November 7, 2012 / 1:18 PM / 7 years ago

Congo to negotiate mining code changes, official says

JOHANNESBURG (Reuters) - Democratic Republic of Congo’s plans to sharply raise the state stake in mining projects is a proposal that will be negotiated with mining companies and also consulted with the World Bank and the IMF, a senior mines ministry official said on Wednesday.

Heavy machinery is seen at Frontier copper mine in Fungurume, in southern Democratic Republic of Congo May 25, 2010. REUTERS/Katrina Manson

Mines Minister Martin Kabwelulu announced last month that a proposed overhaul of the country’s mining code would seek to increase the government stake to 35 percent from the existing 5 percent, in a proposal that rattled foreign mining firms working in the central African nation.

Congo holds rich deposits of copper, tin, cobalt and gold and is among a number of developing countries trying to increase revenue from their mineral wealth by boosting taxes and the state’s share in profits.

Miners active in Congo include Australia’s Tiger Resources, Randgold Resources, AngloGold Ashanti, Freeport McMoRan and Glencore-owned Katanga Mining.

Dona Kampata Mbwelele, coordinator of Congo’s Mines Ministry who was representing the minister at an iron ore conference in Johannesburg, stressed the state stake increase proposal would be discussed with all participants in the national mining sector, including civil society representatives.

“We are in discussion with all the actors,” Mbwelele told Reuters on the sidelines of the conference organised by Metal Bulletin.

“Up to this point in time, you can’t talk of the revision of the mining code as if it was already signed by the president of the republic,” he added.

Mbwelele said that while the ministry was seeking a 35 percent stake for the state in projects, civil society organisations had proposed a 20 percent government stake and mining companies preferred the state to have no stake at all.

“It’s a negotiation ... we haven’t yet held the meeting with the mining operators and civil society. We’re going to have this meeting in December,” he said. “We’ll all meet together in December to find the balance.”

Mbwelele was clearly anxious to offer reassurance to worried investors about the proposed overhaul of the 2002 mining code by suggesting there was room for flexibility and negotiation.

“The government can’t impose itself and just say ‘that’s my mining code’, no,” he told Reuters.

“INVESTORS SHOULD NOT BE AFRAID”

Mines Minister Kabwelulu has already said the proposed overhaul of mining laws will not be retroactive and so will not affect existing contracts.

A draft of the proposed changes in the mining law seen by Reuters shows Congo is seeking a 35 percent stake in projects that is “free of charges and ... non-dilutable.” It also includes a proposal to double royalties on some minerals and introduces a 50 percent levy on miners’ “super profits”.

The draft revision defines “super profits” as made when a commodity’s price rises exceptionally over 25 percent compared with its level at the time of the project’s feasibility study.

Mbwelele said the Mines Ministry also intended to consult its proposals for the revised code with the World Bank and the International Monetary Fund (IMF).

“We’ll bring them in too ... It’s they who will tell us whether it’s a good idea to hold out for the 35 percent, or not,” he said.

The Congolese mines official recalled that in previous years a review of mining contracts had also generated alarm and concerns among the companies operating in the Congo.

“But afterwards, we didn’t chase anyone away, they’re all there and I think that’s what will happen this time too,” Mbwelele said.

“The investors should not be afraid,” he added.

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