Maravi

Congo mining contract proposes 35% state share

Congo mining contract proposes 35 pct state share
Mon Jun 14, 2010 8:27am EDT
By Katrina Manson

KINSHASA, June 14 (Reuters) - The mines ministry in the Democratic Republic of Congo says it wants state-owned mining firms to hold a 35 percent stake in all future mining joint ventures, in contrast to a wide range of shareholdings in existing ventures.

A new proposed contract, written in May and awaiting government approval, will serve as a basis for negotiation, said Valery Mukasa, interim chief of staff at the Ministry of Mines.

"The idea is that this will be the model for partners in future," Mukasa told Reuters in an interview.

"We've put in the provisions we would like but all contracts will remain open to negotiation."

Mukasa said the proposed contract, drawn up with the input of civil society groups in the country, which has in the past been a major producer of copper, would not be applied retrospectively to joint ventures that have already been negotiated. The state's share in these tends to range from 12.5 percent to 40 percent.

After a protracted review of more than 60 contracts that began in 2007, several companies fell foul of the central African government's efforts to spur production and revenue, and state holdings were increased.

The final contract under discussion is that of the $2 billion Tenke Fungurume copper and cobalt mine, in which state-owned mining company Gecamines has a 17.5 percent share and Freeport McMoRan (FCX.N) has a 57.75 percent.

Congo's mines minister Martin Kabwelulu has previously said the Gecamines share should be hiked to 45 percent.

The proposed contract also requires companies to pay a 1 percent signing-on bonus on the total value of the deposit determined in the feasibility study and for a 2.5 percent royalty on gross sales.

Other provisions include a deadline that stipulates companies must begin production within two years of establishing the mine site.

Companies must also adhere to the rules of the Extractive Industries Transparency Initiative -- a scheme for which Congo is still a candidate -- that requires companies to publish what they pay to the government.

All mining companies will still be subject to the mining code, a more general law dating back to 2002, which regulates business practices and taxes. Mining officials are reviewing this code but no completion date has yet been set.

A major investor in Congolese mining is Canada-based First Quantum (FM.TO)(FQM.L), which is locked in a legal dispute with the government. In May a top Congo court annulled its rights to two copper mines, after last year closing down Kolwezi, a separate First Quantum plant in the country [ID:nLDE64N04G].

(Editing by Daniel Magnowski and William Hardy)

Labels: DRC, FIRST QUANTUM MINING, GECAMINES, MINING, MINISTRY OF MINES (DRC), TAXATION

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