DRC state miner Gecamines plans overhaul of copper and cobalt joint ventures
Excavators and drillers at work in an open pit at Tenke Fungurume, a copper and cobalt mine 110 km northwest of Lubumbashi in Congo's copper-producing south in a picture taken on January 29, 2013. PHOTO | REUTERS
The Democratic Republic of Congo's (DRC's) state miner is broadening a push to extract more from its copper and cobalt joint ventures, seeking to negotiate for higher stakes across the board to gain leverage in management of some of its biggest mines.
Gecamines is also leveraging existing shareholding in mines to negotiate off-take contracts for the purpose of trading copper and cobalt on its own.
The miner wants more local executives on boards governing joint ventures to have a greater say in how assets are managed, Guy Robert Lukama, the Gecamines chairman, told Reuters.
The plans may mean overhauling some terms of agreements that Gecamines deems unfavorable to capitalise on the world's scramble for supplies of minerals critical to global green energy transition.
"We want to repair a certain stage of mistakes that were made when they asked us to give most of our best assets to third parties just to attract foreign direct investment," said the chairman of the state miner, which at its peak in 1986 produced more than 490,000 tons of copper and cobalt - but is now a shadow of its former self.
Chinese mining companies have been key to driving output in the world's biggest supplier of cobalt, a key component in batteries for electric vehicles and mobile phones. DRC is also the world's third-largest copper producer.
President Felix Tshisekedi's government had previously said some deals were heavily skewed in favor of China, forcing some state-backed firms to find an additional $1 billion in a renegotiated infrastructure for minerals pact.
Prolonged debts
Board representation on the mines could ensure accountability, transparency, community development and compliance with rules on local procurement and training of DRC staff, Lukama said.
He added that some mines aren't investing in expanding output, citing prolonged levels of indebtedness. A lack of oversight could be behind the huge debts, which he said is depriving the state miner of returns.
Lukama questioned why some of its partners are reporting losses and scaling down production because of a slump in cobalt's value while copper prices have remained elevated. In DRC, cobalt output is a by-product of copper.
"We can no longer accept this level of debt while people don't put capital into the assets," he said.
"We are not sleeping partners in our own country. We should be part of the governance."
CMOC Deal
Last year's deal with China's CMOC Group secured Gecamines a right to acquire copper and cobalt produced from Tenke Fungurume Mining equal to its 20 percent stake, on market terms. Gecamines also scored an $800 million settlement to end a dispute over mineral royalties and $1.2 billion in dividends over the life of the Tenke mine.
The deals has prompted Gecamines' push to trade copper and cobalt at projects with partners including Glencore and Zijin Mining.
Gecamines' partners had retained full off-take rights because they used debt to build the projects, Lukama said. "The off take was there to secure the flows of repayment of debt, now the debt is repaid, why should they keep it 100 percent."
Lukama said some terms need to be reviewed as investors aren't meeting expectations, with communities not better off despite the mining boom.
He declined to say which companies are not meeting expectations.
Changes to the mining code in 2018 bolstered Gecamines' powers to seek reviews of terms in mining contracts and boosted the minimum state participation threshold, said Andrew Smith, a senior Africa analyst at risk intelligence company Verisk Maplecroft.
"DRC does have a history of pressurising mining companies into ceding shares," Smith said.
"Measures such as asserting that firms have not paid adequate royalties or taxes by underreporting revenues and production have been used in the past," he added.
