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Democratic Republic of Congo Mining Report Q2 2010
Business Monitor International, March 2010, Pages: 40
The Democratic Republic of Congo Mining Report provides industry professionals and strategists, corporate analysts, mining associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on the Democratic Republic of Congo's mining industry.
First Quantum Contract Dispute Escalates
The long running dispute between the Congolese government and Canadian miner First Quantum Minerals worsened in early 2010, with news in February that First Quantum had launched international arbitration proceedings. The dispute surrounds the cancellation of First Quantum’s contract to develop the Kolwezi tailings project in August 2009, which was formally confirmed in a letter sent to First Quantum by state miner Gécamines in January 2010, following the national review of mining contracts. First Quantum is seeking to protect its 65% interest in the project, which had been scheduled for commissioning in Q210, before construction work was suspended following its contract suspension. Separately, mines minister Martin Kabwelulu was quoted by Bloomberg as saying the government had started talks with potential investors to take over Kolwezi.
There appears to be better news surrounding the contract negotiations between DR Congo and Freeport McMoran over the US$900mn Tenke Fungurume copper-cobalt mine. Media reports in February 2010 were hopeful that both sides could soon reach agreement.
New Data
For 2010, BMI has made significant changes to the way in which we forecast mining data. As well as using local statistics agencies and associations, we now also draw on the expertise of the UN’s Industrial Commodity Statistics Database, the US Geological Survey and the World Bureau of Metal Statistics for our historical export and production data. We then forecast this data using our own proprietary econometric model. Human intervention also plays a necessary and desirable role in our mining forecasting; experience, expertise and knowledge of industry trends and developments ensuring that we can spot likely future changes and anomalous data that a purely mechanical model would not.
Country Overview
The Democratic Republic of Congo (DRC) is home to vast reserves of a wide variety of natural resources such as cobalt, copper, gold and diamonds. DRC is believed to contain about 4% of the world’s copper reserves and one-third of its cobalt reserves.
All mineral deposits in the DRC are state-owned and the holder of mining rights also gains ownership of the mineral products for sale. Governed by the National Mining Code, the Ministry of Mines regulates the Mining Registry, Directorate of Mines and the Geological Directorate. The country is the world’s second largest diamond exporter by volume and the fifth-largest producer.
Industry Forecast
DR Congo is in the process of developing its rich mineral endowments of cobalt, diamonds, copper and gold. Although the DRC has great potential in mining-related activity, political instability needs to be tackled urgently to ensure that the growth opportunity is not lost. BMI believes that the Congolese mining sector can reach an average annual growth rate of between 4.7% across our forecast period. Many new mining facilities are scheduled to start production in 2010-11, which should boost output levels. However, we would caution that our forecasts remain dependent on relative political stability within the African state.
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