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CANADIAN MINING PERSPECTIVES: Mining contracts under fire in DRC

Readers will know that I am not a fan of exploration and mining in countries where political uncertainty is the nor...


Readers will know that I am not a fan of exploration and mining in countries where political uncertainty is the norm. Such is the case in the Democratic Republic of Congo (DRC).

Rumours began circulated in November 2007 that the DRC government wanted to “review” the mining contracts it had awarded to foreign companies. The rumours were put to rest earlier this month when the government posted the text of its findings on its website. (www.MiningCongo.cd).

The list of projects to be reviewed include the country’s largest – the Tenke Fungurume copper-cobalt project of FREEPORT-MCMORAN – as well as those of other international players – the diamond projects of DE BEERS and BHP BILLITON and the Kilo gold project of ANGLOGOLD ASHANTI. Smaller players can expect the government to get around to their projects in due course.

The DRC government participates in the country’s mineral industry through a small number of state-owned equity partners. This raises many questions. Is the review a thinly-disguised cash grab by these companies? Will the process be conducted by the government behind closed doors? Will producers be allowed to negotiate or appeal the decisions of the review panel? This is the sort of uncertainty that makes mining in Africa riskier than it needs to be.

The DRC situation is likely to remain unsettled for some time. The worst case would be nationalization of the country’s resources. The best case would see the review conducted transparently on the world stage. Something in between is more likely from a government that allows its military to smuggle minerals out of the country, and whose opposition leader lives in exile, saying he fears for his life.

Still this central African nation has tremendous mineral potential. Besides the gold, copper, cobalt and diamonds mentioned earlier, there are deposits of tantalum, silver, manganese, tin, uranium and coal. Plus the country has petroleum, hydroelectric and timber resources. This potential draws investors from around the world.

If President Joseph Kabila’s government scares off foreign investment at this time, it will have shot itself in the foot, so to speak. The country might limp along, attempting to recover the land’s many resources on its own, but I doubt the DRC has enough expertise to do so effectively.

Foreign investment is vital to the country. Sustainable development can go a long way towards bringing the DRC people the benefits of education, health care and free enterprise. Welcome to the 21st Century.