HomeInterviewsExclusive Interview with Mr. Louis Watum, Managing Director, Ivanhoe Mines DRC

Exclusive Interview with Mr. Louis Watum, Managing Director, Ivanhoe Mines DRC

louisThis is the best time to invest and seek to improve our respective operational efficiencies to remain competitive”

Exclusive Interview with Mr. Louis Watum, Managing Director, Ivanhoe Mines DRC. Ivanhoe Mines New Horizons is this year’s diamond sponsor for iPAD DRC and Katanga Mining Week.

1. Can you talk about a current mining project in which you are involved that is particularly stimulating for your organisation?

The Kamoa Copper Project. The project’s history is illustrated below:

In 2008, following intense exploration operations in the area covered by its Exploration Licences, African Minerals (Barbados) Ltd sprl (AMBL), now “Kamoa Copper SA”, discovered the Kamoa copper deposit (named after a river crossing the region), which is located 25 km West of Kolwezi and 270 km West of Lubumbashi.

The discovery was recognised as the most important of the year by the Prospectors and Developers Association of Canada, an organisation comprising over 70 world-class geologists, who awarded Kamoa the prestigious Thayler Lindsley Prize earlier this year.

Kamoa Copper SA’s major shareholders are Kamoa Holding Ltd (95%) and the Congolese State (5%). Negotiations are currently taking place regarding the transfer of an additional 15% to the Congolese State based on commercial terms to be agreed upon.

The Kamoa copper deposit, one of the largest ever exploited in the world, contains 739 million tonnes of ore at 2.67% Cu (measured resources) and 227 million tonnes of ore at 1.96% (inferred resources), with a cut-off grade of 1% Cu.

We are in the initial stages of building a large, modern copper mine at Kamoa, close to Kolwezi. The Kamoa mine will be developed in phases; the first phase will consist of a conventional underground copper mine and surface concentrator complex with an initial mining rate and concentrator capacity of three million tonnes per year. The first phase of mining would target high-grade copper mineralization from shallow, underground resources to yield a high-value concentrate. In the second phase this modern, mechanised, underground mine will be expanded to eight million tonnes per year in concentrator capacity.

Mining operations at Kamoa should begin at the end of 2018; a smelter is planned with a capacity of 300,000 tonnes of copper/year, which is equivalent to one third of the copper produced by all mining companies in the DRC.

2. From your perspective, what are the challenges confronting the mining sector in the region?

– The current review of the DRC Mining Code: Considering the current worldwide trend of national resources nationalism among politicians their drive to maximise tax revenues in the short term, and the very high and sometimes unrealistic expectations from the various stakeholders, mining operators are facing an economic context that is more and more uncertain and difficult, characterised by a reduction in mining grades, an increase in production costs as well as low metal prices. It is important that the Congolese State, in its review of mining contracts, guarantee both the stability of benefits offered to investors, in addition to adequate tax incentives and transparency in their application, which will have the effect of attracting the much needed large investments to develop the country.

– The current deficit of electricity available for mining projects: Since the current energy deficit is enormous in the DRC, it is important that we collectively look beyond the current short‑term arrangements to rehabilitate existing infrastructures or buy electricity from neighbouring countries, and that we truly commit to creating new energy production infrastructures.

– The poor and insufficient basic infrastructure: In a country that is 80 times the size of Belgium, the lack of adequate infrastructures such as roads, railways, ports, airports, etc. leads to very high logistics costs, which results in high operational costs and lower profit margins for operators, and reduces our country’s competitiveness. It is crucial that the Congolese State pay particular attention to this issue and mobilise the resources necessary to develop adequate infrastructures.

– Artisanal mining challenge: Whilst the Congolese State is allowing some areas to be exploited by artisanal miners in an attempt to try and reduce unemployment and community distress, the negative impacts of these activities (landslides causing fatalities, high rates of school drop outs and low levels of education, high rates of early pregnancies, high rate of sexually transmitted diseases, high incidence of criminality and prostitution, environmental impacts, etc.) and the risk of sterilization of vast areas with high mineralogical potential (the presence of thousands of artisanal miners on a potentially rich site has the effect of stopping any large investment) should encourage all parties of the mining sector, in addition to the Congolese State and civil society, to look for alternative solutions in order to create employment and business opportunities in lieu of forfeiting long term potential grow of the economy.

– The enigmatic trilogy between the State/Government, mining companies/investors and civil society/local populations: These three parties are often stuck in fruitless talks, since their respective expectations don’t seem to be addressed. It is essential that each party clearly understands and play its own role in the first place: the State is responsible for ensuring security, stability and the transparency of laws/regulations, and for offering tax incentives to attract investments. Mining companies are responsible for bringing in capital and technology, developing projects in strict compliance with applicable laws including social and environmental requirements, paying taxes and ensuring an adequate transfer of knowledge. Local communities are responsible for taking ownership of employment and business opportunities generated by investments, engaging in a constructive way with mining operators to find solutions to various issues and acting in a responsible manner in the provision of labour and other services.

– The 2015-2016 electoral timetable and its associated measures, as well as the splitting of provinces into new ones: The available information still lacks clarity: the latest development is that the national independent electoral commission, or CENI (Commission Electorale Nationale Indépendante), indefinitely postponed the elections for the governors and deputy governors of the newly‑created provinces in the face of legal, logistical and other constraints. Governance of the new provinces, without a clear administration in place (governors, deputy governors, etc.), is a problem;

– Lack of security in some areas due to the presence of uncontrolled armed elements.

3. What surprised you most this year in the mining sector?

The sudden apparent slow-down of China, the champion of economic growth, and the fact that many international mining operators were expecting growth to continue in China and had undertaken large projects to supply the Chinese with raw materials. Projects initiated a few years ago are now entering the production phase, thus generating a surplus of metals that China cannot absorb; as a consequence, some operators are looking into lowering their production projections.

4. How is your company different from the competition?

The Kamoa Project is a typical greenfield project, and is one of the largest deposits ever exploited in the world.

The Kamoa Project has the potential to bring significant benefits, not only to its host communities, but also to the people of Katanga and the DRC as a whole:

Based on the Preliminary Economic Assessment, the expected life of mine is at least 30 years and the initial capital investment to develop the first phase of the Kamoa mine is an estimated $1.4 billion. Over the life of the mine, the total capital investment into Kamoa is expected to be in excess of $7.6 billion and the mine is expected to generate significant export & tax revenues for the DRC and benefit local stakeholders in the form of employment, procurement and other opportunities.

5. What will your message be to iPAD DRC Mining & Infrastructure Indaba?

That each party in the trilogy between the State, mining operators and civil society must play its own role, as indicated earlier.

More specifically, my message to other mining operators is as follows: on January 12, 2015, when meeting with the Chamber of Mines of the Federation of Congolese Enterprises (FEC) at Hotel Grand Karavia in Lubumbashi, the Prime Minister stated that the mining sector represents 33% of the DRC’s GDP. Now that commodities prices are low, it should be recalled that there will always be mining cycles, resulting in highs and lows, and that now is the time to invest and to look for ways to improve our respective operational efficiencies in order to stay competitive. The State in turn needs to take an honest look at the current bearish commodity market and adjust its fiscal expectations from the mining industry.

Lastly, I remain convinced that developing profitable mining projects remains a singularly important way to propel our country in the realm of emerging economies.

6. What is the main reason you are taking part in iPAD DRC Mining & Infrastructure Indaba?

To share, talk about our experiences, listen to others, encourage investors, give information on what is really going on in the field.

7. Is there anything else you wish to share with us?

Our congratulations and praise to the iPAD organising team for the great work done – they worked without respite over the years. Today, the iPAD Conference has become a unique platform supporting the DRC mining industry and facilitating exchanges between the mining operators and government decision makers.