Loading ...Congo’s miners face harsh new reality as mining law finalized
The options for mining companies battling new legislation in the Democratic Republic of Congo — Africa’s biggest copper producer and the source of two-thirds of the world’s cobalt — have just about run out.
After six months of lobbying, companies including Glencore Plc and Randgold Resources Ltd. have got nowhere in their battle to push back against the mining law, which voids existing agreements and increases their costs. Congo approved the final part of the bill on Friday, and despite earlier indications from President Joseph Kabila that the rules might be eased, the law hasn’t been weakened in any way.
While the constitution bars Kabila from running for a third term, Congo’s embattled leader has refused to rule himself out as a candidate in elections later this year, and his campaign to wring more revenue out of mining companies is proving popular with voters. A meeting in March in which chief executives including Glencore’s Ivan Glasenberg pleaded their case to Kabila was used by state media to portray the president as a wise power broker standing up for the national interest.
“Something like this, which is quite scary to foreign investors, isn’t going to bother” Kabila, said Hunter Hillcoat, a mining analyst at Investec Securities Ltd. in London. The law is both a vote winner and a much-needed source of extra revenue as the president seeks to increase state largess. “Kabila is going to pull out all the stops to get financing in place,” Hillcoat said.
Few alternatives now remain open to the companies — try to cut individual deals to gain exemptions or challenge the changes at international arbitration, leading to protracted legal battles.
Friday’s decision means the miners are now liable to pay a 50 percent tax on so-called super profits and up to a 10 percent royalty on cobalt production, in addition to other changes. In a violation of the terms of the previous legislation, the government has also chosen to ignore stability clauses in their contracts that should have protected Glencore, Randgold and others from the most material changes for 10 years.
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