anvil article

Business Day (South Africa): Digging deep into the Congo.
Charlotte Mathews

6 October 2007
Source: Business Day (South Africa)

Digging deep into the Congo Copper mines are bringing much-needed development to the communities where they operate A high copper price and a lack of world-class projects make it well worth taking the considerable risks the country presents, writes CHARLOTTE MATHEWS MASSIVE piles of discarded rock and heaps of rusting scrap metal, including several crashed railway trucks, greet visitors to Kamoto Copper Mine, once the biggest copper producer in the Democratic Republic of Congo. Inside the concentrator, only two mills and a single tier of freshly painted flotation tanks are working. But this is a huge improvement on the situation a year ago, when workers who had not been paid for five years were operating rusted flotation tanks streaming 40% copper concentrate onto the floor of the plant to a depth of 3m. In July last year, management of Kamoto was taken over from state-owned mining company Gecamines by junior miner Katanga Mining.

In a year, Katanga has removed 40000m of debris around the site, restarted underground mining, refurbished two mills and 88 flotation tanks, and is close to restarting the Luilu metallurgical plant.

Kamoto, which is the third-largest copper resource in Africa, is already attracting attention from other mining companies. A hostile bid from Central African Mining & Exploration (Camec) has fallen through, but Katanga chairman Art Ditto confirmed that several major companies had visited Katanga recently. One of those is rumoured to be Anglo American.

At the other extreme, another junior miner, Anvil Mining, has built two new copper mines on undeveloped properties far from roads, power and towns in a fraction of the time it takes to build a greenfields gold or diamond mine.

At Dikulushi, on the edge of Lake Mweru, Anvil started to level the site in June 2002 and by October, 136 days later, had produced its first blister copper. Everything needed for the mine, except its vegetables, is ferried across the lake by barge; concentrate is shipped back across the lake for transport by road through Zambia and SA to Durban.

Dikulushi built its own port, generates its own electricity, is upgrading the access road from the nearest village, Kilwa, and is building a new road towards Lubumbashi. It has also built a clinic, schools and drilled water boreholes for the local community, which was suffering regular typhoid outbreaks.

The effort is justified by the exceptional quality of Dikulushi's copper deposit, which has an average grade of 7,6% copper and 6oz/ton of silver. Globally, mining companies can make a profit out of a grade of less than 1,5% copper.

At Kinsevere, closer to Lubumbashi, Anvil has built another greenfields mine with its own access road and power connection to the national grid, which began producing concentrate in June. At a cost of $278m for a two-phase development, it expects to produce 11816 tons of copper concentrate by the end of this year.

The biggest untapped copper deposit in Congo is the Tenke Fungurume project owned by Freeport McMoran. According to industry website Miningmx, Freeport CEO Richard Adkerson told the recent Denver Gold Forum that the lack of world-class copper projects was one of the key reasons the group had accepted the risks of operating in Congo.

Freeport will invest $650m to develop Tenke Fungurume, which has an estimated life of 40 years producing 115000 tons of copper and 8000 tons of cobalt a year.

In the past three years, the strong copper price and gradual return of political stability have changed perceptions of Congo's attractiveness. Copper has risen to about $3,75/lb from below $1/lb in 2003, reflecting surging demand from developing economies such as China and India for the metal, which is used in electrical and building applications.

Copper opportunities in Congo have grown as Gecamines, which was once the world's biggest copper producer, has started to reduce its copper holdings.

The major issue of uncertainty among mining companies is the review of mining licences, which was announced earlier this year and has still not been completed. For copper miners in Katanga Province, another challenge has been the closure of the border to Zambia earlier this year to exports of low-grade copper. The Katanga government wants companies to undertake copper refining within the country, as the bigger investment in refining facilities is in Zambia, which is also benefiting from higher-value copper exports.

The substantial capital commitment required to build refining facilities is not easily entered into without long-term confidence in the future of Congo, where fighting continues in the north and the first democratic election was only held earlier this year.

Apart from political stability, the challenges being faced by mining companies include a lack of basic infrastructure, unskilled labour, endemic malaria and a four-month rainy season which can disrupt open-pit production and access roads. All this makes for an unattractive lifestyle for highly skilled expatriate labour, which is difficult to retain in the current resources boom.

In the past three years, the strong copper price and gradual return of political stability have changed perceptions of Congo's attractiveness