HomeCentral AfricaGécamines: New direction, same objectives

Gécamines: New direction, same objectives

Throughout its 52-year history, Gécamines (La Générale des Carrières et des Mines or General Careers and Mines) has undergone a series of transformations to its business model.

Most recently, it moved away from a joint venture business model to a mine operator business model.

Chairman ALBERT YUMA MULIMBI explains the reason for its new business approach and touches on the importance of DRC Mining Week. LAURA CORNISH reports.

This article first appeared in Mining Review Africa Issue 4, 2019
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As one of Africa’s largest mining companies, there can be no understating the importance of the role that Gécamines plays in the Democratic Republic of Congo’s (DRC) mining sphere.

Currently, going through a multi-year, multi-billion reorganisation strategic development plan to reposition itself as one of the world’s mining majors.

More importantly, Mulimbi points out that Gécamines wants “to rebuild a competitive mining organisation and redevelop a mining potential worthy of our country.”

It is for this reason that it has opted for a mine operator’s model.

Mulimbi explains that the liberalisation of the Congolese mining sector did not produce the desired effects.

“Moreover, in addition, it has had the effect of weakening us by depriving us of our mining potential and our mining operational capacity,” he adds.

“After almost 30 years without investment, our company has only residual certified permits, production facilities that have become obsolete by international standards, and an organisational structure that is no longer able to meet the challenges of the modern mining industry.”

According to Mulimbi, the Gécamines of tomorrow will never look like yesterday.

That’s because the environment in which it evolved has completely changed.

“It is a new company that we are rebuilding, which means accepting the abandonment of the old one with its omnipresent presence throughout the territory, providing and replacing everything in a modern, competitive business, refocused on its mining profession. What we are doing today is what the big mining companies in South Africa did decades ago.”

Gécamines is at the beginning of this transformation that it began in June 2018.

This includes a very significant reconfiguration of the workforce, the total or partial abandonment of extra-mining activities, the establishment of a more responsive organisation, simplified hierarchical levels and the adoption of an ambitious certification programme.

“In addition, there will also be a computerised integration of all the activities of the company, allowing for the implementation of rules of management, control and monitoring in real time, empowerment and accountability of managers through the creation of business units, and the standardisation of all our procedures to global standards of conformity.

“This is not a short-term project to create this new company and will probably last a decade after which we will know if we have managed to transform and sustainably straighten our business,” adds Mulimbi.

Forging mutually beneficial partnerships

Meanwhile, Mulimbi adds that the JV model has done little to ensure that local mining firms to contribute fairly to royalties.

He states the company has not met its objectives for which a large number of partnerships had been formed between 1996 and the late 2000s with a total transfer of Gécamines permits for 32 Mt of copper and 3 Mt of cobalt.

The spin-offs, in terms of tax on the profit for the state, in dividends, in contribution to the local economic development or the well-being of the local communities, were very far from the projections of the feasibility studies.

Mulimbi puts this down to the specific nature of the partnerships and their financing structure, characterised by a massive use of indebtedness.

In addition, all the projects have experienced very significant slippages, be it the cost of the initial investments, the operating expenses and correlatively financial expenses.

“This situation has led to recurring losses, which are deepening the debts of our JVs and depriving the partnerships of all hope, of ever being able to collect operating-related dividends,” adds Mulumbi.

“Therefore, we have returned to our partners to analyse with them this situation and try to find constructive solutions.”

With this in mind, Gécamines focused on two aspects: the restructuring of the debt so that the sources of financing are better balanced between equity and debt, and the governance, by involving Gécamines in the major decisions of investments, financing and operations of it partners.

“This is what we asked Katanga Mining, our partner in Kamoto Copper Company, to turn 62% of the company’s debt into equity and to rewrite parts of the JV agreement.

“This is also what happened in our partnership with ERG through Boss Mining, where 100% of the debt was restructured into equity, our share in the shareholding increased from 30% to 49% and the project management is now more balanced between us.

“We are confident that our interests will now be better aligned with our partners in these new agreements and that they will provide each party with a better return on their investment.”

Mulimbi points to two most recent projects at Deziwa and Kingamyambo/Kilamusembo that are not traditional JVs as examples of its new business model.

“For the first, it is a fixed-term JV, with a Build Operate Transfer contract, which guarantees us that after a period of nine to 11 years, we will become the only owner of this 80 000 tpa copper plant built by our partner CNMC.

For the second, there is no longer a JV, only a contractual link related to the remuneration of the amodiation of the title, for which, part of the production is reserved for Gécamines.”

Getting the message out to industry

Regarding DRC Mining Week taking place in June in Lubumbashi, Mulimbi posits that the event is the most anticipated and important mining event of the year in the DRC.

“As such, it is therefore central to Gécamines’ communication strategy regarding all players in the industry,” he states.

Mulimbi explains that Gécamines’ main message at DRC Mining Week is to show that it has returned to a fully-fledged mining company who has a major role to play in the DRC.

“While this is not yet seen in our production figures, extremely important transformations are at work in our structure that will produce in the months and years to come their results,” he adds.

No doubt, Gécamines’ transformation plans will take time, but this is something that Mulimbi says everyone needs to understand and accept.

“How many industrial enterprises in Africa, formerly public, in a particularly complex environment, have been successful in their transformation and turn around? Quite little indeed.

“That’s because the challenges are many, so I ask everyone to give time to the company to build, step by step, and start a new future,” he concludes.

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