UPDATE 2-Congo's copper province governor rejects export ban

Thu Apr 18, 2013 1:28pm EDT

By Jonny Hogg

KINSHASA, April 18 (Reuters) - The governor of Katanga, Congo's sole copper and cobalt mining province, said he would not enforce a new ban on the export of copper and cobalt concentrates, putting him on a collision course with the central government.

The mines and finance ministers signed a directive this month giving companies 90 days to clear their stocks of concentrate before the ban comes into effect, after which processing would have to be done in Congo or heavy payments made to the government.

"As the government of Katanga we reject this decision, and we will continue exporting," Moise Katumbi said by telephone. "Congo doesn't have enough electricity to process the finished product."

Congo is the world's largest producer of cobalt, which is used to create high-strength alloys, and exported 650,000 tonnes of copper in 2012, around 30 percent of which was in concentrate form, according to Katumbi.

Shares of Congo-focused miners Ivanplats Ltd and Freeport-McMoRan Copper & Gold rose on Thursday, reversing some of the losses that followed the announcement on Wednesday of the government's ban.

Despite a vast network of rivers, Congo exploits only a fraction of its hydroelectric potential, and the government expects power shortages to worsen in the coming years.

Less than 10 percent of Congo's 70 million people have access to power, and mining companies are already scaling back production and expansion because of shortages, with only about half of the 14 turbines at its Inga dam operational.

Katumbi said he had not been consulted about the ban on the export of concentrates and warned that any attempts to push it through could have serious consequences.

"The government will lose income, and that would put the prime minister in a difficult position. Even if I ask my six-year-old son, he's going to say (the ban) is mad," he added.

POLITICAL FALLOUT

The fallout from the legislation is the latest blow to the government of Joseph Kabila, who vowed to attract investors when he was re-elected in 2011 but has instead seen Congo slide to fifth last ranking in the World Bank's index that measures the ease of doing business.

Security has deteriorated sharply in the eastern provinces, including Katanga. Last month hundreds of insurgents clashed with security forces, in the streets of its capital Lubumbashi, sending shock-waves through the normally calm city.

Katanga is not only the country's economic centre, producing around 70 percent of tax revenues, but is also Kabila's political heartland, and he is losing control of it, according to Marc Andre Lagrange of International Crisis Group.

If already nervous investors pull out, then the precarious position of the president, known for his hands-off, virtually invisible style of government, could be further weakened Lagrange said.

"Recent events in Lubumbashi demonstrate that Kabila has lost grip over most of the eastern part of Congo ... It shows that Kinshasa is just cut off from the rest of the country," he added.

Mines Minister Martin Kabwelulu is due to arrive in Lubumbashi on Friday in an apparent bid to resolve the growing rift sparked over the concentrates ban.

But late on Wednesday he said in a text message to Reuters that power and governance problems were no justification for stopping the change in the law.

"It's always the same protestations from the mine operators: lack of current judicial security, etc. And if we follow that, there will never be progress in the Congolese mining sector," the minister wrote.

The ban is likely to have little effect on major producers such as Freeport and commodities trader Glencore, which already process the bulk of their copper inside the country.

Those most affected would include small-scale miners and Kazakh company ENRC, which exports concentrate to be processed across the border in Zambia.

ENRC has declined to comment on the ban. It is commissioning a new mine, Frontier, to produce 40,000 tonnes of copper in concentrate form in 2013.

Other miners that operate in Katanga and export concentrates include Mawson West and Tiger Resources.

Congo attempted to introduce a similar ban on concentrates exports in 2007 and again in 2010, but each time the decision was reversed.

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