DRC miners hopeful new code issues can be resolved
Miners operating in the Democratic Republic of Congo (DRC) said Monday they were hopeful their current talks with civil society, a member of the mining code revision tri-partite group and other key interested groups, would help iron out issues that need to be dealt with before the country’s new mining code is implemented.
The group, which includes Randgold Resources, Glencore, Ivanhoe Mines, Zijin Mining Group, MMG, Crystal River Global and China Molybdenum Co and AngloGold Ashanti, proposed last month that a sliding scale of royalty rates be linked to the prices of key commodities, copper, cobalt and gold. However, they have yet to receive a response from the ministry of mines.
The likes of Glencore, Randgold, Zijin, China Molybdenum and Ivanhoe, among others, expect authorities to realize the sliding scale they propose would be a more effective mechanism for the government to share in higher commodity prices than the new code's provisions.
The miners, which collectively are responsible for 85% of the DRC's copper, cobalt and gold output, are asking the government to explicitly preserve mining agreements it entered into before the new code was signed into a law in early March.
The revised regulation imposes a super-profits tax of 50% if prices rise by 25% above those used in a mine's feasibility study, as well as a hike in royalty rates, particularly for metals deemed as “strategic” by the DRC.
The companies said the sliding scale they propose would be a more effective mechanism for the government to share in higher commodity prices than the windfall tax and strategic minerals scheme included in the new code.
"The industry believes a way forward could be found which would be in the best interests of all parties,” they said in a collective statement. “A mutually acceptable solution would support and encourage the substantial investment the DRC requires for the optimal development of its mineral resources and the growth of its economy.”
Congo supplies more than 60% of the world’s cobalt, metal whose price has quadrupled in two years, and that share will only grow over the medium term. It is also could poised to soon overtake the US as the world’s number four copper producer.
Both commodities are key components in computer chips, mobile phones and lithium-ion batteries that power electric vehicles (EVs).
Experts, such as Colin Hamilton, director of commodities research at BMO Capital Markets, believe that cobalt consumers will be the most affected by the higher taxes imposed to producers and exporters in Congo.
“Given the tight nature of the cobalt market at present, we would expect miners to attempt to pass through higher royalty costs to consumers,” Hamilton said.