Investors cheer as Congo opens talksPeter KovenSource:Financial...

Investors cheer as Congo opens talks
Peter Koven
Source:Financial Post
20 February 2008

Investors cheered yesterday as the Democratic Republic of Congo (DRC) finally completed its mining contract review and started responding to the companies, removing a giant black cloud that was hanging over them.

The DRC government started the controversial review process about eight months ago after identifying problems with certain contracts.

Until this week, it made no effort to contact the companies, and investors started to worry that many of them could be cancelled. Those fears intensified after deputy mining minister Victor Kasongo said earlier this month that the government found problems with every contract and was concerned with the internal rates of return the companies could generate.

Now it appears that the DRC is finally serious about bringing the process to an end and holding talks with the companies.

"Minister Kasongo said yesterday that he would like an open dialogue with companies. I think the market sees that as a very positive development," said Robert Lavalliere, vice president of investor relations at Anvil Mining Ltd.

Shares of Moto Goldmines Ltd. surged 25% after the company revealed the results of its review. While the DRC government wants to adjust the terms of its contracts, investors were relieved that it does not plan to cancel any of them.

At the same time, Anvil shares climbed 4% after the company said the DRC wants to bring its Dikulushi mine into the current mining act, which means a higher tax rate. Anvil will enter negotiations with the government soon.

Katanga Mining Ltd. did not report the results of its review, but the stock climbed 9% on speculation that its contract issues can be resolved soon as well.

"People are looking at it and saying it isn't anywhere near as bad as they thought," said Kerry Smith, an analyst at Hay-wood Securities. "If this all gets settled and people get more comfortable with the Congo, the stocks will be significantly higher than they are today."

Shares of Lundin Mining Corp. also rose yesterday, but the company reported after the close of markets that the government wants a number of changes to the contract to develop the Tenke Fungurume project. Lundin said in a statement that it believes its current agreements are legally binding.

In the case of Anvil, its Dikulushi mine is not subject to the current mining law because it predates it.



Anvil Says Congo Asking To Redraw License;Shares Fall

20 February 2008
Source:Dow Jones News Service
By Elisabeth Behrmann

SYDNEY Copper producer Anvil Mining Ltd. (AVM.AU) Wednesday said it has received a letter from Congo's Minister of Mines, outlining a cancelation of Anvil's current license for its Dikulushi mine and to redraw the agreement under the terms of Congo's current mining code.

The Ministry of Mines in Congo this week completed a review of mining licenses in the country after a commission found that none of the contracts had been properly drawn up, with a focus on licenses issued between 1996 and 2005.

"The letter from the minister includes a statement of terms upon which the government proposes discussions be based to balance the partnership between the Democratic Republic of Congo and Anvil," said the company, which is listed on the Australian and Toronto exchanges.

Anvil shares ended sharply lower in Australia, down nearly 5% at A$14.45.

Anvil has majority interest in and operates the Dikulushi copper-silver mine, the Kinsevere copper mine and the Kulu copper tailings operation, all in the Katanga province in Congo.

Many of Congo's mining contracts were drawn up during unstable times, when a bloody civil war ravaged the country, and the government claims they are unfairly balanced, with the country forgoing benefits from its vast minerals riches.

Miners contend the contracts aren't unfairly structured and that they should be granted a risk premium for operating in a country where localized conflicts still flare up frequently.

For Kinsevere, Congo's mining minister wants a cash bonus paid to former state-owned miner Gecamines to be raised to US$150 million from US$1 million.

The minister also wants to scrap the ceiling on copper royalties to reflect changes in metal prices.

Under current contracts, Anvil pays royalties of between $35 a ton and $70/ton of copper, hitting a limit when copper reaches $4,000/ton.

Copper prices on the London Metal Exchange this week punched above $8,000/ton.

For Kulu, the ministry has asked for a royalty of 2% of gross revenues to be paid to Gecamines, and for the former state miner to participate in day-to-day management.

Other miners operating in Congo, such as Lundin Mining Corp. (LUN.T), have received similar letters from the ministry.

A leaked report published in November on the Web site of a Kinshasa-based newspaper recommended that 38 contracts be amended, and 23 contracts be canceled entirely, prompting company share prices to tumble.

Anvil said it would respond to the government's position by a Feb. 27 deadline, and that it seeks discussions with the minister of mines.

Anvil shares have fallen around 30% since the news of the possible cancelation of mining licenses first broke.