Randgold, Glencore and other miners club together to fight Congo legislation

A group of mining companies, including Glencore and Randgold Resources, have banded together in an effort to halt legislative changes in the Democratic Republic of Congo (DRC).

A new code, approved by lawmakers on 27 January following a five-year reform process, was set to raise costs for mining companies in the country, Africa’s primary producer of copper and a key source of cobalt used in electric car batteries.

The group of companies, consisting of Glencore, Randgold, Ivanhoe Mines, MMG, Zijin Mining Group, China Molybdenum and Anglogold Ashanti, sent a letter to Congolese President Joseph Kabila on 8 February requesting a meeting to discuss changes to the mining code, Bloomberg reported.

The new laws are not wholly dissimilar to those recently passed in Kabila's former home of Tanzania under President John Mugulifi, with whom Kabila is close. Royalty rates in Tanzania for gold, copper, silver and platinum exports were hiked to 6% from 4% and government is looking to take a stake in mining companies operating there, as shareholder in Acacia Mining will know only too well.

Congo's overseas mining companies are also pushing to form their own association of major mining companies in the DRC, with members of the group such as Glencore, Randgold and China Moly having stated in December that they were willing to pursue the matter "by all domestic and international means at their disposal".

Mines minister Martin Kabwelulu said on Monday: "It is a pity that these companies are making a move outside FEC’s Chamber of Mines. The body has participated in discussions with all stakeholders since 2012."

Mark Bristow, chief executive of Randgold, which has been lobbying on the issue in recent weeks, said: "Watching people shoot themselves in the head, not even in the foot, is frustrating for me. 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."

As part of its mining legislative rejig, last month DRC proposed a potential increase in the royalty that miners would be required to pay on cobalt from 2% to 3.5%, by changing the category of cobalt as a "strategic substance". DRC is responsible for two-thirds of the world's cobalt supply.

Analysts at RBC Capital Markets said the new code could also mean cobalt is taxed at 35%, up from 30% if it is deemed strategic, and a 50% super profits tax would be levied, though last week acknowledged there was limited clarity and conflicting information on what that super profits tax entails at this point.

Economists have identified cobalt as a potential bottleneck for electric vehicle producers, with production of the metal likely to remain a major challenge for the next 5-10 years, especially given how the global industry was incredibly reliant on Congo.

Glencore has two main assets in the DRC, 85%-owned Katanga and wholly owned Mutanda, producing more than 500kt of copper and around 55kt of cobalt, both with further potential upside.