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Ivanhoe Mines chairman Robert Friedland said he would pay higher taxes, but only if it benefits local people.
Ivanhoe Mines (TSX:IVN) founder Robert Friedland is ready to pay higher royalties and taxes as proposed by a new mining code in the Democratic Republic of Congo (DRC), but only if it benefits local people.
“I don’t mind paying . . . as long as that royalty goes to develop, help and empower local people,” he told investors at a conference in Cape Town. “I want the accounting of that money to be transparent and absolutely help people around the mines.”
The new bill, which has yet to be signed off on by President Joseph Kabila, will allow the country to increase taxes and royalties from 2 percent to 3.5 percent for base metals. It would also create a 50 percent “super-profits” tax if commodity prices rise faster than expected.
“I am not concerned about the level of taxation, that’s not the fundamental issue. The issue is the mining industry needs stability and we absolutely need transparency,” Friedland added.
Shares of Ivanhoe Mines, which is developing the Kamoa-Kakula project, have plunged almost 20 percent since the DRC Congress passed the revised mining code last week. Other miners in the country have also been under pressure, including Randgold Resources (LSE:RRS), Glencore (LSE:GLEN) and MMG (HKG:1208).
Friedland said the industry was united in its determination to reach a “sustainable” long-term solution for taxes and royalties in the DRC and was “absolutely confident” there would be dialogue with policymakers and President Kabila.
The DRC, the world’s top cobalt-producing country, introduced the current mining law in 2002 in an effort to increase transparency for foreign companies. But despite including a clause protecting miners for 10 years if any changes were made to the legislation, the new revised code says the measures will be enacted immediately.
“The mining industry is sick and tired of being gored,” Friedland said. “We are like a herd of antelopes, our horns pointing out united in our opinions.”
Other executives have also voiced concerns about the new bill, such as Mark Bristow, CEO of Randgold, which produces 45 percent of its gold in the DRC. He said Randgold would take its case to the International Court of Arbitration if the law is approved by President Kabila.
“It is our express wish that the government grasps the serious consequences this ill-considered code will have on its ability as a country to attract international investment and re-investment to the DRC, and to refer the code back to the ministry of mines for further consultation with the industry,” he said.
On Thursday, shares of Ivanhoe Mines fell 4.83 percent to close at C$2.76 in Toronto. The company’s share price has been on a downtrend since the beginning of the year, down 33.25 percent year-to-date.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.
