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Companies in Congo urge government to reconsider export ban
April 24, 2013

On April 5, the government of the Democratic Republic of Congo issued an order to mining companies to halt the export of concentrated copper and cobalt as the nation seeks to promote domestic processing.

Mining companies there have since urged the government to reconsider the ban, arguing that the country lacks sufficient electricity to process all its own ore.

“We all want to make money and the more we add value to our products, the more money we make, but there are realities like energy,” said Simon Tuma-Waku, vice president of the Chamber of Mines at Congo’s main business federation told Bloomberg. “We’ll talk about the timing with operators but the government has to guarantee energy.”

Congo was the world’s eighth-largest producer of copper and the biggest producer of cobalt last year, according to the U.S. Geological Survey. It also holds gold, diamonds and tin. Besides power shortages, a lack of infrastructure and legal insecurity hamper investment and will undermine the government’s plans to change its mining code, which include raising taxes and boosting its share of new mining ventures, executives said.
The amendments “call into question the basis on which mining operators and investors decided to come to Congo,” Marcel Malengo, managing director of African Minerals (Barbados) Ltd., the Ivanplats Ltd. (IVP) unit that runs the Kamoa copper project, said at a conference in Kinshasa. The government could boost its revenues if it adhered to the code in place, he said.

Last year the International Monetary Fund canceled its loan program with Congo after the government failed to fully explain a 2011 mining deal between state-owned Gecamines and a company owned by Israeli billionaire Dan Gertler. The Extractive Industries Transparency Initiative suspended Congo for a year, citing inadequate disclosure of oil and mining revenues.

The country’s EITI office said $88 million in taxes and payments made by miners in 2010 never reached the national treasury.

Freeport-McMoRan Copper and Gold Inc., Glencore International and Eurasian Natural Resources Corp. were among Congo copper producers to suffer a slump in share-trading after Mines Minister Martin Kabwelulu announced the export ban. Shares were also hurt by sliding copper prices as Chinese demand growth slows.

In the coming days, mining companies expect the minister to offer a timetable for talks on revising the mining code, Tuma- Waku said.

A draft of the proposals shows the government is seeking to raise taxes and royalties from miners, cut exemptions and institute a windfall profit tax. The state may also increase its share of new mining ventures to 35 percent from 5 percent, which may make many projects unprofitable, said Louis Watum, general manager of Randgold Resources Ltd. (RRS)’s Kibali Gold project.

The Mines Ministry has said the revision process will include public and industry consultations. The changes must be passed by parliament, which isn’t scheduled to debate them in the current session ending in June, according to its agenda.

 

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