A power shortage that is likely to take years to resolve could have dire effects on copper mining companies growth plans in the Democratic Republic of Congo (DRC) as miners were told to halt any expansion that would require more power.
The country announced in January that it will institute an electricity-rationing program for miners and that its state-owned power company must stop signing new contracts, Congolese Prime Minister Augustin Matata Ponyo said in a letter to the ministers of mines and energy. The DRC is Africa’s biggest copper producer.
“I equally deem it necessary that mining clients postpone immediately and until further notice all expansion projects requiring supplemental energy,” Matata said in the letter, which was given to Bloomberg News by a member of the Federation des Entreprises du Congo, the Congolese business group, and verified by the government.
Glencore Xstrata’s Mutanda and Katanga Mining projects and Freeport-McMoRan Copper & Gold’s Tenke Fungurume mine are Congo’s top copper producers. Katanga Mining is scheduled to expand production to almost 300 kt (330,000 st) by the end of the year, according to statements and filings on Glencore and Katanga Mining’s websites. Tenke plans to add a second sulfuric acid plant by 2016, Tenke Fungurume Mining Sarl said in a January press release.
Both Mutanda and Katanga Mining will have more than enough energy to meet their needs for 2014, according to a November 2013 report on Glencore’s website. Eleven percent of Mutanda’s 2013 energy came from generators, the report says.
Katanga’s miners have already spent or pledged more than $600 million to improve the power supply, according to the letter. Tenke will spend more than $200 million alone, while Katanga Mining and Mutanda have pledged more than $300 million to rehabilitate and expand power delivery from the Inga hydro site to Katanga, the document says.
Mining contributes approximately 80 percent of Congo’s annual export revenue and accounts for about 30 percent of gross domestic product, the letter says. Copper production topped 900 kt (990,000 st) in 2013, a record for the central African nation, according to the International Monetary Fund. CRU Group ranked Congo the biggest producer in Africa and the world’s sixth-largest last year.
Congo can provide only about half of the 900 megawatts demanded by miners in the province of Katanga, where the country’s copper is primarily located, Matata said. The nation can import about 100 megawatts from the state-owned Zambia Electricity Supply Corp. and another 50 megawatts from Lusaka, Zambia-based Copperbelt Energy Corp. to help make up the difference, according to the letter.
“Without this input, no significant increase in existing production nor development of new operations” is feasible, Matata said. New energy projects will not come on line “for several years,” he said.
After mediating discussions between FEC’s Chamber of Mines and the state-owned Societe Nationale de l’Electricite, the government decided to ration its 461.7 megawatts of available power among all of Katanga’s miners, according to the letter.
Electricity allocations were made based on existing contracts, production importance, and the minimum energy required for profitable business, the letter says.