It is BMI Research's view that higher commodity prices, new projects and expansions will make the DRC the fastest growing major mining market in the world.BMI Research - a unit of the Fitch Group believes this will happen during 2018 despite mounting political and regulatory risks.
"We expect DRC's mining industry value to witness an average growth of 17.7% in 2018, outperforming other comparable mining markets.
"Rising prices in key commodities will be the driving force behind improving domestic mining production growth, prompting the reopening of Glencore's copper-cobalt Katanga mine, while an expansion at Randgold's Kibali mine will support domestic gold output.
"Despite this positive outlook, we foresee downside risks to our forecasts emerging from rising political instability as President Kabila ignores calls to step down and the passing of a new mining charter which will raise existing royalty rates for miners.
Rising prices to support project development
"DRC's mining sector growth will receive a boost from the reopening of Glencore's copper and cobalt-producing Katanga mine in December 2017, following significant rallies in both metals last year (copper by 39% y-o-y and cobalt by 127% y-o-y).
"Glencore expects copper production at the mine to amount to 150 kt this year and 300 kt next year, once at full capacity.
"Furthermore, the mine is set to become the largest cobalt producer in the world with an expected output of 11 kt this year and 34 kt in 2019 , following productivity enhancements .
"We expect prices of both cobalt and copper to remain elevated this year, supported by a strong demand outlook, which will incentivize domestic producers to ramp output as margins increase.
"We also expect solid growth in domestic gold production this year, as the country's largest gold mine, Randgold's Kibali mine, increases output.
"The company expects that production at the mine will reach 700 koz this year, up from a guidance of 610 koz in 2017 following the commissioning of an automated ore handling and hoisting system in its underground operation.
"As an added tailwind, we expect rising gold prices to lead to an uptick in artisanal gold mining which accounts for a significant portion of gold mining activity in the country, although this has not been incorporated into our forecast due to a lack of available data.
Outlook positive despite downside risks
"Downside risks will emerge to our positive outlook due to political instability and the introduction of a new mining regulatory regime.
"In terms of political instability, BMI's Country Risk team expects that President Kabila's failure to relinquish office at the end of 2017 will limit foreign aid and lead to the growing strength of insurgencies that will cause unrest in the central and eastern regions.
"Instability in the eastern regions of North and South Kivu in particular would pose risks to the numerous gold operations found there, although the country's largest gold mine, Kibali, should remain relatively sheltered due to its location further north.
"Another key risk stems from revisions to the DRC’s mining charter passed through parliament in January 2018.
"The new charter would see royalty rates on base metals such as copper and cobalt increase from 2% to 3.5% or even 5% if deemed "strategic" metals.
"However we do not expect this change to have a major impact on investment as the proposed increase in royalties would only bring the country in line with rates found in other jurisdictions in the region.
"Furthermore, containing up to 50% of global cobalt reserves and accounting for 8 6 .7% of global cobalt exports in 2016, we expect cobalt buyers will have to continue to rely on the DRC as their key supplier, due to a distinct lack of supply from alternative markets."
DRC Mining Week, will return to Lubumbashi from 13 - 15 June 2018 as mining operators prepare to elevate their operations to new levels. The event is the largest mining and industrial platform in the DRC, showcasing the vast investment opportunities in the sector.
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