01 June 2018

Mining companies warn Congo it faces legal action and $3bn revenue loss

An industry note to government states mining companies are confident in their legal positon as they confront government over new legislation.

Major mining companies, including Glencore and Randgold Resources, are have issued a note demanding the Congolese government abandon industry legislative plans or face legal action, citing projected losses of over $3 billion. The government of the Democratic Republic of Congo is seeking to implement a new industry code, approved by President Joseph Kabila in March.

Protecting rights
Discussions between industry and government about the new law concluded earlier this month with firms saying 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’ if the legislation is applied, a group representing investors including Randgold, Glencore, Ivanhoe Mines and China Molybdenum 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.

Confidence in legal position
Congo is the world’s largest source of cobalt and Africa’s biggest copper producer. Firms say by refusing to accept a package of industry proposals, 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 ten years. The note concluded, ‘The mining companies have confidence in their legal position.’