CORRECTED - UPDATE 2-Congo panel says 61 mining contracts not viable

(Deletes erroneous reference to Canada's Banro Corporation (BAA.TO), which does not have a joint venture with the state and is not listed as one of the 61 companies under review)

By Joe Bavier

KINSHASA, Nov 3 (Reuters) - Sixty-one mining contracts under review by a mining commission in Democratic Republic of Congo should be cancelled or renegotiated, according to a preliminary report from the panel seen by Reuters on Saturday.

The document, which a commission member said had not yet been finalised, showed that no contract reviewed by the panel was considered "viable" in its current form.

Thirty-seven contracts, including those with international firms Freeport McMoRan Copper & Gold Inc (FCX.N), BHP Billiton (BHP.AX) and Nikanor NKR.L, needed renegotiating while the remaining 24 should be terminated, the document recommended.

The commission was established to bring mining contracts in the vast former Belgian colony, most of which were negotiated during a 1998-2003 war and a subsequent three-year transition period, up to international standards.

"(The document) is the work of a subcommittee and is not the final version of the report. There still could be changes," the commission member told Reuters.

He said the final version of the report should be presented to Congo's Ministry of Mines on Tuesday.

Among those contracts recommended for cancellation are Toronto-listed Anvil Mining Ltd's (AVM.TO) rights to the Dikulushi copper and cobalt mine, where the Perth-based company has recently launched an underground mining operation.

"The commission notes that the state earns absolutely nothing in this contract and proposes the government end it," the report said among its recommendations.

The panel also called for a 2004 decree authorising the creation of KMT Plc, of which First Quantum Minerals Ltd (FM.TO) (FQM.L) is the major stakeholder, to be repealed.

MINING CODE

The commission criticised several mining majors for irregularities in the negotiation of their contracts and recommended they be renegotiated but not cancelled.

Freeport McMoRan's Tenke Fungurume project, negotiated before the company's takeover of Phelps Dodge, was criticised for not respecting Congo's mining code.

"The government should end all these conventions and invite the parties to sign a new partnership conforming to the mining code with the right of pre-emption in favour of the current partner," the report said.

BHP Billiton and AngloGold Ashanti (ANGJ.J), which are both in joint ventures with state companies, and Nikanor, which has launched a $1.8 billion copper project in Congo, were similarly criticised.

Following Congo's first democratic elections in more than four decades last year and a return to relative political stability following a five-year war, interest in the country's vast mining sector is booming.

The government first announced plans for a review of the legality and fairness of mining contracts early this year but the process was not launched until June and the commission's work has been delayed on several occasions.

Upon completion of the evaluation of the mining licenses, the commission is due to begin renegotiating the deals.