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2nd UPDATE: Congo To Review Mining License Report Tuesday

5 November 2007

Source: Dow Jones International News

By Andrea Hotter

LONDON (Dow Jones)--The Congolese government will consider the findings of a commission's review into the country's mining licenses Tuesday, the country's vice-minister of mines told Dow Jones Newswires Monday.

"The government has not yet read the report, but is expected to do so Tuesday," Victor Kasongo said. "An executive decision on its findings is expected Friday or later, and we'll then issue a document with additional analysis."

He said he was unaware of the findings of the report, and emphasized the findings were yet to be reviewed by the Congolese government.

Criteria under evaluation include how a company obtained its license, how financially solvent it is and whether the state is remunerated equitably.

A total of 63 licenses are under review - 60 are attached to state assets and three are private, allocated under "certain conditions," Kasongo said.

But Justin Nyembo Mutahile, technical director at Congo's state-run Cadastre Minier, said that the report would recommend the annulment of some of mining contracts. Speaking by telephone from Kinshasa, Congo's capital, he said attention focused on those permits issued between 1996 and 2005.

Congo is home to an estimated 10-15% of the world's copper reserves, leaving miners keen to secure access to new deposits little choice but to abide by the decisions of the government.

The permits of one international mining company, Central African Mining & Exploration Co. PLC (CFM.LN), have already been revoked. Camec is awaiting the outcome of an appeal and says the move was an attempt to derail its bid for Katanga Mining, which has since been dropped. The government vehemently denies this.

The rationale behind the measures is to restore Congo's mining sector to its once wealthy glory. Katanga province in Congo's southeast in particular is potentially an economic dynamo. At their peak, its mines contributed 80% to the country's gross domestic product, but output declined dramatically due to internal conflict and lack of reinvestment.

But the measures have come under fire from investors, who say the government has given little thought as to what the repercussions of changes to the mining licenses may be. As well as leaving smaller firms facing bankruptcy, it could trigger the exodus of other investors from Congo and deter others from coming to the country.

Dual-listed Anvil Mining Ltd. (AVM.T), Congo's biggest copper producer, fell more than 15% on the Australian Stock Exchange Monday to a three-and-a-half-month low of A$17.40 on the back of reports its mining licenses were to be canceled or reviewed. Anvil said it hasn't been contacted by the Congo government on the matter.
U.S. copper producer Freeport McMoRan Copper & Gold (FCX), which is developing the Tenke Fungurume copper-cobalt project in Congo's Katanga province, declined to comment on reports that licenses may be canceled.
Freeport chief executive Richard Adkerson recently told Dow Jones Newswires that it is confident the review of mining licenses in Congo will verify the legitimacy of its own contract.

-By Andrea Hotter