Congo Government Closer to Deal With Miners on Code ChangesMichael J. Kavanagh
The Democratic Republic of Congo’s government and mining companies are discussing a deal to immediately increase royalties while retaining a 10-year stability clause on existing projects in the copper-rich nation.
The two sides still disagree over the new royalty rates, according to minutes from a series of meetings between representatives from companies, the government, and civil society that ended this week. The minutes were e-mailed to Bloomberg by a person familiar with the talks who asked not to be named because the information isn’t public yet.
The government’s proposed changes would increase royalties on copper and cobalt to 4 percent from 2 percent, and to 3.5 percent from 2.5 percent on gold. The companies are fighting for an increase to 3 percent on copper and cobalt and keeping gold royalties the same, while some are pushing for no increases on any metal, the minutes show.
Freeport-McMoRan Copper & Gold Inc. and Glencore Xstrata Plc control the largest mines in Congo, which is Africa’s biggest copper producer and the world’s largest producer of cobalt. The Central African nation also has deposits of gold, which is mined by companies including Randgold Resources Ltd., AngloGold Ashanti Ltd., and Banro Corp.
Congo’s government and miners have argued for more than two years over changes to the 2002 code, which the government wants to submit to parliament during its current session.
Miners with sites under exploration could retain the 10-year period during which contract stability is guaranteed if they transform their licenses into exploitation permits within two years after the implementation of the new code, the minutes say. New mining projects in the country would be subject to a five-year stability clause.
Glencore, Randgold and AngloGold’s subsidiaries in Congo are pushing for the government to respect the current 10-year stability clause in the code, which would preclude any immediate change to royalties or other fiscal terms, the minutes show.
Glencore spokesman Charles Watenphul declined to comment in an e-mail, while Randgold and AngloGold didn’t immediately respond to e-mails requesting comment.
Copper and cobalt miners would consider a royalty increase to 3.5 percent if the country provided miners with enough power, according to the minutes. 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.
The government also proposed raising the royalty rates on concentrated copper and cobalt to 10 percent against a 3 percent rate proposed by companies. The mines ministry has already announced it would end the export of concentrated minerals next year to force miners to process all their metal domestically.
The royalty on precious stones would increase to 6 percent from 4 percent and a 5 percent royalty would apply to strategic minerals, according to the government proposals. Congo has deposits of uranium.
The country also wants to institute a windfall tax of 40 percent, which the companies reject completely, the minutes show.