UPDATE 2-Katanga signs first new deal in Congo mine review

(Adds quotes from Gecamines

By Eric Onstad and Joe Bavier

LONDON/KINSHASA Aug 5 (Reuters) - Katanga Mining (KAT.TO) has signed a new deal with Congo's Gecamines to create Africa's biggest copper mine, the companies said on Tuesday, completing the first renegotiation in the country's sweeping mines review.

The two sides signed a memorandum of understanding affirming ownership would remain at 75 percent for Katanga and 25 percent for Gecamines, which is owned by the Democratic Republic of Congo's government.

Royalty payments to Gecamines, however, would rise to 2.5 percent from 1.5 percent, Katanga Mining said in a statement.

Congo launched a review of all mines contracts last year after President Joseph Kabila's government came under pressure to deliver on promises made during elections in 2006 to make the sector more transparent and increase revenues for the country.

The board of the joint venture company, Kamoto Copper Co, will be expanded to eight members, three of which will be appointed by Gecamines, Katanga said.

"I am very pleased that this MoU addresses outstanding matters affecting joint venture business, including government requirements from the mining review, and that we can deal with everything in one merged joint venture agreement," Katanga's chief executive, Arthur Ditto, said.

The first cash payment to Gecamines for transfer of mining rights is $5 million and will be made on implementation of the merged joint venture.

Katanga bought London-listed miner Nikanor last year for about $2.1 billion to consolidate the companies' copper and cobalt assets near the town of Kolwezi.

The company has targeted annual output of 300,000 tonnes of copper and 30,000 tonnes of cobalt by 2011.

"We've closed the deal with Katanga. That's the first we've closed," Gecamines Chief Executive Paul Fortin told Reuters when asked how the renegotion process was going.

"So far it's been very amicable and Gecamines has made some gains. We will look at a few more next week," he added.

Critics of the process say the government has not provided enough information on the renegotiations, in particular the lack of a time-frame and failure to publish the terms of reference. (Editing by Greg Mahlich/David Lewis)