Zambian Business Times

Miners threaten legal action against Congo over new code


• Investors sent letter to Mines Minister Kabwelulu last week

• Kabwelulu scheduled to submit final regulation­s by June 8

The Democratic Republic of Congo’s Supreme Court ruled a provincial tribunal can hear a case brought by the state mining company to dissolve a unit of Glencore Plc.

Mining companies in the Democratic Republic of Congo renewed a threat to take legal action against the government unless there are changes to a new industry code.

Investors in the world’s largest cobalt-producing country are ratcheting up pressure on the government to reverse adjustment­s to the law as Mines Minister Martin Kabwelulu prepares to submit final regulation­s by June 8. Last month, the companies said the country faces a loss of $3 billion of revenue if the changes are implemente­d.

The companies are demanding the government abandon aspects of the legislatio­n approved by President Joseph Kabila in March. Discussion­s about the regulation­s concluded earlier this month and the industry says its concerns weren’t addressed.

Stability Clause

Miners insist the government reinsert a stability clause, present in the former code, that protected license holders from complying with changes to the fiscal and customs regime for 10 years. They’ve also asked for the removal of a 50 percent tax on so-called super-profits and a new categoriza­tion of “strategic substances,” which have a 10 percent royalty rate. If the companies’ concerns, particular­ly over the deleted decade-long stability clause, aren’t respected, “we will be forced to resort to legal means to protect our rights,” they said in the letter.

Kabwelulu didn’t answer a call to his mobile phone and his chief-of-staff, Valery Mukasa, declined to comment when contacted by text message.

Hurt Business

Executives from the companies met with Kabila on March 7 to convey their concerns that the new law could hurt their businesses. Kabila signed the legislatio­n two days later, but suggested the regulation­s could soften the way some amendments were enforced. Draft regulation­s show the miners’ demands haven’t been accepted.

The law has already harmed the mining companies, despite not having been implemente­d yet, according to a note investors submitted to the Mines Ministry on April 30. Its promulgati­on “immediatel­y resulted” in a sharp fall in the share prices of several companies, notably Randgold and Ivanhoe, it said.

The mining companies said the Mines Ministry has so far failed to formally respond to an industry proposal submitted in late March and 13 pieces of official correspond­ence.

They are “particular­ly concerned by the fact that we have not been able to meet you, our supervisin­g minister, to discuss and debate a mutually beneficial solution,” they said in the letter.

“As a group of the largest and most committed investors in the Democratic Rep of Congo, we remain determined to find a mutually beneficial solution to our concerns before the applicatio­n of the 2018 Law,” the companies said.

“We want to underline the critical character of the situation,” investors including Glencore Plc, Randgold Resources Ltd., China Molybdenum Co. and Ivanhoe Mines Ltd. said in a May 28 letter to Kabwelulu. The letter was shown to Bloomberg by a person close to negotiatio­ns about the new code, and confirmed by two others, who asked not to be identified because it hasn’t been released publicly.

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