Congo Abandons Mining-Code Changes Amid Industry GloomFranz Wild and Tom Wilson
Copper output fell in 2015 and likely to worsen in 2016
Higher gold production from Randgold bucks downward trend
The Democratic Republic of Congo dropped plans to revise its mining code in a bid to protect investment as lower prices and energy shortages drove down output in Africa’s biggest copper producer.
Copper production dropped 3 percent to 995,805 metric tons in 2015, the first drop in six years, the Chamber of Mines at the Federation des Entreprises du Congo said in an annual report distributed Wednesday in Cape Town. Output in the fourth quarter slumped 12 percent from the previous year, it said.
“We can’t add to the crisis we are in,” Mines Minister Martin Kabwelulu said in an interview in Cape Town, explaining why the government won’t push through proposed changes to the mining code. “This whole year will be very difficult because of commodity prices and our energy prices.”
Congo began reviewing the 2002 mining code in 2014. Revised laws approved by the government in March included increasing profit taxes to 35 percent from 30 percent, raising the state’s free share of new mining projects to 10 percent from 5 percent and royalties on copper and cobalt revenue to 3.5 percent from 2 percent.
The chamber, an industry lobby group, had opposed revisions to the code because of the potential negative impact it could have on investment in mining. Randgold Resources Ltd. Chief Executive Officer Mark Bristow said in October the planned changes risked destroying the industry in Congo.
The chamber welcomed Kabwelulu’s announcement, though said that because the amendment bill was in parliament, it could still be revived at a later stage.
“The government agrees with us that it’s dangerous to touch the mining code,” chamber head Simon Tuma-Waku said in an interview.
Copper prices dropped 26 percent in 2015 to the lowest level in six years. The government in November lowered its growth forecast for 2015 to 7.7 percent from a previous estimate of 8.4 percent as commodity prices tumbled, though it has remained bullish about economic growth this year. The 2016 budget predicts a growth rate of 9 percent, above the World Bank’s 7.3 percent forecast.
The suspension of production at Glencore Plc’s Katanga Mining Ltd. copper project in southeastern Congo will further cut production of the metal this year to between 800,000 and 900,000 tons, Tuma-Waku said. The operation halted production in September as it sought to control costs. The decline will lead to more job losses, Tuma-Waku said.
“It’s not looking rosy, not at all,” Tuma-Waku said.
Congo’s energy deficit, which grew to 950 megawatts in 2015 from 542 megawatts the previous year, will further restrain growth and private companies need to be more involved in energy production, the chamber said.
“Inadequate and highly non-transparent management by state-owned electricity supply company SNEL is the single-biggest factor inhibiting the development of the mining industry,” the chamber said in its report. “Potential investors in the energy sector do not have the slightest confidence in the existing structure.”
Production of cassiterite, or tin ore, fell 18 percent last year, according to the chamber. Output of coltan, used in electronics, dropped 25 percent. Cobalt production grew 3.6 percent and diamond output increased 3 percent. Gold output jumped 30 percent to 25.5 tons, mainly due to an increase in production at Randgold Resources Ltd.’s Kibali mine, the chamber said.
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