DRC
Risky business: Alphamin’ s DRC mining gamble
Investors say there is no reward without risk, but some take this credo to greater extremes than others.
THE BISIE MINE IS EXPECTED TO PRODUCE SOME 9,900 TONNES OF LOW COST TIN CONCENTRATE FOR 12 YEARS
Mining firm Alphamin is intent on building the Democratic Republic of Congo’ s( DRC) a mine in the northeastern province of North Kivu. It will be the first modern mining operation in this historically insecure region of the Congo. The Toronto-listed firm is breaking ground at a site called Bisie, in the Walikale territory of North Kivu. It boasts among the world’ s richest tin deposits. However, the challenges – from poor infrastructure to roving militant groups – are all too real.
Alphamin plans to put $ 134m into pre-production investment, then to raise debt and equity through 2016 and 2017 to fund the ramp-up phase and working capital. The Bisie mine is expected to produce some 9,900 tonnes of low cost tin concentrate for 12 years, with first yields expected at the end of 2018 according to the firm. With a promised 48.4 percent internal rate of return for investors, it is easy to see how many would bite despite the risks.
However the project has certainly not been easy. The remote location and lack of infrastructure in much of the DRC means the company has had to build its own road to the site using little more than manual labour. A mobile phone tower only recently went up in the area. Then there is the question of security.
Walikale is now safer than many parts of conflict-prone North Kivu. However as recently as 2014, militant groups operating in the area attacked Alphamin’ s base camp, which fell within the territory of three competing armed groups. One might wonder why a company would choose to set up operations in one of the DRC’ s most unstable areas even as a constitutional crisis over the rule of president Joseph Kabila threatens to tip the entire country back towards conflict.
Boris Kamstra, chief executive of Alphamin Resources Corp, says the firm had been exploring various commercial options but decided that tin stands out as a particularly interesting commodity. Prices for the metal are on the rise, and changes in technology are fueling demand.“ The demand profile for tin changed completely when it was included in electronic solders to replace lead. You have a historic lack of exploration and underdevelopment of tin assets, which looking forward gives you a declining supply,” Mr Kamstra explains. He downplays the risk from armed groups, saying most are now based outside Walikale and further eastwards, while stressing the work Alphamin has put into developing ties to the local communities in which it operates.
However rebel groups still act as competition to outsiders arriving to mine in‘ their’ areas, as well as targeting companies for extortion and banditry. DRC has a long history of its rich mining assets being coopted by militant groups to fund their violent campaigns. A 2013 UN report estimates that 98 percent of the gold sold from Congo that year was smuggled out, mostly through neighbouring Uganda.
Fueling conflict?
Alphamin does attempt to address the problem of conflict minerals explicitly. The company says the Bisie mine will comply with the US Dodd- Frank Act. The Act, a wide-ranging reform bill focused mostly on financial sector reform after the 2008 financial crisis, includes a requirement that all US-listed companies determine origins
44 Business Times Africa | 2016