(Bloomberg) - The Democratic Republic of Congo's government will soon announce which minerals are to be designated "strategic" and subject to a 10 percent royalty rate, the mines minister said.
Congo's updated mining code, signed by President Joseph Kabila in March and applied since regulations were finalized in June, introduced new taxes and hiked royalties on all metals - including raising copper and cobalt to 3.5 percent from 2 percent and gold to 3.5 percent from 2.5 percent. The law also established the category of "strategic" minerals, to which a rate of 10 percent will apply, though the state hasn't yet identified which metals will be affected.
"A decree from the prime minister will be able to do it very soon," Minister Martin Kabwelulu said by email on Friday. "My experts are working on it.""My experts are working on it."
The mining code is contested by major investors including Glencore Plc, China Molybdenum Corp. and Randgold Resources Ltd., which have said they may launch international legal challenges against the reforms if they aren't softened significantly. A particular source of anger is the cancellation of a 10-year stability clause, present in the superseded law from 2002, which would have protected miners against fiscal modifications until 2028.
Kabwelulu said in January that cobalt, a once obscure byproduct of copper and nickel mining but now a key component in electric batteries, could be categorized as "strategic." The metal's importance and value has soared in recent years, driven by growing global demand for electric vehicles. In 2017, Congo's mines were responsible for two-thirds of the world's cobalt output, or 81,000 metric tons."If the international economic situation demands it, the head of government may, in the interest of the state, declare certain mineral substances as 'strategic substances."
"The revised mining code provides that if the international economic situation demands it, the head of government may, in the interest of the state, declare certain mineral substances as 'strategic substances,"' Kabwelulu said in January. The old law did not "authorize the government to classify cobalt or tantalum as a strategic substance," he told lawmakers, saying cobalt has "not only a strategic but also a critical character" on the world market. Congo also produced about a quarter of all tantalum mined last year.
Glencore and China Moly would be among the companies most affected by any decision to make cobalt strategic. Glencore's Mutanda unit was the world's largest cobalt miner in 2017, producing more than 23,000 tons, according to Guildford, U.K.-based Darton Commodities Ltd., and is set to be overtaken by Kamoto Copper Co., which is also controlled by the Swiss commodity giant. China Moly owns Tenke Fungurume Mining, which mined almost 17,000 tons of cobalt last year.
Congo should "be able to enjoy the benefits of cobalt's global importance," Jacques Kamenga, the managing director of state mining company Gecamines said at a conference in the southeastern town of Kolwezi on Sept. 12. "Considering cobalt as a strategic product, as stated by the new mining code, is a first step," he said.
(By William Clowes)