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ISSN 1747-146X
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THE LEADER VOLUME 13 • NUMBER 2
The DRC, its mining code and transforming Gécamines
Mining companies in the DRC are urging that government rethink new legislation. Bloomberg has reported that a letter, which it has seen, has been sent by local subsidiaries of Glencore, China Molybdenum, Randgold Resources, Ivanhoe Mines and MMG to Leon Kengo wa Dondo and Aubin Minaku, the Presidents of the Senate and National Assembly, respectively. They asked them to“ suspend the process of adopting the text in its current version” and to“ organise a true consultation of the mining industry.”
On December 8, the National Assembly approved an increase in royalties on copper, cobalt and gold to 3.5 %. The proposed new legislation also introduces a profit-windfall tax and doubles the state’ s free share to 10 %. It also reduces the period during which contract stability is guaranteed to five years from 10 years. It is likely this will be wrangled over for some months now. Against this backdrop, the 2017 financial year of the state mining company Gécamines has just ended. This included the completion of a commitment awaited by many, the inauguration, on December 22, 2017, of the modernised registered office in the presence of the highest State authorities and institutions, led by the President of the Republic, His Excellency Joseph Kabila Kabange.
The company says that“ this inauguration, a symbol of the transformation that Gécamines has been undergoing for some years under the auspices of its Board of Directors, presented the opportunity for its Chairman, Albert Yuma Mulimbi, to draw up an objective and uncompromising report on the activities of the company and to announce the major projects and challenges which await Gécamines for 2018.”
Mulimbi reported that“ the overwhelming majority of partnerships which management has entrusted to external partners present negative results, do not generate any dividends, and thus do not contribute to national development to the extent expected. Gécamines initiated, between 2015 and 2017, a series of audits of its partnerships with the help of leading international firms. The initial results of these audits reveal that they were managed at the expense of Gécamines, often through unacceptable accounting and management practices. Gécamines cannot content itself with such a situation for longer.
“ In 2018, Gécamines therefore intends to initiate a frank discussion with its partners and, as needed, demand a clarification of the agreements in place.” He says Gécamines is attentively following the discussions currently taking place in Parliament on the reform of the Mining Code of 2002, whose stated objective is“ to rebalance the sharing system of the mineral wealth of the DRC, one of the most advantageous in the world for investors. As a recent report of a financial backer in effect noted, the boom of the natural resources sector from 2007 benefited more to foreign investors than to the State and local producers, the choice to have recourse to multinationals operating in the formal sector thus not having generated the economic outcomes expected. It is now clear that the generous provisions of the Mining Code of 2002 do not allow the DRC to fully benefit from its abundant natural resources.”
In the future, Gécamines intends to break with past schemes that do not fulfil their initial objectives. It has chosen to follow a subsidiarity principle. It will only form partnerships for the operations that require the contribution of third parties and that will allow it to maximise industrial or financial return. Two innovative partnership schemes are currently the subject of pilot projects with leading partners:
■ A time-limited partnership scheme, based in particular on“( i) the recovery of an operational and modern production tool at the end of a period agreed in advance,( ii) a more egalitarian distribution of shares,( iii) a real and increasing implication of Congolese executives in the steering of the project and( iv) an effective distribution of subcontracting in the best interest of the Congolese economic structure.
■ A mining production sharing scheme, inspired by the oil industry, thus allowing Gécamines to benefit directly from a part of the mining production, regardless of the financial results of the partnership, so as to guarantee to the Congolese that their wealth will effectively benefit them.” Gécamines itself intends to play its role in the modernisation effort initiated. Between 2015 and 2017, Gécamines commissioned from various international consultant firms an audit of its industrial apparatus as well as an organisational audit.
Gécamines’ production apparatus, due to a lack of necessary investment over various decades, has become obsolete, uncompetitive and, often, inefficient. Also, its industrial and institutional structure is no longer adapted to the reality of a global industry.
Gécamines“ has taken various strong decisions, including( i) the closure of its obsolete and dangerous sites,( ii) in the short-term, the concentration of its activities on its most profitable sectors,( iii) the investment in the certification of its reserves to prepare the future, which had not taken place for 25 years and( iv) the completion of a bankable study for the creation of a new plant.”
Gécamines has decided to initiate“( i) a progressive modernisation of its facilities,( ii) an organisational transformation so as to convert Gécamines to the best standards of the international mining industry,( iii) a global personnel training plan on the latest technological, legal and financial developments, unprecedented in the recent history of the company.”
John Chadwick Founder
John @ im-mining. com
FEBUARY 2018 | International Mining 3