March 20 (Bloomberg) -- The Democratic Republic of Congo said a government-appointed panel recommended changes to a mine contract with Freeport-McMoRan Copper & Gold Inc. and Lundin Mining Corp. that includes cutting their stake in the Tenke Fungurume project.

The Mines Review Commission wants state-owned Gecamines to increase its stake in the copper and cobalt project to 45 percent, from 17.5 percent, according to a report dated November 2007 and published today on the Mines Ministry's Web site.

``Expropriation is what it is,'' Kerry Smith, a mining analyst at Haywood Securities Inc. in Toronto, said in an interview. ``It's a complete circus from the government's side.''

Last year, President Joseph Kabila began the review of foreign miners including Freeport, AngloGold Ashanti Ltd. and Katanga Mining Ltd. to amend contracts deemed unfair to the state. The country's southern region is the source of more than two-thirds of the world's cobalt reserves and a 10th of its copper.

``We've received a letter from the ministry of mines seeking comment to the modifications of our contract and we have responded,'' Freeport spokesman Bill Collier said in a telephone interview from New Orleans. ``Our contract was negotiated fairly and transparently with the government.''

Sophia Shane, a spokeswoman for Vancouver-based Lundin, wasn't available to comment when telephoned by Bloomberg.

Government Letters

Freeport fell 52 cents to $87.08 at 4:15 p.m. in New York Stock Exchange composite trading, for a decline this year of 15 percent. Lundin declined 1 cent to C$6.62 in Toronto.

The Congolese government has already sent letters to foreign mining companies about the commission's findings, which were made public today for the first time.

The commission said it wants a review of contracts held by Katanga, London-based Central African Mining & Exploration Plc and Canada's First Quantum Minerals Ltd. David Orford, a Katanga spokesman in London, said the company was already aware of the findings and has responded. Central African has settled issues over its Congo contracts, spokesman Ben Brewerton said. First Quantum President Clive Newall said in an interview there was ``nothing new'' in the report.

The commission also proposed that Johannesburg-based AngloGold give the Office d'Or de Kilo-Moto, a state-owned gold producer, a 45 percent stake in its project, up from the 13.8 percent currently. Alan Fine, a company spokesman in Johannesburg, said AngloGold has responded to the government.

`Negotiating Positions'

``Many of the government's recommendations should probably be understood as negotiating positions rather than take-it-or- leave-it decisions,'' Philippe de Pontet, African analyst at the Eurasia Group in Washington, said in an e-mail. ``We'd expect a process of give and take at this point, rather than a series of ultimatums from the Congolese government.''

A group of government ministers will review the commission's findings as well as analysis conducted by a group of advisers including Ernst & Young, the government said in an e-mailed statement.

Freeport owns a 57.75 percent stake in Tenke, Lundin owns 24.75 percent and Gecamines owns the remainder. The mine is expected to produce for about 40 years and to yield 250 million pounds (113,000 metric tons) of copper and 18 million pounds of cobalt annually in its first decade of operation, Freeport said on its Web site. Tenke has a development budget of $900 million.

Chinese Joint Venture

Congo signed an agreement on Jan. 28 with the state-owned Export-Import Bank of China. The bank will provide a loan for infrastructure projects in return for 10 million metric tons of copper resources placed in a joint venture controlled by Sinohydro Corp. and China Railway Engineering Corp.

Freeport has explored less than half of its Tenke Fungurume concession area, which spans an area of about 600 square miles, the company said on its Web site.

The risk to Freeport is that the government tries to gain control of part of the property that would only be developed in decades' time, said Charl Malan, a mining hedge-fund manager at Van Eck Associates Corp. in New York. The government's joint venture with the Chinese companies is a likely beneficiary of any property that may be taken from the Tenke lease, he said.

``My concern is that Tenke is big and that the government will appropriate a part of it because Freeport is not able to develop it soon enough,'' Malan said in an interview. ``From the country's perspective, it's the right thing to do. From a western investor's point of view, it's not a good thing.''

To contact the reporters on this story: Franz Wild in Kinshasa via Johannesburg at pmrichardson@bloomberg.net; Stewart Bailey in New York at sbailey7@bloomberg.net.

Last Updated: March 20, 2008 16:28 EDT