Joseph Kabila, right . Picture: REUTERS/LINTAO ZHANG
Joseph Kabila, right . Picture: REUTERS/LINTAO ZHANG

Kinshasa — The Democratic Republic of Congo’s (DRC) mines ministry said it was completing work on new regulations, as a draft document showed the government has so far ignored companies’ key concerns about the reforms.

Miners, including Glencore and Randgold Resources, have demanded the government dial back aspects of the legislation approved by President Joseph Kabila in March. The ministry makes no mention of any of the major changes the companies seek, according to a draft document seen by Bloomberg that was verified by a member of a commission charged with revising the mining code, and by a mining company manager.

The document was circulated to mining companies on May 3.

"We are in the process of working so that there is a draft which must be examined by the government," Valery Mukasa, chief of staff to mines minister Martin Kabwelulu, said from the capital, Kinshasa. "We are first finishing the work and at that moment we will communicate on the whole text."

Miners argue the new code will drive investors away because it breaches title holders’ rights, increases royalty payments on copper, cobalt and gold, and introduces new taxes. Two days before Kabila promulgated the code, mining executives met with the president, who declined to amend the law but indicated that drafting regulations which implement the legislation might alleviate the companies’ concerns.

The mines ministry is required to submit a final version of the regulations to DRC’s cabinet within 90 days of the president signing the code. Without extracting major concessions during the month that remains, mines controlled by Randgold, Glencore and the others could immediately be liable to pay the higher royalties and new taxes.

Seven mining companies, including Ivanhoe Mines and China Molybdenum, submitted a proposal to the mines ministry at the end of March that insisted the government re-insert a stability clause, contained in the 2002 code, which protected licence holders from complying with changes to the fiscal and customs regime for 10 years.

The miners also asked for the removal of a 50% tax on so-called super-profits and a new categorisation of "strategic substances", which have a 10% royalty rate. DRC’s prime minister will be able to designate certain minerals as strategic via decree, according to the document. Addressing DRC’s parliament in January, Kabwelulu said cobalt could become a strategic metal.

Surging prices

DRC’s mines produced two-thirds of the world’s cobalt last year. The price of the commodity, a key ingredient in rechargeable batteries needed to power electric vehicles, has almost quadrupled in the past two years.

The mining companies continue to negotiate with the ministry in the hope of making some gains. Miners advised in their proposal that the government introduce sliding royalty rates on copper, cobalt and gold, which they said will generate more revenue for DRC’s state than the super-profit tax when commodity prices are high. The recommendation has not been accepted, according to the draft document.

Bloomberg

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