Miners warn Congo it faces $3bn revenue loss over new law
(Bloomberg) — Mining companies in the Democratic Republic of Congo told the government it will lose more than $3 billion over a decade and face legal action if plans to implement a new industry code proceed.
Miners including Glencore Plc and Randgold Resources Ltd. are demanding the government abandon aspects of the legislation approved by President Joseph Kabila in March. Discussions about the regulations that will be used to implement the new law concluded earlier this month and the industry says the negotiations failed to address their concerns.
“There can be no ambiguity, from a governmental point of view, as to the intention of the mining companies to protect their rights” “There can be no ambiguity, from a governmental point of view, as to the intention of the mining companies to protect their rights” if the legislation is applied, a group representing investors including Randgold, Glencore, Ivanhoe Mines Ltd. and China Molybdenum Co. said in a note submitted April 30 to the Mines Ministry. The note, which hasn’t been made public, was shown to Bloomberg by two people familiar with the negotiations who asked not to be identified.
Mines Minister Martin Kabwelulu didn’t answer a call seeking comment. The country is the world’s largest source of cobalt and Africa’s biggest copper producer.
By refusing to accept a package of industry proposals made in March, the government may lose more than $3 billion of income from existing copper, cobalt and gold projects “since the mining companies will pursue the application of their rights” contained in the former mining code and “the government will not consequently be able to collect the revenues expected” from the 2018 law, according to the note.
The mining companies insist the government reinsert a stability clause, present in the former code, which protected license holders from complying with changes to the fiscal and customs regime for 10 years. They’ve also asked for the removal of a 50 percent tax on so-called super-profits and a new categorization of “strategic substances,” which have a 10 percent royalty rate.
“The mining companies have confidence in their legal position,” they said in the note, which was written in response to questions from the government about the financial impact of the new law. “The government will not benefit from any of the expected benefits of applying the current version of the Mining Code, since the mining industry will vigorously and collectively reject this application.”
(Written by William Clowes)