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In Depth

Chinese firms face new reality of Congo mining

LIKASI, Congo (Reuters) - Just a few months ago, flatbed trucks, pickups and even a creaking bicycle streamed up to a concrete-block hut, bringing bags of copper and cobalt ore from the mines of southern Democratic Republic of Congo.

Congolese diggers work in an improvised mine near the town of Kambove April 17, 2007. Just a few months ago, flatbed trucks, pickups and even a creaking bicycle streamed up to a concrete-block hut, bringing bags of copper and cobalt ore from the mines of southern Democratic Republic of Congo. The shelter is a buying depot for JMT Mining SPRL, one of dozens of informal collection points for ore exported for processing to feed China's demand for industrial commodities. But since taking office in February, Congo's government has been on a mission to bring order to a chaotic mining sector, starting by clamping down on exports raw ore for processing abroad. REUTERS/Joe Bavier

The shelter is a buying depot for JMT Mining SPRL, one of dozens of informal collection points for ore exported for processing to feed China’s demand for industrial commodities.

But since taking office in February, Congo’s government has been on a mission to bring order to a chaotic mining sector, starting by clamping down on exports raw ore for processing abroad.

Moise Katumbi, the governor of mineral-rich Katanga province, closed a checkpoint in Kasumbalesa, the main export route to neighboring Zambia and beyond, vowing that, in future, all ore must be processed in Katanga.

“(The mining companies) are keeping the money and sending it overseas,” said Katumbi, who, under a new mining code, will see 40 percent of all revenues remain in his province.

“Show me even one toilet that has been built with that money.”

Though later loosened to allow the export of mineral concentrates, the ban on the export of raw ore still stands.

“Nothing is getting out,” said Bill Wang, who oversees the JMT Mining depot, said in an interview. “I’m sitting at home now.”

Wang, proud to have been among the first Chinese people to arrive in Likasi, at the heart of the mining region, used to purchase 30 tons of copper ore and 10 tons of cobalt ore daily at his two buying counters.

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Now, his company is setting up a furnace to process the ore, a move that would allow it to resume exports. Wang expects it to be completed in July. Other Chinese firms are considering setting up their own processing plants.

CHAOS

China’s demand for industrial commodities drew scrutiny in Congo, where miners work in dangerous, unregulated conditions and where some foreign companies paid no mining rights.

An estimated 150,000 people work in Katanga province’s informal mining sector, often in mines without reinforced galleries or ventilation. Accidents and deaths are common.

The sector grew out of the slow decay of once-huge state miner Gecamines under the late Mobutu Sese Seko and flourished during the chaos created during Congo’s 1998-2003 war.

Today, it is fuelled by rising copper and cobalt prices on the world market and booming demand from emerging economies.

That demand led to an invasion of buyers, with hundreds of Chinese people lining the dusty roads leading to Katanga’s mining zones.

“The Chinese have a huge appetite for low-grade cobalt, so they fell upon the Congo when Gecamines fell apart, and they enjoyed the pleasure of being able to get it at any price,” said Nick French, a cobalt trader at SFP Metals in London.

China uses around 15,000 tons of heterogenite -- the ore from which cobalt is extracted -- per year, SFP estimated, mainly in batteries for mobile phones and laptops. Pure cobalt metal sells on world markets for more than $30 per pound ($66,000 per ton), its most expensive in more than a decade.

For ore containing 5 percent cobalt, Wang paid $500 per ton and up to $2,000 per ton for 13 percent.

Those kinds of prices have, in a short time, made the Chinese popular with the local diggers.

“The other buyers will give you 100 francs (around $0.18) per kilogram, and you have to wait a day,” digger Jacques Mayonde told Reuters at a Chinese-run depot at the foot of a giant mountain of Gecamines’ tailings near the town of Kambove.

“With the Chinese you’re OK. They pay 500 francs (about $0.90). You come, they weigh it, and you get your money right away.”

The arrangement has worked well for Wang and other Chinese brokers. But lately they’ve hit a few snags.

The companies that hold legitimate concessions say informal mining is essentially theft, and ore bought by the Chinese constitutes stolen goods.

Following Congo’s first democratic elections in more than four decades last year, many are now beginning to launch industrial mining operations. The informal sector’s days could be numbered as big Western miners like FreeportMcMoran -- encouraged by the successful elections -- protect their investments.

“It used to be a buyer’s market, and now it’s a Congolese seller’s market,” SFP’s French said.

“It’s more difficult to get heterogenite because it’s in stronger hands now.”

additional reporting by Daniel Magnowski in London

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