GEOPOLITICAL RISK GOLD CRUDE OIL

[Ed Monton]

Canadians dip toe in Congo

By: Nicole Mordant


Posted: 2003/07/07 Mon 15:15 PDT / © Mineweb 1997-2003


VANCOUVER - Canadian miners, heartened by new mining rules and attempts at government reform in the Democratic Republic of Congo, are taking another look at exploring and developing projects in this hugely mineral-rich but deeply politically volatile country in the heart of Africa.
Although the new mining code was published last July, the provisions needed for its enforcement have only just been approved by the Congolese government. President Joseph Kabila's administration appears to be making a concerted effort at getting its mining policy in order although it is having less success on the political front.

Congo is one of the world's richest and unexplored mineral regions, endowed with resources including coal, cobalt, copper, diamond, gold, tin and zinc. But war, corruption, political strife and five different mining regimes in 40 years has decimated the sector, which once contributed a quarter of GDP but now supplies just 6% of a much-reduced pie. From the 50 or so mining companies active in the Congo in the 1960s, only seven have stayed on. But there are signs that this could be changing.

New deals
Under the aegis of the mining code, Toronto-listed America Mineral Fields [TSX: AMZ] last week settled drawn-out negotiations over the ownership of the Kolwezi copper-cobalt project with Congo's state mining company, Gecamines. AMZ President and CEO Tim Read says the deal offers secure mineral title, which, coupled with a "stabilising political environment" will allow the junior to get on with developing the tailings project in the south of the country.

Over on the northeast, Canadian junior Banro [TSX-V: YBE] last month obtained long-awaited presidential blessing securing its access to four gold properties that were snatched by the government in 1998 and then returned last year.

Congo is not only the preserve of the more adventurous juniors. In an interesting move, Toronto-based gold senior Kinross is considering making a foray into the Congo copperbelt. Although vague on detail, Kinross Vice-Chairman Arthur Ditto says Kinross is working with a Congolese-based company to possibly play a "merchant-banking" or "sponsorship" role in mining operations in the Kolwezi area. Ditto says any agreement is still a long way off but acknowledges the significance of the new mining legislation in attracting Kinross' attention.

"The mining code provides a framework for putting together a venture. Without that sort of thing, we would not be there," says Ditto.

The code
The aim of the code, sponsored by the World Bank, is to create a transparent and equitable set of rules for minerals investment in the Congo, replacing a former system that was at best haphazard and at worst plain corrupt.

"Previously everything was allowed, everything was negotiable," says an official in the mining unit of the World Bank. "Now there are rules and procedures for all major steps in mining development and nothing can be negotiated."

Based on best practice from other minerals legislation, the code covers the prospecting, exploration, exploitation, processing, transportation and sale of minerals. Experts say the code, which also sets clear guidelines on financing procedures and taxation, should speed up government decision-making on mining projects.

"The new mining code is a giant step forward. It levels the playing field to allow mining companies to pursue exploration and development activities on the same terms as in other countries," says Geoff Chater, a spokesman for Canadian copper mid-tier, First Quantum Minerals [TSX: FM; LSE: FQM].

First Quantum operates the Lonshi copper mine in the southeast pedicle of the Congo that juts into the heart of the Zambian copper belt. There is speculation the Vancouver-based junior has had some exploration success in the Lonshi area, but Chater declines to comment.

Fighting continues

Despite Congo's mineral riches, its world-class mining code and Kabila's apparent departure from the less-than-salubrious practices of his predecessors, political stability remains elusive. Congo is just emerging from a four-year civil war, which sucked in five of its neighbours and resulted in the deaths of an estimated 2.5 million people.

Kabila is in the process of creating a power-sharing government, which will include his supporters, rebels, civilian opposition and other civil society groups. The move is aimed at paving the way for multi-party elections, the first since independence from Belgium in 1960. But while these peace moves are ongoing in Kinshasa, fighting between government-backed rebels and tribal groups continues almost daily in the east.
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