Congo Finalizing Mining Rules After Company Concerns Ignored

(Bloomberg) -- The Democratic Republic of Congo’s Mines Ministry said it’s completing work on new regulations, as a draft document showed the government has so far ignored companies’ key concerns about the reforms.

Miners including Glencore Plc and Randgold Resources Ltd. have demanded the government dial back aspects of the legislation approved by President Joseph Kabila in March. The ministry makes no mention of any of the major changes the companies seek, according to a draft document seen by Bloomberg that was verified by a member of a commission charged with revising the mining code and by a mining-company manager.

The document was circulated to mining companies on May 3.

“We are in the process of working so that there is a draft which must be examined by the government,” Valery Mukasa, chief of staff to Mines Minister Martin Kabwelulu, said from the capital, Kinshasa. “We are first finishing the work and at that moment we will communicate on the whole text.”

Miners argue the new code will drive investors away because it breaches titleholders’ rights, increases royalty payments on copper, cobalt and gold, and introduces new taxes. Two days before Kabila promulgated the code, mining executives met with the president, who declined to amend the law but indicated the drafting of the regulations that implement the legislation might alleviate the companies’ concerns.

Miners’ Proposals

The Mines Ministry is required to submit a final version of the regulations to Congo’s cabinet within 90 days of the president signing the code. Without extracting major concessions during the month that remains, mines controlled by Randgold, Glencore and the others could immediately be liable to pay the higher royalties and new taxes.

Seven mining companies including Ivanhoe Mines Ltd. and China Molybdenum Co. submitted a proposal to the Mines Ministry at the end of March that insisted the government reinsert a stability clause, contained in the 2002 code, which protected license holders from complying with changes to the fiscal and customs regime for 10 years. The miners also asked for the removal of a 50 percent tax on so-called super-profits and a new categorization of “strategic substances,” which have a 10 percent royalty rate.

Congo’s prime minister will be able to designate certain minerals as “strategic” via decree, according to the document. Addressing Congo’s parliament in January, Kabwelulu said cobalt could become a “strategic” metal.

Surging Prices

Congo’s mines produced two-thirds of the world’s cobalt last year. The price of the commodity, a key ingredient in rechargeable batteries needed to power electric vehicles, has almost quadrupled in the past two years.

The mining companies continue to negotiate with the ministry in the hope of making some gains. By Wednesday, the ministry had yet to formally respond to a proposal suggesting changes to the code that was submitted by the companies on March 29, according to two people familiar with the matter who asked not to be identified because the information isn’t public.

Miners advised in their proposal that the government introduce sliding royalty rates on copper, cobalt and gold, which they said will generate more revenue for Congo’s state than the super-profit tax when commodity prices are high. The recommendation has not been accepted, according to the draft document.

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, Liezel Hill

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