Mining Companies Urge Top Congo Lawmakers to Block New Law

(Bloomberg) -- Mining companies in the Democratic Republic of Congo have urged lawmakers to rethink new legislation that could lead to acrimony between the government and the industry.

Local subsidiaries of Glencore Plc, China Molybdenum Co., Randgold Resources Ltd., Ivanhoe Mines Ltd. and MMG Ltd. sent a letter, which has been seen by Bloomberg, to Leon Kengo wa Dondo and Aubin Minaku, respectively the presidents of the Senate and National Assembly. They asked them to “suspend the process of adopting the text in its current version” and to “organize a true consultation of the mining industry.”

On Dec. 8, the National Assembly approved legislation that increases royalties on copper, cobalt and gold to 3.5 percent, introduces a profit-windfall tax and doubles the state’s free share to 10 percent. It also reduces the period during which contract stability is guaranteed to five years from 10 years.

The bill has been transferred to the Senate and, if passed, will be sent to President Joseph Kabila to be signed into law. While Parliament closed on Dec. 15 and its regular business won’t resume until mid-March, an extraordinary session of both chambers is scheduled to start on Jan. 2. The Senate is due to examine the mining legislation, according to a statement signed by Minaku on Dec. 17.

The new law would “significantly lessen the confidence of investors in the regulatory environment” of Congo and discourage investment, according to the letter. It would reduce the state’s tax receipts from mining and also threaten jobs, social programs and infrastructure projects, the companies said.

Mining Minister Martin Kabwelulu didn’t respond to calls and text messages.

‘Lasting Dispute’

Congo is Africa’s biggest copper producer and the world’s largest source of cobalt. The current mining law, which was promoted by the World Bank and adopted in 2002, attracted billions of dollars of investment from mining companies including the letter’s signatories, as well as Freeport McMoRan Inc. While the economy has grown, two-thirds of the population of around 80 million people lives on less than $2 a day and the annual budget has never exceeded $10 billion.

The government first introduced the revised mining code to parliament in 2015 and withdrew it before it was debated on account of a slump in metal prices and fierce industry opposition. The state-owned mining company Gecamines has claimed revenues generated by its partnerships with major mining companies have been lower than expected and the government hopes to take a larger share following the resurgence of key commodities. The price of copper has risen 31 percent so far in 2017 while cobalt is up 130 percent in the year.

Last year, Congo produced 1.02 million metric tons of copper and 68,822 tons of cobalt, the key battery component of electric vehicles.

The mining industry’s concerns haven’t been heard and proposed modifications have been “largely ignored,” according to the letter. Such an approach is likely to cause “a lasting dispute” as the companies and their shareholders will “protect their investments by all domestic and international means at their disposal.”

The signatories offered to support a consultation to come up with another mining code during 2018.

To contact the reporter on this story: William Clowes in Kinshasa at wclowes@bloomberg.net.

To contact the editors responsible for this story: Paul Richardson at pmrichardson@bloomberg.net, Helen Nyambura, Vernon Wessels

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