A court in the Democratic Republic of Congo has appointed a temporary administrator to run China Molybdenum’s Tenke Fungurume copper and cobalt mine at the request of state miner Gecamines, a minority shareholder in the project.
This follows a dispute that broke out last year between Congolese authorities and China Moly over reserve levels at the mine. According to Reuters, DRC’s government announced in August 2021 that it had formed a commission to reassess the reserves and resources at the mine in order to “fairly lay claim to (its) rights”.
China Moly, which has an 80 per cent stake in Tenke Fungurume, Congo’s second-biggest copper mine, said at the time it was confident the issue would be resolved. But the court order on February 28, 2022 showed state mining company Gecamines, which owns 20 per cent of Tenke Fungurume, petitioned judges in December to strip the mine’s current leadership of decision-making powers and appoint a temporary administrator.
The court appointed a Gecamines official as administrator for a period of six months taking over management responsibilities from China Molybdenum-appointed chief executive, Jun Zhou.
The new administrator will be charged with “reconciling the two partners on the points of divergence, namely access to technical information and social affairs of the company”.
The creation of the government commission in August was part of a broader set of moves against Chinese investors, who control about 70% of DRC’s mining sector, according to the country’s chamber of mines. The government has also said it is reviewing a $6 billion “infrastructure-for-minerals” deal from 2008 with Chinese investors that DRC politicians and activists have criticised as skewed in favour of the Chinese.
Alarm Bells
The move is likely to alarm mining investors as state participation in minerals ventures in several African countries becomes a growing trend.
Uganda’s Parliament recently passed the Mining and Minerals Bill, 2021 which calls for the establishment of a National Mining Company to manage the government’s commercial and participating interests in mineral agreements. The national company will hold a 15 per cent free equity in all large and medium mining ventures as well as have the right to pay up 20 per cent extra shares in the mining ventures at the commercial rate.
The Uganda Chamber of Mines and Petroleum (UCMP) responded to the development by petitioning President Museveni not to assent to the bill, arguing that the “free carried interest of 15 per cent from exploration to production is a disincentive to private sector investment”.
In 2017, Tanzania slapped a record $190 billion in revised taxes, interest and fines on Acacia Mining, a subsidiary of Barrick Gold after it accused the company of under-declaring its profits as a plot to evade taxes. The charges were later revised but not before Tanzania was assured of more state participation in the company’s operations.
Clean Energy Revolution
The DRC is the world’s top producer of cobalt, a metal used in electric batteries, and Africa’s leading miner of copper, so by taking back control of its mines, the Congolese government could become a big player in the global clean energy revolution.
China Moly is unlikely to let go of the mine easily though, as it figures prominently in the Chinese government’s effort to dominate major supply chains for minerals and metals needed in the production of batteries for electric vehicles.
Cobalt is essential in the manufacturing of electric vehicles. It is now trading at a three-year high as the world weans itself from fossil fuels.
Some observers have linked the DRC move to reconsider the Tenke Fungurume mine rights to pressure from the USA, which is disturbed by China’s stranglehold on the global supply of cobalt and other battery minerals.
A New York Times article quoted Tiffin Caverly, vice president at the Export-Import Bank of the United States, saying that China’s dominance of the battery minerals market may drive up prices, hurting the electric car manufacturing industry in the process.
The same article noted that the USA government was looking to strengthen ties with the DRC so as to gain access to its critical resources like cobalt. The USA recently sent a delegation to Kinshasa to meet with President Felix Tshisekedi and other top officials.
Uganda also has some significant copper and cobalt reserves at the Kilembe Mines in Kasese.
