Miners Threaten Legal Action Against Congo Over New Code

(Bloomberg) -- Mining companies in the Democratic Republic of Congo renewed a threat to take legal action against the government unless there are changes to a new industry code.

Investors in the world’s largest cobalt-producing country are ratcheting up pressure on the government to reverse adjustments to the law as Mines Minister Martin Kabwelulu prepares to submit final regulations by June 8. Last month, the companies said the country faces a loss of $3 billion of revenue if the changes are implemented.

“We want to underline the critical character of the situation,” investors including Glencore Plc, Randgold Resources Ltd., China Molybdenum Co. and Ivanhoe Mines Ltd. said in a May 28 letter to Kabwelulu. The letter was shown to Bloomberg by a person close to negotiations about the new code, and confirmed by two others, who asked not to be identified because it hasn’t been released publicly.

The companies are demanding the government abandon aspects of the legislation approved by President Joseph Kabila in March. Discussions about the regulations concluded earlier this month and the industry says its concerns weren’t addressed.

Stability Clause

Miners insist the government reinsert a stability clause, present in the former code, that protected license holders from complying with changes to the fiscal and customs regime for 10 years. They’ve 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.

If the companies’ concerns, particularly over the deleted decade-long stability clause, aren’t respected, “we will be forced to resort to legal means to protect our rights,” they said in the letter.

Kabwelulu didn’t answer a call to his mobile phone and his chief-of-staff, Valery Mukasa, declined to comment when contacted by text message.

Hurt Business

Executives from the companies met with Kabila on March 7 to convey their concerns that the new law could hurt their businesses. Kabila signed the legislation two days later, but suggested the regulations could soften the way some amendments were enforced. Draft regulations show the miners’ demands haven’t been accepted.

The law has already harmed the mining companies, despite not having been implemented yet, according to a note investors submitted to the Mines Ministry on April 30. Its promulgation “immediately resulted” in a sharp fall in the share prices of several companies, notably Randgold and Ivanhoe, it said.

The mining companies said the Mines Ministry has so far failed to formally respond to an industry proposal submitted in late March and 13 pieces of official correspondence.

They are “particularly concerned by the fact that we have not been able to meet you, our supervising minister, to discuss and debate a mutually beneficial solution,” they said in the letter.

“As a group of the largest and most committed investors in the Democratic Rep of Congo, we remain determined to find a mutually beneficial solution to our concerns before the application of the 2018 Law,” the companies said.

©2018 Bloomberg L.P.

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