New Congolese mining code rattling mining companies

Date: Mar 14, 2018
Beyond raising costs for domestic miners, a new mining code signed into law by Congolese President Joseph Kabila last week, poses downside risks to the investment outlook of the country’s mining industry over the coming years, as a result of heightened government intervention and regulatory uncertainty, research firm BMI said on Tuesday.

The new code will raise royalties on minerals across the board – copper from 2% to 3.5%, gold from 2.5% to 3.5% and potentially lead to an increase in royalties on cobalt from 2% to 10%, if deemed a “strategic substance”.

Additionally, a new 50% tax on so-called super profits, defined as income realised when commodity prices rise 25% above levels in the project’s bankable feasibility study, would be introduced.

Kabila introduced the code in an attempt to shore up the support and funding needed to retain power. “The executive decision was made following the passing of the new mining code by the Democratic Republic of Congo (DRC) parliament and senate and, in the aftermath of a meeting between the President and key mining stakeholders last week, which yielded no agreement on changes to the final text,” BMI noted.

Discussions on updating the country’s 2002 mining law had been ongoing for a number of years but stalled owing to the commodity price slump experienced over 2014 to 2017.

Other key changes in the code include a provision that doubles the State’s free share in mining projects to 10% and a reduction on the period during which contract stability is guaranteed down to five years, from the ten years stipulated in the current mining law.

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