Running discussion on SP, page-60952

OK, Just read this and think about the fact that the application for a ML was lodged 17/5/21.

Read Chapter 3, paragraph 2, the bold and underlined section and don't forget that date 17/5/21.

Now AVZ and CATH have extended their contract drop dead date to the end of Feb/2022, maybe it is clear why.

There is of course a possibility that the ML will be granted earlier, but these are the rules.
Not AVZ's, or CATH's, or Hotcopper's rules, but the DRC's rules and they happen to count in this case.

You can form your own opinion, do your own sums and yeah think about that friend of a poster in Kinshasa.

The Mining Law Review: Democratic Republic of the Congo
Aimery de Schoutheete, Thibaut Hollanders, Joëlle Thambwe Mwamini and Martin Longompulu
Liedekerke Wolters Waelbroeck Kirkpatrick
01 November 2021
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I OVERVIEW

Mining represents a critical sector for the development of the Democratic Republic of the Congo (DRC). According to the World Bank, the mining sector has dominated the Congolese economy since the early 1910s.
This domination is unsurprising, given that the country is incredibly rich in minerals. For example, the Katanga Copper Belt's cobalt reserves total an astounding 5 million metric tons, making it the world's largest known cobalt deposit. The DRC also possesses the largest known diamond deposits and the largest gold deposits in the world. Its copper reserves make this region the second richest copper region in the world, with 70 million metric tons, surpassed only by Chile. Other significant mineral resources in the DRC include tin, tantalum and tungsten.
Since peace returned to the DRC, successive governments have faced significant challenges in their efforts to establish or re-establish both industrial production and a legal framework for this key sector.
After several years of discussion, the Congolese Mining Code was enacted by the Congolese Congress in 2002, replacing outdated mining legislation. This resulted in both an increase in foreign direct investments and a steady increase in copper production in the years prior to the global financial crisis of 2008. Despite this crisis, more than 1 million metric tons of copper were transported in 2014, up from 9,000 tons in 2003, the year a peace agreement officially ended Africa's deadliest civil war.
The 2002 Mining Code was substantially amended by Law No. 18-001 of 9 March 2018 (the New Mining Code). The New Mining Code notably reinforces local content requirements, reduces the tax regime attractiveness and abrogates the 10-year stability clause provided for in the 2002 Mining Code.
Major mining companies have threatened to challenge the New Mining Code through international investment arbitration. However, the DRC government has maintained all the problematic amendments in the New Mining Code.
Some commentators had predicted that, as a consequence, the DRC's mining sector could suffer a slowdown. This has, however, not been the case and the DRC's mining sector continues to grow.
II LEGAL FRAMEWORK

The New Mining Code² was adopted by the Congolese Parliament on 27 January 2018 and promulgated by the president of the DRC on 9 March 2018. The implementing measures of the New Mining Code are set forth in the Mining Regulations adopted in June 2018.³
The DRC is a member of several international organisations, including the World Trade Organization, the World Bank Group, the Multilateral Investment Agency, and the International Centre for Settlement of Investment Disputes. The DRC has also ratified the 1958 New York Convention on the recognition of foreign arbitral awards.
In addition, the DRC voluntarily adhered to the Extractive Industries Transparency Initiative criteria, and has entered into several bilateral investment treaties and into a convention for the avoidance of double taxation with Belgium.
Additionally, with the stringent UK Bribery Act and US Foreign Corrupt Practices Act in force, it is essential for any company doing business in the DRC to seek professional commercial and legal guidance to mitigate business and regulatory risks. Section 1502 of the US Dodd–Frank Wall Street Reform Act and the new EU Conflict Minerals Regulation⁴ are also relevant for businesses active in the DRC. Depending on the type of mineral traded (tin, tungsten, tantalum and gold), these laws impose extensive supply-chain due diligence obligations on both upstream and downstream companies.
At the regional level, in July 2012 the DRC joined the Organisation for the Harmonisation of Business Law in Africa (OHADA). OHADA law can only benefit further investment by providing companies doing business in the DRC with a single, modern, flexible and more reliable business law framework, which already applies in 17 OHADA Member States and which supersedes previous or subsequent national legislation. OHADA law is of particular interest to mining companies, as it primarily covers commercial, corporate, loan-guarantee, accounting and arbitration law. OHADA law entered into force in the DRC on 12 September 2012. In addition, a one-stop shop for business start-ups was instituted and shows encouraging development.⁵
Congolese law, which is based on civil law and closely modelled on Belgian law in particular, will remain applicable in areas not governed by OHADA law. It will, thus, be of paramount importance to understand the myriad applicable pieces of legislation to properly navigate the remaining bureaucratic, legal and, especially, cultural and linguistic hurdles.
The Mining Cadastre receives applications for mining rights, grants mining rights and keeps records of mining rights, among other functions.⁶ Moreover, the DRC has created a national transparency initiative committee with respect to the management of extractive industries in the DRC.⁷ Any regulation is issued by the Ministry of Mines, which supervises mining activities at the national level. At the highest level, the President of the DRC is empowered to enforce the mining regulations and to classify mineral substances as reserved mineral substances, if applicable.
III MINING RIGHTS AND REQUIRED LICENCES AND PERMITS

i Introduction

Underground minerals belong exclusively to the state. However, any private party may be authorised by the state to engage in mining activities (from exploration to exploitation and distribution), provided that specific objectives of eligibility, priority and capacity criteria set forth in the Mining Code are met. The types of mining permits available in the DRC are research permits, exploitation permits (including small-scale mines) and tailing exploitation permits. Specific legislation regarding artisanal mining and quarry rights also exists.
Companies that wish to develop mining activities in the DRC are required either to incorporate a Congolese company or to elect domicile with a 'mining agent' as a condition of eligibility to obtain an exploitation permit. In addition, to be eligible for a mining permit, companies are obliged to either form a joint venture with a state-owned company (such as Gécamines) that already holds the necessary permits, or freely assign a mandatory 10 per cent stake of its share capital to the DRC.
ii Surface and mining rights

Any person wishing to engage in prospecting or reconnaissance activities must make a prior declaration to the Mining Cadastre and seek a prospecting permit. This permit entails no priority whatsoever in relation to potential future exploration or exploitation rights.
An exploration permit may be granted to any eligible private company for a period of five years, renewable once for the same duration, with respect to all mineral substances (Article 52). To be eligible for an exploration permit, a company must demonstrate a minimum financial capacity of at least five times the total amount of the annual surface rights payable for the area covered by the exploration permit (Article 58). The surface rights amount to US$5.89 per square metre (Article 397). In addition, the company will have to submit a rehabilitation and mitigation plan before starting any research activity. There are specific obligations for maintaining the permit, including the requirement to start exploration work within one year of delivery of the permit (Article 197).
Should the holder of a research permit demonstrate through a feasibility study the existence of an economically workable ore deposit (including tailings, for which specific permits exist) and sufficient financial capacity for the development, construction and exploitation of a mine, the Minister of Mines may grant an exploitation permit for a duration of 25 years, renewable for successive periods of 15 years. The exploitation permit may be refused by the Minister of Mines only for specific reasons, which are exhaustively listed in the Mining Code. Obtaining an exploitation permit obliges the operator to transfer to the state a free carry participation of 10 per cent of the operator's share capital (Article 71). In practice, however, operators that are engaged in joint ventures with state-owned permit holders, such as Gécamines, are not required to transfer 10 per cent of their share capital to the state.
In addition to exploration and exploitation permits, the Mining Code contains specific provisions with respect to artisanal or small to very small-scale mining rights, and quarry rights. Quarry rights relate to construction materials rather than mineral substances.

The timeline for obtaining an exploration or exploitation permit is as follows.
The Mining Cadastre has 20 working days to examine the request and to make a decision (Article 40). Following this, the Directorate of Mines must conduct a technical investigation. The office in charge of the protection of the environment examines the environmental impact study and the environment management plan. These reviews must be conducted within a period of time set forth in the Mining Code for each type of request (typically, for exploitation permits, within 30 working days for the Mining Cadastre, 60 working days for the Mining Directorate and 180 working days for the environmental investigation). Should any of the aforementioned authorities fail to reach a decision within the required time frame imposed by the Mining Code, the mining permit will be considered granted.
When a favourable decision is made, the Mining Cadastre will then grant the mining permit to the applicant, provided that the relevant surface rights have been paid for within 30 business days.

All mining rights are conveyable under the Mining Code. A specific right of amodiation (comparable to a long lease agreement) also entitles the holder of an exploitation permit to transfer all or part of such rights under a rental scheme. Exploitation permits can also be mortgaged. Finally, while mining rights are valid only for specified mineral substances, permits can be extended to additional minerals through specific procedures.
iii Additional permits and licences

Processors of mineral substances who do not hold mining rights and whose activities are limited to processing activities must obtain a specific licence in this respect pursuant to the Mining Code.
iv Closure and remediation of mining projects

The holder of a research permit will also have to submit a rehabilitation plan for the site after its closure to be eligible for an exploitation permit. The closure of a research or exploitation centre must be promptly notified to the Mining Administration.⁸
The holder of the mining rights is required to obtain a financial guarantee in an amount sufficient to carry out environmental rehabilitation.
IV ENVIRONMENTAL AND LABOUR CONSIDERATIONS

i Environmental, health and safety regulations

The New Mining Code and the Mining Regulations contain several environmental and health and safety regulations. Environmental regulations are by far the most detailed.
While most health and safety regulations are contained in the Congolese Labour Code, and are therefore not specific to the mining sector, the Mining Regulations do contain specific safety directives regarding the use of explosives.
In order to conduct mining operations, an Environmental Exploitation Permit from the Ministry of the Environment is mandatory, in addition to the environmental obligations arising from the New Mining Code.
ii Environmental compliance

Environmental compliance obligations exist at every stage of a mining project:

1. the holder of an exploration permit must apply for the approval of a mitigation and rehabilitation plan in which the measures taken to limit and remedy environmental damage caused by exploration work are described;
2. any person applying for an exploitation permit is required to submit an environmental impact study and a project environmental management plan, which must contain a description of the 'greenfield' ecosystem and of the measures envisaged to limit and remedy harm caused to the environment throughout the duration of the project; and
3. to be granted an environmental exploitation permit, the holder of a mining right is required to submit an environmental impact study and an environment management plan to the Ministry of the Environment for approval.⁹

As mentioned above, rehabilitation costs must be covered by a financial guarantee to be set up in accordance with the Mining Regulations.
iii Third-party rights

Under the Mining Code, occupants of the land covered by a mining permit have a right to be indemnified when their activities (such as agriculture) are affected by a mining project, in accordance with the conditions set out in the New Mining Code.
Other rights include an obligation for the operator to consult with local authorities.
Additional provisions of the New Mining Code are intended to ensure the conservation of any archaeological findings that occur during the course of the project.
iv Additional considerations

Generally speaking, the DRC's infrastructure is either outdated or non-existent. In order to develop and maintain activities and personnel, mining operators are therefore frequently required to participate in local development, for instance by funding roadworks, hospitals or schools.
V OPERATIONS, PROCESSING AND SALE OF MINERALS

i Processing and operations

The New Mining Code authorises a permit holder obtaining any further licences or permits to install and operate processing plants inside the perimeter of the relevant permit.
There are no specific restrictions on the import of equipment and machinery, or on the use of foreign labour and services, save for certain tax measures pursuant to the New Mining Code. However, when applying for the granting of a mining right, mining operators must, pursuant to the New Mining Code, commit to process and manufacture minerals in the DRC. If for any reason it is impossible to do so, a derogation may be granted subject to the fulfilment of several criteria. However, current mining title owners will benefit from a three-year period to comply with this industrialisation requirement.
Expatriate labour may be hired but the New Mining Code (like its predecessor) provides that, assuming equal qualifications, priority must be given to the local labour force for the performance of mining operations.
ii Sale, import and export of extracted or processed minerals

The sale and processing of mineral substances is unrestricted under the New Mining Code: the exploitation permit holder is free to sell the products to customers of his or her choice, at freely negotiated prices.
iii Foreign investment

Generally, there are no legal restrictions on foreign investment in the mining sector, and currency exchange provisions are quite liberal.
There are, however, some basic obligations with which operators must comply. The DRC adopted new Exchange Control Regulations on 25 March 2014, which have been in force since 24 September 2014. Their main characteristics are as follows:

1. the export or import of funds equal to or above US$10,000 is subject to a licence called 'Modèle RC' issued by the Central Bank as an approved intermediary; certain documents justifying the transfer will need to be provided;
2. subject to the relevant tax being paid, the filing of the Modèle RC form and the delivery of other supporting documents required by the Central Bank, commercial banks in the DRC are authorised to transfer dividends, capital gains, interest, principal, fees and commissions on foreign loans outside the DRC. There is no exchange control restriction on transfers abroad of profit by a foreign company;
3. there is a restriction for the payment in cash of amounts above or equal to US$10,000;
4. repatriation of incomes is within 60 days;
5. transactions are paid for in local currency, unless otherwise agreed; and
6. taxes are paid in local currency.

VI CHARGES

The tax and customs regime applicable to DRC mining companies is exhaustively set forth in the New Mining Code.¹⁰
The main taxes levied on mining companies include surface taxes and rights, corporate income taxes, royalties, taxes on dividends and interest rates, and taxes on wages.
The value added tax (VAT) regime entered into force on 1 January 2012.¹¹ Since then, import of goods is subject to VAT at a rate of 16 per cent. The tax base equals the cost, insurance and freight value plus any (customs) duties and taxes (with the exception of VAT itself). Import of goods is deemed to take place when the goods cross the border of the DRC, but VAT is only due upon the declaration for release of the goods.
Prior to the entering into force of the DRC 2021 Financing Act, the Ordinance Act instituting the VAT, as amended and completed from time to time, exempted the imports of goods made by the mining companies from VAT. However, the 2021 Financing Act has removed this special VAT exemption and introduced a new VAT treatment for the imports of goods by mining companies. The VAT due on goods imported by mining companies will now be established and liquidated by way of declaration of goods to customs at the point of entry and will subsequently be declared to the DRC tax administration department to which the licensed company belongs at the first VAT declaration due date following the import.
The modalities of application of the provisions of the 2021 DRC Finance Act¹², with respect to the aforementioned VAT regime on importation of goods, remain to be set out in a Ministerial Decree of the Minister of Finance.
i Royalties

Royalties (i.e., specific mining tax) are due on the gross commercial value of all commercial products. Royalties become due at the exploitation phase and are payable at the leaving of the goods from the exploitation or processing site of the project. They amount to 1 per cent for iron or ferrous metals, 3.5 per cent for non-ferrous metals, 3.5 per cent for precious metals, 6 per cent for gemstones, 1 per cent for industrial minerals, zero per cent for common construction materials and 10 per cent for strategic minerals determined by the government (i.e., copper, cobalt and coltan and geranium).¹³
Although mining royalties are deductible expenses for the determination of corporate income tax, they are due regardless of the mining company's profitability (Article 255).
ii Taxes

The corporate income tax rate is set at 30 per cent of turnover, as it is the case under the DRC's common regime.
Specific taxes are subject to the standard or common tax regime, such as taxes on rental revenues, real estate contributions (for surfaces falling outside the scope of the mining surface taxes or rights) and taxes on vehicles and roads.
The tax rate on expatriate remunerations only amounts to half the common tax rate set at 25 per cent.
The withholding tax rate payable on dividends is set at 10 per cent of the gross amount.
In principle, withholding tax on interest is levied at the ordinary rate of 20 per cent on the gross amount.
However, interest paid in respect of loans granted from abroad in a foreign currency is not subject to withholding tax provided that the interest rate and other loan conditions are at least as favourable as those the company could obtain from unaffiliated companies.
The New Mining Code has further implemented a super profit tax at a rate of 50 per cent. The super profit tax is due when the commodity prices rise by 25 per cent in comparison to those referred to in the feasibility study. The revenues subject to the super profit tax are then exempted from the profit tax (i.e., the corporate income tax at 30 per cent).
Lastly, the New Mining Code has introduced a capital gain tax, which will become due in the case of a share transfer; the amount that is taxable is calculated on the basis of the share transfer price and the accounting value of the share.
iii Duties

The customs regime¹⁴ applicable to mining companies includes some exemptions, particularly for temporary (for up to 18 months) imports, furniture imported by expatriates, etc. In addition, various preferential rates on imports apply to mining companies. These rates increase as the project progresses:

1. 2 per cent for all goods and products strictly for mining use, which are imported before exploitation of the mine has commenced;
2. 5 per cent for all goods and products strictly for mining use, which are imported after exploitation of the mine has commenced; and
3. 5 per cent for fuel, lubricants, reagents and consumer goods, which are destined for mining activities throughout the duration of the project.

The preferential rates of 2 per cent and 5 per cent only apply to goods that appear on the list that the holder of the mining licence must submit to the Congolese authorities, which must be approved by a joint Decree issued by the Ministry of Mines and the Ministry of Finance.
iv Non-tax revenues

The 2021 Financing Act provides for the application of the 'non-tax revenue procedure' to: (1) the payment of the 50 per cent share of royalties; (2) the transfer of grants; (3) the additional royalty; and (4) rents (in the case of amodiation) provided for in various mining contracts and paid to the companies in the state's mining companies.
v Other fees

Any holder of a research or exploitation permit is subject to a surface right at the rate of US$5.89 per quadrangle.
VII OUTLOOK AND TRENDS

In early 2013, the Congolese government initiated a review of the 2002 Mining Code. The fact that some international institutions, such as the Carter Centre and The World Bank, have pointed out several flaws in the 2002 Mining Code has undoubtedly influenced the government's decision to initiate such a major review of the Code. According to the New Mining Code's explanatory statement, among other points, the aim of the Code is to:

1. enhance the government's control over the mining sector;
2. increase the state revenues generated by mining activities;
3. further regulate elements related to the social and environmental responsibility of mining corporations; and
4. incorporate the latest changes in the Congolese administrative context; for instance, the introduction of VAT in the Congolese tax regime.

In 2015, the government decided to suspend the review of the 2002 Mining Code, presumably because of the turmoil that the contemplated amendments would cause for the mining industry. However, in May 2017, the new DRC government announced that it would pursue the review.
On 27 January 2018, after unsuccessful discussions with mining operators, the New Mining Code was approved by Parliament, promulgated by the president of the Republic on 9 March and published in the Official Gazette on 28 March 2018. In June 2018, a new mining regulation came into force, closing the legislative procedure of the mining sector reform.
Mining companies seeking to invest in the DRC must note that, pursuant to the New Mining Code, subcontracting activities in the mining sector are subject to Act No. 17/001 of 8 February 2017 establishing the rules applicable to subcontracting in the private sector (the Subcontracting Act). The Subcontracting Act notably provides that:

1. activities can only be subcontracted to Congolese-owned companies promoted by Congolese nationals (with strictly limited exceptions);
2. all companies established on Congolese national territory must put in place, internally, a policy of training that should allow Congolese nationals to acquire the technical know-how and the qualifications necessary to accomplish certain activities; and
3. companies may not subcontract more than 40 per cent of the value of a contract.

In this respect, whereas local content requirements were already imposed on subcontracting activities in the mining sector by a ministerial decree, the Subcontracting Act's implementation measures impose rather unclear obligations on mining operators and subcontractors.
In line with a current African trend, the New Mining Code reinforces local content requirements. By way of example, 25 per cent of purchase desks' share capital is reserved for Congolese citizens.
From a political point of view, DRC president Felix Tshisekedi has stated, in May 2021, his intention to revise all the contracts the DRC has signed with China as the scope of the terms of these contracts is now deemed contrary to the national interest and inequitable for the DRC. In particular, the contracts that were entered into between the DRC and China under the 'infrastructure for minerals' deal are on the president's radar. The announced renegotiations are not expected to impact the current state of the mining sector at large.
The adverse economic conditions continue to take a high toll on several local mining companies, which are frequently managed primarily for the benefit of foreign shareholders, to the detriment of the companies themselves.
The now extended coronavirus crisis has caused disruptions in the mining sector, particularly in logistics through border closures, and increased prices of inputs needed in the extractive industry such as sulphur, which is necessary for the extraction of copper and cobalt. Most companies have reprised production since the initial months of the various lockdowns but the future of production remains uncertain as the coronavirus pandemic is taking a turn for the worst in the DRC.
Footnotes

¹ Aimery de Schoutheete is a senior partner, Thibaut Hollanders is a partner and Joëlle Thambwe Mwamini is an associate at Liedekerke Wolters Waelbroeck Kirkpatrick SCRL. Martin Longompulu is a paralegal at Liedekerke DRC SASU.
² Act No. 007/2002 of 11 July 2002 establishing the Mining Code, as amended by Act No. 18-001 of 9 March 2018.
³ Decree No. 18/24 of 8 June 2018 on Mining Regulation.
⁴ Regulation (EU) 2017/821 of the European Parliament and of the Council of 17 May 2017 laying down supply chain due diligence obligations for Union importers of tin, tantalum and tungsten, their ores and gold originating from conflict-affected and high-risk areas.
⁵ Le Guichet Unique – CEPICI.
⁶ Decree No. 068/2003 of 3 April 2003 relating to the creation, organisation and functioning of the mining cadastre (CAMI).
⁷ Decree No. 05/160 relating to the creation, organisation and functioning of the national committee of the initiative for transparency in the management of extractive industries in DRC (CN-ITIE/RDC).
⁸ Article 218 of the Mining Code.
⁹ Article 21 of Law No. 11-009 dated 9 July 2011 pertaining to general principles related to environmental protection.
¹⁰ Article 220 et seq. of the Mining Code.
¹¹ Ordinance Act No. 10/001 of 20 August 2010 relating to the introduction of VAT.
¹² Finances Act No. 20-020 of 28 December 2020 with respect to the 2021 financial year.
¹³ Article 241 of the New Mining Code; Article 1 of Decree No. 18/042 of 24 November 2018 relating to declaration of strategic minerals.
¹⁴ Article 225 et seq. of the New Mining Code.