2nd UPDATE: Govt Reshuffle Delays Congo Mines Review-Lawmaker21...

2nd UPDATE: Govt Reshuffle Delays Congo Mines Review-Lawmaker

21 November 2007

Source:Dow Jones Commodities Service
By Andrea Hotter



LONDON (Dow Jones)--A pending Cabinet reshuffle is delaying a Congo Ministry of Mines review of a Congolese commission on the country's mining licenses, a member of the country's National Assembly told Dow Jones Newswires Wednesday.

But around 70% of a leaked draft of the report earlier this month is accurate, Barnabe Kitaya Bin Karubi said. The leaked report was published on the Web site of a Kinshasa-based newspaper and recommended that 38 contracts be amended, and 23 contracts be canceled entirely.

Attention is focused on those licenses issued between 1996 and 2005.

"In August the President [Joseph Kabila] announced a Cabinet reshuffle and it's coming very soon, which is delaying the interministerial meeting into the commission's report," Karubi said. The flaring up of violence in remote parts of the country's borders with Rwanda and Uganda have also delayed the reshuffle and analysis of the findings of the report, he added.

It's "hard to say" whether the mining minister and vice-minister will be casualties of the reshuffle, Karubi said. "That's for the President to decide." According to Karubi, the leaked draft sparked a "big debate" in Congo, and that's certainly true among the world's mining companies. An investigation is currently ongoing into how exactly a draft of the report came to be prematurely leaked.

The leaked report said First Quantum Minerals (FM.T) and Anvil Mining (AVM.T) have projects among the cancelations, while Nikanor PLC (NKR.LN), Katanga Mining Ltd. (KAT.T), Lundin Mining (LUN.T) and AngloGold Ashanti (AU) would face amendments to their contracts. Company share prices suffered as a result.

A number of non-governmental organizations have been monitoring the review process, including the Carter Center and the Open Society Initiative for Southern Africa. While nothing is certain until the government makes its recommendations and Congo's Parliament signs off on the review, "these NGOs say 70% of the leaked report could be true," Karubi said.

Karubi has the ear of the president; he was Kabila's principal advisor and personal assistant from 2003 to 2006, when Congo's transitional government staged the country's first elections since the independence era. "Most big companies are in the category where they need to make some minor changes; those licenses being called most seriously into question are owned by companies that acquired them during the war," Karubi said, and by less than legitimate means.

"The leaked report is a blessing in disguise; if a company didn't do its feasibility study, then this needs to be made amends for," he added.

"We realize we have to fix these problems - it's partly the government's fault in giving the concessions away during the war; we're all to blame," he told Dow Jones Newswires. "But now, the president wants to clean up the mining sector."

Western mining companies face "serious competition" in Congo from the Chinese, Karubi said. But licenses won't be confiscated from western companies operating legitimately in Congo to be given to Chinese firms. "We won't take concessions from major companies like BHP Billiton PLC (BHP) and give them to the Chinese - we're not irresponsible," he said.

Chinese involvement in Africa has been closely watched for the last 18 months, with a number of high-profile delegations from both Congo and China having visited each other's countries through this time.

The Chinese are investing in Congo by setting up a financial institution there, he noted.A Memorandum of Understanding for around $10 billion has been signed by Eximbank of China, Karubi said.

"The [Chinese] financial institution will have lending facilities for services to mining, infrastructure developments and so on," Karubi said. And it's rail, roads, airports and ports that are key to the future development of Congo, which has attracted investment from the West but mainly in the way of poverty alleviation programs or health campaigns. "We've had no programs to build long-term infrastructure in Congo," said Karubi. In return for their investment, the Chinese will negotiate for various mining or forestry concessions, for instance, he added.

-By Andrea Hotter, Dow Jones Newswires;