Change of mining code in Congo could hurt investment

May 6, 2014

A draft proposal to change the mining code in the Democratic Republic of Congo could reduce the flow of foreign direct investment according to Randgold Resources Ltd. (RRS) Chief Executive Officer Mark Bristow.

Bloomberg reported that 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. Congo last year surpassed Zambia as Africa’s biggest copper producer, according to CRU Group, a London-based commodities analysis company.

The problem, according to Bristow, is that much of the mining done in the country is not done under the code so the change would not benefit the government and would hurt the companies that do work under the code.

Congo was the world’s eighth-largest producer of copper and the biggest miner of cobalt last year, according to the U.S. Geological Survey. It also holds gold, diamonds and tin. A lack of infrastructure and legal insecurity hamper investment and will undermine the government’s plans to change its mining code.

Copper and cobalt miners would consider a royalty increase to 3.5 percent if the country provided miners with enough power, according to minutes from a series of meeting between representatives from companies, the government and civil society in March. Congo announced an electricity-rationing program in January and is limiting mining-project expansion amid a power shortage that will take years to resolve. The country is importing energy from neighboring Zambia to try to fulfill miners’ needs.

Randgold and AngloGold, the world’s third-biggest producer of the metal, will double the amount of power generated at the Kibali gold mine in Congo to 47 megawatts by 2016, the companies said in a statement handed to reporters at the site on May 2.

Kibali is building four hydropower plants to add to the 22-megawatt Nzoro II facility commissioned last month, the single-largest electricity project in Orientale Province, Social and Environment Manager Cyrille Mutombo told reporters at the mine on May 1. An earlier project known as Nzoro I produces 1 megawatt that’s supplied to the neighboring community, he said.

Kibali is a $2.7 billion gold-mining project and so far about $2 billion has been invested in the venture that started in 2010, according to the companies.

The operation, which exported its first gold ahead of production schedule and forecasts last year, is currently prospecting on eight sites and plans to add three mines to the existing operation, Mines Superintendent Martin Mutata told reporters May 1.

Excavation of the first of the new open pits is expected to begin in January and another in two years, Mutata said.
 

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