New Zambia mine taxes could deter investors By James Macharia 6...

New Zambia mine taxes could deter investors

By James Macharia

6 February 2008

Source: Reuters News

CAPE TOWN, Feb 6 (Reuters) - First Quantum Minerals Ltd said on Wednesday new mining taxes in Zambia were "unattractive" and could deter new entrants or further investment into that country's lifeblood of copper mining.

But despite copper mining being a cornerstone of Zambia's economy, some analysts say the economy has not benefited much as foreign companies have shared little of their profits.

"The new tax proposal in Zambia is exercising our minds. It doesn't look very attractive right now," Clive Newall, president of First Quantum, told a mining conference in cape Town.

"Certainly it won't be attractive for new players, and may stop new developments, which is an unintended consequence."

He said First Quantum would study the tax structure before commenting further on the tax regime.

Zambia has said it plans to introduce a windfall tax on base metals at a minimum rate of 25 percent and increase mineral royalties to 3 percent from 0.6 percent, as from April 1, 2008.

The World Bank has backed Zambia's new mining taxes, saying the $415 million projected tax revenue from copper exports this year would help fight poverty and boost its kwacha currency.

Newall said power shortages that have recently led to the stoppage of mining in Zambia had become a new concern.

But the Vancouver-based company, which owns a number of mines in Zambia, was committed to the region and Africa, where it also operates in the Democratic Republic of Congo (DRC) and Mauritania.

Zambia's copper output for 2008 could be hurt by power woes that led to the rationing of power and suspension of operations at copper mines last month. Other challenges included poor transport and a shortage of
skilled labour, Newall said.

"The Copper Belt infrastructure is strained and there is a scarcity of human capital, a skills shortage as the old guard retire," he said.

The Copperbelt region extends from southeast DRC to northern Zambia.

Despite the hurdles, Newall projected an output of 421,000 tonnes of copper in 2011.

The Toronto-listed company has said it expects copper production to climb 37 percent this year to a total of 310,000 tonnes. Total output stood at 226,693 tonnes last year.

The company expects its largest mine, Kansanshi in Zambia, should produce 181,000 tonnes, up from 163,824 last year.

Newall said First Quatum's Frontier mine in the Democratic Republic of Congo reaches was expected to produce more. Output from Frontier, should be 84,000 this year.

"We have got to squeeze more production out of Frontier," he said.


UPDATE 2-Congo to issue mining exploration tender-Gecamines

By Paul Simao


6 February 2008

Source: Reuters News

CAPE TOWN, Feb 6 - The Democratic Republic of Congo will
call for a tender for mining exploration projects in a few months, the managing director of Gecamines, Congo's state mining group, said on Wednesday.

In a presentation on the sidelines of a mining conference in Cape Town, Paul Fortin said there would be "a call for tender in the next few months for exploration" in Lubumbashi and other parts of the African nation's rich copperbelt region.

"We will give you an option if any sizeable deposits are
discovered," Fortin said, adding that the tender could include bids for diamond exploration.

Although investor interest in the mineral-rich DRC has jumped
since the end of a civil war in 2003, a move by the government to renegotiate mining contracts has stoked concerns of instability and a lack of transparency in the mining sector.

The DRC announced on Tuesday it had launched a "fast-track"
scheme to speed up a long-delayed review of mining contracts, many of which were signed during the 1998-2003 conflict and a subsequent three-year transition period.

Government officials have expressed concerns that many mining firms are able to sign one-sided deals that provide little in the way of taxes and royalties to the impoverished African nation.

But the country's deputy mining minister said on Wednesday the review would not dampen interest in exploration and mining in the DRC and that affected companies would be willing to negotiate with the government.

"I am certain that the interest in Congo will still be there, and it is certain that people (mining firms) will negotiate," Deputy Minister of Mines Victor Kasongo told Reuters after a presentation to analysts and mining representatives.

He added that Indian and Israeli firms were among those expressing an interest in investing in DRC, which has become a key focal point in the rush to secure access to Africa's vast natural resources.

Chinese companies are among those who have already staked a claim to mining rights in the African nation in exchange for loans to rebuild roads, railways and other infrastructure destroyed or neglected for decades.

Under the terms of a joint venture recently signed with Gecamines and Kinshasa, Chinese firms will receive rights to millions of tonnes of copper and cobalt in two concessions in the country and provide some $6 billion in loans in return.

Production from the Mashamba and Dikuluwe mines is expected to begin in 2011, with output rising to about 400,000 tonnes of metals per year after start-up.

Together the Mashamba and Dikuluwe mines contain 10 million tonnes of copper and 2 million tonnes of cobalt.

Although the International Monetary Fund has expressed concern about the impact of the huge Chinese loan on the DRC's economy, mining officials in Kinshasa see the deal as winning a proposition for the government and Congolese people.

Gecamines' Fortin said Chinese were welcome in the country and were expected to have a "stabilising effect" there.

"You have another Big Brother on the scene, and the more the merrier," he said.


Results of DRC mining contract review ready within months, says Kasongo
Clementine Wallop
5 February 2008
Source: Metal Bulletin News Alert Service

The results of the Democratic Republic of Congo's (DRC)
mining contract review will be ready within the next few months, deputy mining minister Victor Kasongo told the 13th Mining Indaba on Tuesday.

The results of the review will tell companies whether or not the DRC government considers their contracts to have significant but correctable flaws, or if the contracts are so unreasonable that they cannot be amended.

None of the contracts investigated by the DRC's review body were clear of problems, Kasongo told delegates in Cape Town.

"Not a single contract was properly constituted," Kasongo said.

The review process has been longer and more complex that the review panel first anticipated when the investigation began last year, Kasongo told delegates.

"We found complexities that we had never expected, and we need to work through them line by line…What we thought was going to be a minor operation has turned into multiple laser surgery - and we don't have enough surgeons in the DRC," he said.

Kasongo is now trying to find a simple and reliable review method to help companies and state-owned mining company Gécamines to resolve the contract problems with the minimum confrontation, he said.

Companies will have the right to appeal the review panel's decision for 30 days after the decisions are made public, and they will then go into a "brief and open" negotiating process with the government, Kasongo said.

"We would prefer to bring the companies to the negotiating table [and to] find a way to appeal without [taking too much] time and money," Kasongo said.

The review panel has found similar faults across the contracts, including excessive rates of return to the companies as compared to Gecamines' return, and a "massive" undervaluing of the DRC's mineral assets.

Some of the companies under review have also constrained the sovereignty of the DRC to make legislation freely and displayed only minimal corporate governance, Kasongo said.

"We see many contracts with unreasonable feebleness of obligations for investors…My government has a duty to ensure the environment that created [these contracts] is not repeated" Kasongo told delegates.

The minister criticised firms operating in the DRC that have
profited from speculation about their production and their part in the contract review, although he did not name any particular companies.

"I have little sympathy with those who went to get valuable assets cheap - withholding information keeps oxygen from the DRC. Mining operations feed my people, speculation does not," he told delegates.

He also stressed that no companies have been singled out for
criticism and sought to dispel rumours of a 'last in, first out'approach.

"We are not picking on new or hapless companies…we all need the mining contracts system," Kasongo told delegates.

Kasongo also clarified that a recent Chinese investment in the DRC did not involve the sale of a stake in Gécamines, contrary to reports.

"Gécamines remains 100 percent owned by the DRC," he said.

Despite the tough talk, Kasongo reiterated his enthusiasm for foreign investment in the country, so long as investors are honest and contribute to the local economy.

The DRC government itself needs to gain investors' trust and break down the misrepresentation of the country, he said.

"Nothing will bring safety and security [to the DRC] better
than investment…the Ministry [of Mines] needs to deliver a return, it needs to convert potential energy into kinetic energy to feed our people," Kasongo said.

By the time of the Mining Indaba in 2009, Kasongo told delegates that he hopes to have some new investors to show off.

"This year is going to be a great year, an exciting year," he said.