Wednesday, September 17, 2008

DRC mining contract review nearing completion

The Democratic Republic of Congo’s (DRC’s) mining review process was in its final phase, with negotiations between the State and a number of the 61 contract holders nearing conclusion, the Ministry of Mines said this week.

However, some of the contract holders still had to make “meaningful contributions” to the negotiations before the September 30 deadline, the government said in an emailed statement.

The government launched a review last year of 61 mining contracts, many signed during the country's 1998 to 2003, war.

Deputy Minister of Mines Victor Kasongo commented that although the process did appear to be working, there were still some companies that needed to come forward and engage with the government. “I urge those which situations are retrievable to do so, our door is open and we are ready to listen.”

Of the 61 mining companies in the renegotiation process, 14 companies had already satisfied all the criteria set out by the Ministry. Kasongo stated that others were approaching finalisation, and details of these would be made available once negotiations were completed.

However, the government noted that there had been a certain intransigence on the part of some operators to understand that what might constitute a ‘good deal’ for the company, did not necessarily mean that the contracts were profitable for the DRC.

Kasongo stated that the review had revealed the extent to which some contracts were not viable or had in some way failed on feasibility, adherence to the mining code, or had otherwise not realised the terms of business agreed upon in the outset.

“We are committed to ensuring that all mining contracts deliver maximum value and return on investment for all stakeholders, as well as employment and revenue opportunities for the Congolese people and businesses. When this cannot be identified and realised, then we have to follow the letter of the law and revoke the licence concerned.”

He added that when mining contracts were awarded, they were intended for active mining. “We are having to now adopt a firm policy towards the contracts and licences of use them, or lose them.”

With the negotiation process in its final stage, the companies under review have been separated into three different categories based on a required criterion.

The 14 countries that fall within the ‘Green Light’ companies have successfully produced feasibility studies of the future development of the mining assets and were now entering final negotiations with State entities.

The ‘Orange Light’ companies, which numbered 25, were making some progress. However, these companies needed to renegotiate and modify their contracts, and they were given from an additional 12 to 18 months to produce a viable plan for an ongoing private and public partnership.

The remaining 22 companies were classified as ‘Red Light’ companies, and the Ministry stated that their contracts were so far out of line with mainstream international practices, as to warrant cancellation. These companies now had to seek to negotiate new contracts, rather than modifying existing contracts.

The Ministry stated that at least three of these companies had little chance of retaining a foothold in the minerals rich DRC.

The renegotiation process only covered known existing assets, and the DRC government was insisting on shared ownership of future discoveries of mineral reserves. This would be based on the standard international practice of a 51% and 49% share between the parastatals and the private companies.

There would also be an element of compulsory subcontracting, which was to be given to Congolese-owned firms, to increase the local employment rates and the standard of living.

However, the Ministry said that although existing contract companies had a shareholding that fell short of international standards, the DRC government would not penalise these companies, in recognition of the commitment they made by remaining active during the DRC’s unstable past.