Mining groups facing Congo shake-up after hardline review
Jonathan Clayton, Africa Correspondent
Two London-listed miners are among companies with mining contracts in the Democratic Republic of Congo (DRC) that should be renegotiated, a government commission has said.
A DRC government commission was set up to review 61 mining contracts. Its findings, seen by The Times, are far tougher than had been expected. The commission concluded that 38 contracts would have to be renegotiated and 23 cancelled because of legal and tendering irregularities.
Nikanor, which announced a $3.3 billion (£1.6 billion) merger with Katanga on Tuesday, will be told to renegotiate its contract for the KOV copper mine. It has already started spending a projected total of $1.8 billion on rehabilitation and other infrastructure projects, such as roads, water and electricity.
Camec, which has already been hit by uncertainty over its Congo operations, has also been targeted in the report through its links with Boss Mining, its Congolese partner.
The findings of the commission, which was set up after the country’s first democratic elections in the summer of 2006, still have to be signed off by the Mining Minister, Martin Kabwelulu, and President Joseph Kaliba, but they have already begun to hit the share prices of some of the world’s biggest mining companies.
Many of the companies that are affected by the review’s findings have invested millions of pounds in the Congo in recent years. They include AngloGold Ashanti, BHP Billiton, Anvil Mining, First Quantum and De Beers.
Phelps Dodge, which was acquired last year by Freeport-McMoran, was criticised by the commission for not respecting mining codes in its development of Tenke Fungurume – believed to be the highest-grade undeveloped copper and cobalt deposit in the world. The company returned to the Congo only a few years ago and has heavily invested in the project.
International lobby groups and watchdogs have long advocated better control of the mining companies’ activities in the DRC. Tricia Feeney, of the Oxford-based human rights group RAID, said: “We hope that this review, which is vitally important for improving the lives of the Congolese people, will not suffer the same fate as previous inquiries.
“If the DRC Government is unwilling or unable to enforce the commission's recommendations, then it is up to home governments to hold mining companies to account. A line has to be drawn between acceptable and unacceptable behaviour in the scramble to gain control over the Congo's natural resources.”
The commission has been reviewing deals concluded with the state copper and diamond conglomerates Gécamines and Miba during Congo’s 1998-2003 civil war and three years of transitional government until elections in 2006, to determine whether they were in the best interests of the DRC. It is an open secret that many deals were done through middlemen who received backhanders and paid off members of the ruling clique.
A UN report previously concluded that there had been “mass scale looting” of natural resources during the war. Most Congo analysts expected the commission to effectively whitewash all but the most blatantly corrupt or unfair deals.
However, members of the commission – some of whom have received death threats – took a much tougher and more independent stand than expected. They were encouraged by Western donors and the World Bank, who want transparency in the mining sector of Africa’s biggest mineral and resources economy.
A senior member of the commission said: “The problem with nearly all of these contracts is that they were signed under duress or were not clearly evaluated and therefore offer no economic or financial benefits to the country.
“State corporations were literally looted and forced to enter into lopsided joint venture deals by middleman and handlers without any mining experience.”
Katanga and Nikanor claimed that their merger will not be threatened by the review. Jonathan Leslie, the executive chairman of Nikanor, said that the merger had the “explicit support” of Mr Kabwelulu.
Mining industry insiders said that Mr Kabila and his advisers will try to water down the recommendations, but that they may find their hands are tied on the most blatant cases.
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