Contractors working at Glencore's Bracemac-McLeod zinc min. Picture: BLOOMBERG
Contractors working at Glencore's Bracemac-McLeod zinc min. Picture: BLOOMBERG

Kinshasa — Mining companies in the Democratic Republic of Congo have urged legislators to rethink new legislation that could lead to acrimony between the government and the industry.

Local subsidiaries of Glencore, China Molybdenum, Randgold Resources, Ivanhoe Mines and MMG sent a letter, which has been seen by Bloomberg, to Leon Kengo wa Dondo and Aubin Minaku, respectively the presidents of the senate and national assembly.

They asked them to "suspend the process of adopting the text in its current version" and to "organise a true consultation of the mining industry".

On December 8, the national assembly approved legislation that increases royalties on copper, cobalt and gold to 3.5%, introduces a profit-windfall tax and doubles the state’s free share to 10%. It also reduces the period during which contract stability is guaranteed to five years from 10 years.

The bill has been transferred to the senate and, if passed, will be sent to President Joseph Kabila to be signed into law.

While parliament closed on December 15 and its regular business resumes only in mid-March, an extraordinary session of both chambers is scheduled to start on January 2.

The senate is due to examine the mining legislation, according to a statement signed by Minaku on December 17.

The new law would "significantly lessen the confidence of investors in the regulatory environment" of Congo and discourage investment, according to the letter. It would reduce the state’s tax receipts from mining and also threaten jobs, social programmes and infrastructure projects, the companies said.

Mining Minister Martin Kabwelulu did not respond to calls and text messages.

‘Lasting dispute’

Congo is Africa’s biggest copper producer and the world’s largest source of cobalt. The current mining law, which was promoted by the World Bank and adopted in 2002, attracted billions of dollars of investment from mining companies including the letter’s signatories, as well as Freeport McMoRan.

While the economy has grown, two-thirds of the population of about 80-million people live on less than $2 a day and the annual budget has never exceeded $10bn.

The government first introduced the revised mining code to parliament in 2015 and withdrew it before it was debated on account of a slump in metal prices and fierce industry opposition.

The state-owned mining company Gecamines has claimed that revenue generated by its partnerships with major mining companies have been lower than expected and the government hopes to take a larger share following the resurgence of key commodities.

The price of copper has risen 31% so far in 2017 while cobalt is up 130% in the year.

Last year, Congo produced 1.02-million tonnes of copper and 68,822 tonnes of cobalt, the key battery component of electric vehicles.

The mining industry’s concerns have not been heard and proposed modifications have been "largely ignored", according to the letter.

Such an approach is likely to cause "a lasting dispute" as the companies and their shareholders will "protect their investments by all domestic and international means at their disposal", it says.

The signatories offered to support a consultation to come up with another mining code during 2018.

The dispute echoes the South African Chamber of Mines’ battle with the Department of Mineral Resources and minister Mosebenzi Zwane over the third iteration of the Mining Charter.

Bloomberg