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Congo reviewing $6 billion mining deal with Chinese investors

Democratic Republic of Congo’s government is reviewing its $6 billion “infrastructure-for-minerals” deal with Chinese investors as part of a broader examination of mining contracts, Finance Minister Nicolas Kazadi told Reuters.

President Felix Tshisekedi said in May that some mining contracts could be reviewed because of concerns they are not sufficiently benefiting Congo, which is the world’s largest producer of cobalt and Africa’s leading miner of copper.

His government announced this month it had formed a commission to reassess the reserves and resources at China Molybdenum’s (603993.SS) massive Tenke Fungurume copper and cobalt mine in order to “fairly lay claim to (its) rights”.

Kazadi said in an interview that the 2007 deal agreed with Chinese state-owned firms Sinohydro Corp (SINOH.UL) and China Railway Group Limited (601390.SS) was also being reviewed to ensure it is “fair” and “effective”.

Sinohydro and China Railway did not immediately respond to a request for comment. Elie Tshinguli, deputy director-general of the Sicomines copper and cobalt joint venture in Congo, majority-owned by Sinohydro and China Railway, did not respond to a request for comment.

Under the deal struck with the government of Tshisekedi’s predecessor, Joseph Kabila, Sinohydro and China Railway agreed to build roads and hospitals in exchange for a 68% stake in the Sicomines venture.

The deal formed a key part for Kabila’s development plan for the country, but critics say few of the promised infrastructure projects have been fully realised and have complained about a lack of transparency in the deal.

“We saw that there were some governance issues in the past,” said Kazadi. “We needed more clarity on the contract, the kind of finance that is behind (the) investment.”

He said the reviews were “not a matter of threatening any investors” and that the government was conducting the review “in close partnership with the Chinese themselves”.

Chinese investors control about 70% of Congo’s mining sector, according to Congo’s chamber of mines, after snapping up lucrative projects from Western companies in recent years.

After Tshisekedi announced the reviews in May, a move attributed by some analysts to Western pressure to go after Chinese companies, China’s ambassador to Congo warned the country “must not be a battlefield between major powers”.

Asked at an online briefing about the formation of a government commission to reassess reserves, the chairman of China Molybdenum, Yuan Honglin, said communication between Tenke Fungurume and Congo’s state-owned mining company Gecamines, its minority partner at the mine, were going according to plan.

“Both parties are confident to properly resolve the problem within the framework agreement,” the chairman said.

IMF DEAL

Kazadi also said he expected the International Monetary Fund’s review next month of the $1.5 billion three-year programme that received final approval in July to confirm all the conditions had been met.

“There is no doubt that the review should be successful and will lead to a new disbursement in December,” he said, adding the next disbursement of just over $200 million would be used to bolster foreign currency reserves.

Meanwhile the government plans to use half of the 1021.7 million Special Drawing Rights ($1.45 billion) – the IMF’s own currency – allocated to Congo to further shore up reserves, he said.

A big chunk of the remainder will be used to launch an investment fund aimed at diversifying Congo’s economy, he said.

“It will implement new projects in new kinds of areas, like agriculture or energy production,” said Kazadi.

Source: Reuters

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