AMN - DRC ‘strategic minerals’ decision imminent – comment by Yolanda Torrisi

The Democratic Republic of Congo is about to announce which minerals are to be designated ‘strategic’ and subject to a 10 per cent royalty rate with cobalt almost certain to be among them. The government is likely to sign a decree in coming days, according to Mines Minister Martin Kabwelulu.

This move is part of a new mining code that removes tax exemptions and increases royalties and profit taxes, much to the chagrin of mining companies operating in the resource-rich but poverty-ridden nation.

The code, which was signed by President Joseph Kabila in March and applied since regulations were finalised in June, has raised copper royalties to 3.5 per cent from 2 per cent and gold to 3.5 per cent from 2.5 per cent.

It has also established the category of ‘strategic’ minerals, to which a rate of 10 per cent will apply, though the state hasn’t yet identified which metals will be affected.

“A decree from the prime minister will be able to do it very soon,” Minister Kabwelulu stated in an email last Friday. “My experts are working on it.” At a conference in the copper and cobalt mining city of Kolwezi he is also reported as saying that the decree would declare cobalt and certain other substances as strategic.

The DRC government considers minerals with the ‘strategic’ designation important for the economic, social and industrial future of the country. As the country produced two-thirds of the world’s cobalt output, or 81,000 tonnes, in 2017, it is right in the firing line.

Cobalt is a once-obscure by-product of copper and nickel mining but is now a key component in electric batteries. Its importance and value has soared in recent years, driven by growing global demand for electric vehicles.

According to Reuters, the Minister stated in January, “The revised mining code provides that if the international economic situation demands it, the head of government may, in the interest of the state, declare certain mineral substances as ‘strategic substances.”

The previous law did not “authorise the government to classify cobalt or tantalum as a strategic substance,” he said at the time, saying cobalt has “not only a strategic but also a critical character” on the world market. DRC also produced about a quarter of all tantalum mined in 2017 and is Africa’s leading copper producer.

Major mining companies operating in the country, including Glencore, China Molybdenum Corp and Randgold Resources, have strongly opposed the new regulations but the Minister said all have been paying the royalties and taxes as stipulated by the new code.

Glencore’s Mutanda mine was the world’s largest cobalt miner in 2017, producing more than 23,000 tonnes, and is set to be overtaken by Kamoto Copper Co, which is also controlled by the Swiss commodity giant. China Moly owns Tenke Fungurume Mining, which mined almost 17,000 tonnes in 2017.

The companies have have said they may launch international legal challenges against the reforms if they aren’t softened significantly. A particular source of anger is the cancellation of a 10-year stability clause, present in the superseded law from 2002, which would have protected miners against fiscal modifications until 2028.

Yolanda Torrisi is Chairperson of The African Mining Network and comments on African mining issues and the growing global interest in the continent. Contact:yolanda@yolandatorrisi.com