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Major mining companies operating in the DRC want to put forward “once again” their thoughts about changes in the mining code.
Top cobalt producer Glencore (LSE:GLEN) has joined forces with other major miners to challenge a tax reform in the Democratic Republic of Congo (DRC) before it’s approved by President Joseph Kabila.
Mining companies operating in the African country sent a letter to Kabila at the beginning of the month requesting a meeting to “once again” put forward their positions about changes to the mining code approved by lawmakers in January, Bloomberg reported.
The new bill, which has yet to be signed off on by the president, will allow the country to increase royalties for cobalt from 2 percent to 10 percent if the metal is categorized as “strategic substance.” It would also create a 50-percent “super-profits” tax if commodities prices rise faster than expected.
The companies, including Randgold (LSE:RRS) and China Molybdenum (HKEX:3993), claim that their interests have been poorly served by the Chamber of Mines, an industry body, after it “was unable to satisfactorily consolidate and communicate [their] wishes during the re-visitation of the Mining Code.”
The miners also said they have decided to formalize their relationship by “establishing an association of major mining companies in the DRC.” According to Bloomberg, Ivanhoe Mines (TSX:IVN), MMG (HKEX:1208), Zijin Mining Group (HKEX:2899) and AngloGold Ashanti (JSE:ANG) also signed the letter.
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.
Shares of most miners operating in the DRC have been under pressure after the tax reform announcement, with Ivanhoe Mines falling almost 20 percent after the news.
Ivanhoe’s chairman, Robert Friedland, has said the mining industry is united in its determination to reach a “sustainable” long-term solution for taxes and royalties in the DRC. He added that he is “absolutely confident” that there will be dialogue with policymakers and Kabila.
In December, major companies said in a statement that they would defend their investments by all means at their disposal. In fact, Randgold CEO Mark Bristow said he would take the case to the International Court of Arbitration if the law is approved.
“The mining environment in the DRC needs to be improved, but improved in consultation with the main investors, which are China Molybdenum, Glencore and ourselves,” he said.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.
