Falling metal prices, power shortages and anticipated tax increases are threatening the Democratic of Congo’s mining industry even as copper, gold and cobalt output hit record highs, the country’s main business group said.
“Exploration projects are being wound down or halted, assets are being sold off and vigorous efforts are under way to cut production costs,” the Chamber of Mines at the Federation des Entreprises du Congo said in a report e-mailed Wednesday from the capital, Kinshasa. “This is certain to result in direct and indirect job losses as suppliers and contractors are squeezed.”
The slowdown wasn’t immediately apparent in the industry’s first-quarter results, the FEC report shows, as copper output rose 15 percent from the same period in 2014, while cobalt production jumped 17 percent and gold more than 37 percent.
Amid global price slumps for many metals, the country’s miners are trying to forestall a revision of the 2002 mining code that would increase mineral royalties and taxes and remove several tax exemptions. While legislative debate on the revisions was originally scheduled in the parliamentary calendar for the session ending in June, Congolese Mines Minister Martin Kabwelulu said Thursday no date had been set.
The government has committed to reopen negotiations over the terms, the FEC said. The revision “could not have come at a worse time, and will have dramatic consequences for the future,” it said.
The government says the revisions will allow it to more equitably benefit from its mining industry, which was nearly ruined during a series of wars that officially ended in 2003.
Miners produced 265,636 metric tons of copper and 16,293 tons of cobalt in the three months through March, the FEC said.
Last year, Congo produced half the world’s cobalt, a mineral used in rechargeable batteries, according to the U.S. Geological Survey. The country is also Africa’s top copper producer, with miners including Glencore Plc, based in Baar, Switzerland, and Phoenix-based Freeport McMoRan Inc. shipping 1.03 million tons last year, according to the FEC.
Gold projects led by Randgold Resources Ltd., based in London, and Banro Corp. of Canada produced 6,475 kilograms (228,399 ounces) through March, the FEC said. Production of coltan, an ore found in many electronics, more than doubled to 443 tons. Total production in 2014 was 1,324 tons.
Further increases in industrial production have been hampered by energy deficits, the FEC says. Last year, the government began rationing energy to miners, who have been forced to resort to diesel generators or import power from neighboring Zambia.
Congo’s state electricity company, Societe Nationale d’Electricite, failed to honor its contracts with miners, according to the FEC.
SNEL Chief Executive Officer Eric Mbala didn’t answer a phone call or respond to e-mailed requests for comment.
The drop in commodity prices has already claimed at least one mining project. Mawson West Ltd., based in Perth, Australia, closed one of its mines in Congo and reduce its workforce at another amid low prices and lower-than-expected exploration results, the company said in January.
Simon Tuma-Waku, vice president of the FEC’s Chamber of Mines, didn’t respond to an e-mail asking if other miners had followed Mawson West’s lead.
Industrial mining provides nearly a quarter of formal jobs in the country, according to the latest available Extractive Industries Transparency Initiative report on Congo, which covers 2012. Miners employed 85,814 people nationwide, nearly 78,000 of whom were Congolese nationals, the report says.
Hundreds of thousands more work as independent diggers. Congo also has deposits of diamonds, tin ore and tungsten ore, most of which is dug by hand.