetings than it is in Kasongo's words.

"We have been assured by the government, in particular the deputy prime minister, that the agreements we came to with the government in mid-February are completely satisfactory," Martin Jones, a spokesman for Banro says.

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