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Battle lines drawn as companies reject DRC’s proposed mining code

Keywords: Tags  Democratic Republic of Congo, DRC, mining code, copper, cobalt, iron ore, diamonds, gold mining

WINDHOEK, Namibia — Mining companies in the Democratic Republic of Congo (DRC) have raised objections to the government’s proposed mining code, describing some clauses as "a step backwards."

The revised mining tax regime is counterproductive and a breach of stability clauses that were signed by companies in 2002, according to the DRC’s Chamber of Mines.

Mining companies are opposed to the government’s proposal to hold a 35-percent share in mining projects, in addition to the 5 percent the state is entitled to buy under the existing code. The move would be "perceived and interpreted by investors as partial nationalization of their companies," the chamber said.

The new mining code also proposes a new tax regime and higher royalties to maximize revenue collection.

"If in the old mining law state participation was voluntary, the idea of compulsory participation without financial compensation is a step backwards," the chamber said.

It also argued that the new draft cannot change mining investors’ rights, which are safeguarded by a stability clause signed under the 2002 code.

"The proposals made by the state do not meet the tax and legal parameters which prevailed at the time when the investments were made and in particular provisions such as the stability clause," the chamber argued. "The impact of the proposed revised tax system will lead to a lack of competitiveness in Congolese mining, which is also subject to strong international competition."

AMM sister publication Metal Bulletin warned last year that the DRC will face difficulties in enforcing the new code, particularly its push for 35-percent shareholding in mining projects.

The DRC wants mining companies to pay a 6-percent mineral royalty, up from 2 percent, for nonferrous minerals; 6 percent for strategic and precious metals; and 6 percent for gemstones and diamonds, as well as a 35-percent corporate tax, up from 30 percent.

Mining companies will face a 50-percent super-profit mining tax, calculated if the price of minerals increases to more than 25 percent of the forecast price in the project bankable feasibility study.

The chamber said the super-tax proposal "will be rejected."

Mining companies would also be required to repatriate 40 percent of export earnings, failure of which will attract a "fine of an amount equivalent to 5 percent of the amount not repatriated."

A version of this article was first published by AMM sister publication Metal Bulletin.

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