Democratic Republic of Congo (DRC) – The DRC’s Chamber of Mines has warned the government that its proposed changes to the DRC mining code would put the future of the country’s mining industry at grave risk and urged it to retain the present code.
Speaking after its annual general meeting yesterday, Chamber vice-chairman Simon Tuma-Waku, a former DRC minister of mines, said that the 2002 code had supported investment and development to the point where the DRC had overtaken Zambia as Africa’s largest copper producer, and where exploration spend, project pipeline and production growth were superior to those in surrounding mining countries.
“The 2002 code attracts investment but not at the expense of taxes. It is, in fact, a model of its kind, which has exceeded expectations in all the dimensions in which success can be measured,” Tuma-Waku said.
“The DRC is a major beneficiary of this success, with some of the first big mining projects developed under the 2002 code now moving into full tax-paying positions, mining companies contributed more than $1 billion to the DRC treasury last year, despite lower commodity prices.
The Kibali gold project, made possible by the code’s provisions, increased the country’s gold production by 250% in its first full year of operation in 2014. The future contribution of the mining sector to the public treasury is expected to rise substantially.
“It is difficult to understand why, just at the point when it is beginning to reap the full benefits of creating an investor-friendly regime, the government now proposes to break down the very good work that has been done – with its support – instead of building on it. Its new-look code will set back the mining industry, and with it the development of the DRC economy, by at least 10 years.”
The Chamber of Mines noted that the authoritative Fraser Institute’s 2014 survey had ranked the DRC 61st out of 122 mining jurisdictions in terms of investment attractiveness. Had it not been for its highly prospective geology, it would have come in even lower.
“No investor will commit to a country, no matter how impressive its geology, if there no prospect of a reasonable return. The proposed new code will reduce the return on gold projects to virtually zero, while the copper and cobalt sectors will also be badly hit, with investors earning only some 20% of total cash flow over the life of a mine against the government’s 80% take.”
Tuma-Waku concluded that against this background it was essential that the DRC government should re-engage with the country’s mining industry to avert an outcome that would severely damage both, and to maintain a fiscal and regulatory regime that will continue to encourage investment.