Power shortages, cost cuts to hit Congo’s copper output

Power shortages, cost cuts to hit Congo’s copper output

Canadian miner Banro Corp.’s Twangiza gold mine is about 2,350 metres above sea level and 80 kilometres by road from the town of Bukavu, Congo. (Image courtesy of Banro Corp)

Copper output in the Democratic Republic of Congo, Africa's leading producer of the red metal, is expected to fall this year due to supply issues affecting the country’s biggest producing region, as well as cost cutting measures by companies battling low metal prices.

According to the country’s Chamber of Mines, copper production will fall to 1.02 million metric tons, from the 1.03 million achieved last year, Bloomberg reports. Output for diamonds, cobalt, zinc and other metals mined in the Central African nation, is also expected to decline, the industry body said.

In contrast, gold production is expected to jump 33.5% this year, driven mostly by Randgold Resources (LON:RRS) and Banro Corporation’s (TSE:BAA) new mines, according to Reuters.

Several factors will contribute to the country’s lower mining output this year. One of the most obvious ones is the lack of power supply to the copper-rich province of Katanga. According to the chamber, Congo’s state-owned electricity company, Societe Nationale d’Electricite, is facing “a number of challenges” with power delivery in the area and the short-term situation doesn’t look much more favourable.

Chinese factor

China's slowing economic growth will also weigh in. For the past decade, the Asian giant gobbled up much of the commodities that Africa produces, overtaking the United States in 2009 to became the continent's single largest trading partner.

A significant portion of Congo’s mining production, which accounts for roughly 20% of its gross domestic product (GDP), was destined to China.

Surging commodity prices helped the sub-Saharan Africa region grow at over four percent annually for two decades.

But mining operations worldwide have been rocked lately by sharp drops in metal prices linked to worries about China’s economy, and the Congo’s chamber of mines says it is a matter of time for the companies operating in the country to start selling assets and reducing their workforces in an effort to weather weak prices and improve efficiencies.