Randgold hopes giant Kibali mine will transform northeast Congo

DOKO, Democratic Republic of Congo Thu May 8, 2014 11:04am EDT

The KCD open pit gold mine at the Kibali mining site in northeast Democratic Republic of Congo, May 1, 2014. REUTERS/Pete Jones

The KCD open pit gold mine at the Kibali mining site in northeast Democratic Republic of Congo, May 1, 2014.

Credit: Reuters/Pete Jones

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DOKO, Democratic Republic of Congo (Reuters) - The open pit of the giant Kibali mine in northeastern Democratic Republic of Congo, a yawning beige crater punched in dense forest, could turn a remote corner of one of the world's poorest countries into an economic powerhouse.

Kibali represents Congo's return to the world stage as a producer and exporter of gold. The $2.5 billion joint venture between Randgold, AngloGold Ashanti and state miner Sokimo poured its first gold in September and could eventually rank among the world's biggest.

Its scale is already evident. The mines' sides descend in a series of deep shelves, making trucks at the base, which each carry 100 tonnes of rock to the surface to be processed, appear as small as insects.

Randgold Resources CEO Mark Bristow has great hopes that Kibali, and a neighboring agri-business project sponsored by the mine, can do for Orientale province what copper and cobalt have done for the southern province of Katanga, on which central government relies for much of its income.

Decades of corruption, mismanagement and violence have blighted the development of Congo, which at the time of independence in 1960 was Africa's second most industrialized economy. In 2013 it was near the foot of global tables for per capita economic output.

Now industrial mining operations are moving back to regions that have been the preserve of artisanal miners since the collapse of Congo's state-run mining operations in the 1990s, at the end of dictator Mobutu Sese Seko's 31-year rule.

"It's a dream of mine that gold mining and agribusiness in Orientale will beat Katanga as a source of economic welfare," Bristow told a ceremony to officially open Kibali last week.

Record copper exports from Katanga helped Congo's economy grow by 8.5 percent in 2013. President Joseph Kabila's government forecasts it will expand by around 9 percent this year, as mining output picks up elsewhere.

Last year, Kibali produced 88,200 ounces of gold, which is currently worth just under $1,300 an ounce, generating a profit of over $68 million. Randgold forecasts it will produce 550,000 ounces this year and up to 650,000 ounces by 2018.

Its vast pit, called KCD, is estimated to hold 12 million ounces of gold ore. Construction of vertical shafts to allow underground mining are not complete but will help to access an estimated 8 million ounces of resources.

"What you see is just Phase 1," said mining superintendent Martin Matata. "In September, we start Phase 2, expanding south and northeast, then Phase 3 in 2016 will expand to the west."

DISLOCATION

Alongside development comes dislocation. Randgold's permit created an exclusion zone around the site in which artisanal miners could not work, and 21,000 villagers, many of whom were eking out a living digging for gold, were moved before excavations began.

To maintain good relations, Kibali built a town for the villagers called Kokiza, costing $84 million. Residents seem content with the neatly aligned brick houses, though the uniform design is incongruous in an area of haphazard mud-hut villages.

Over 5,500 Congolese were employed during the mine's construction, but many lost their jobs as building was completed. Kibali officials hope that by supporting agriculture the community can benefit from the mine's presence, and hundreds of locals are joining its agricultural co-operatives.

"We used to live from day to day," said Jacques Vurande, a former artisanal miner who works in a co-operative producing rice, aubergines and palm oil to sell to Kibali's catering company and in markets. "Now I can get something from agriculture, something that is lasting."

In Durba, a town near Kokiza, some are less certain. Jerome Kamate has a degree in economics and management but no job.

"We used to survive on artisanal mining for our day-to-day living, but now the gold pits are closed to us," said Kamate. "We were told we'd get jobs in the mine, but that's not the case."

CHALLENGES

The lack of infrastructure presents the main challenge to investors in Orientale. Congo, a country the size of western Europe, has just 2,000 kilometers (1,250 miles) of asphalt roads and no reliable power.

Kibali had to build a 180 km road to the Ugandan border to transport 500,000 tonnes of materials and equipment to construct the mine. That road has attracted traders from Congo and Uganda, helping the local economy to flourish.

"Durba's population before we built the road was estimated at around 10,000. Now, it's more like 50,000," said Kibali's community development officer Preston Nix.

Prime Minister Augustin Matata Ponyo has said he wants to boost tax revenues from mining to foster development, in a country where most of the 65 million people live below the poverty line. Despite opposition from miners, Congo is reviewing its 2002 mining code and seeking to triple royalties for minerals including gold.

Some fear such a plan threatens the goose that lays the golden egg.

Bristow said the current mining code was already onerous enough, but he didn't expect it to jeopardize Kibali.

"We would be protected under the 10-year stabilization clause that we have as part of the original mining code," he said.

(Editing by Daniel Flynn and Will Waterman)

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