DRC plans ‘could hurt investment in mining’

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BR Randgold 38143

Bloomberg

Mark Bristow of Randgold Resources says changing the mining code will not help the treasury. File picture: Bloomberg

Plans by the Democratic Republic of Congo (DRC) to change the nation’s mining code may reduce the flow of foreign direct investment, according to Randgold Resources chief executive Mark Bristow.

A draft of the proposals shows the government is seeking to raise taxes and royalties from producers, cut exemptions and institute a windfall profit tax.

“Like all countries, they want to get more,” Bristow said at Kibali, a Randgold mine that is a joint venture with AngloGold Ashanti.

“The big problem in the Congo is that a lot of the mining industry doesn’t actually operate under the code, so even if you change the code you don’t benefit the treasury.”

The DRC last year surpassed Zambia as Africa’s biggest copper producer, according to CRU Group, a London-based commodities analysis company.

It was the world’s eighth-largest producer of copper and the biggest miner of cobalt last year, according to the US Geological Survey. It also holds gold, diamonds and tin.

The Chamber of Mines at the DRC’s main business federation said last year that a lack of infrastructure and legal insecurity hampered investment and would undermine the government’s plans to change its mining code, which included raising taxes and boosting its share of new mining ventures.

The country needs investment to help fund rebuilding of infrastructure such as power plants, damaged by two civil wars from 1996 to 2003.

Copper and cobalt producers would consider a royalty increase to 3.5 percent if the country provided them with enough power, according to minutes from a series of meeting between representatives from companies, the government and civil society in March.

The DRC announced an electricity rationing programme in January and is limiting mining project expansion amid a power shortage that will take years to resolve. It is importing energy from neighbouring Zambia to try to fulfil producers’ needs.

AngloGold, the world’s third-biggest producer of the metal, and Randgold would double the amount of power generated at the Kibali gold mine to 47 megawatts by 2016, the companies said last week.

Kibali was building four hydropower plants to add to the 22MW Nzoro II facility commissioned last month, the single largest electricity project in Orientale province, social and environment manager Cyrille Mutombo said last week. An earlier project, known as Nzoro I, produced 1MW, which was supplied to the neighbouring community, he said.

Kibali is a $2.7 billion (R28bn) gold mining project and so far about $2bn has been invested in the venture, which started in 2010.

The operation was prospecting on eight sites and planned to add three mines to the existing operation, mines superintendent Martin Mutata said. – Bloomberg


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