Gecamines woos Chinese investors for Congo mining projects - Financial Times

Tenke Fungurume, the largest copper mine in the Democratic Republic of Congo © Reuters

The chairman of Gecamines, the state-controlled mining company in the Democratic Republic of Congo, has outlined ambitious plans to partner with Chinese investors to ramp up production of copper and other commodities in the resource-rich African country.

Albert Yuma Mulimbi told the Financial Times he was dissatisfied with most existing joint ventures involving western mining companies, and claimed they had failed to generate adequate returns for Gecamines.

Gecamines is proposing to use a partnership with China Nonferrous Metal Mining Group to develop a major new copper mine as a blueprint for future joint ventures with other Chinese companies or overseas investors.

Mr Yuma said Gecamines was seeking to lift production at projects involving the company to more than 100,000 tonnes of copper a year by 2018, compared with less than 20,000 in 2015. As well as being home to 10 per cent of the world’s copper reserves, the DRC is also a major source of cobalt, widely used in so-called superalloys and lithium ion batteries.

“We want to become again, as in the past, one of the biggest players in copper and cobalt,” said Mr Yuma in an interview with the Financial Times.

Albert Yuma Mulimbi, chairman of Gecamines © AFP

After the country’s mining sector was nationalised in the 1960s by the then dictator Mobutu Sese Seko, Gecamines became a major industry force, producing almost 500,000 tonnes of copper each year during the mid-1980s.

But the company came close to collapse during the final years of Mobutu’s rule, which ended in 1997.

Mr Yuma said the DRC had been told in the early 2000s by international bodies such as the World Bank and the International Monetary Fund to sell assets to overseas mining companies that would develop the projects and pay dividends and other income streams to the country.

This left Gecamines with minority interests in major DRC mines, with western companies such as Freeport-McMoRan of the US, Switzerland’s Glencore and Canada’s Ivanhoe Mines having controlling stakes and operating the projects.

But Mr Yuma complained that existing deals with international companies had failed to generate dividends for Gecamines, which is burdened with almost $1.5bn of debt.

“We don’t have dividends and all the revenue is exported and transferred,” he said. “So this kind of business is not good any more.”

Gecamines is embroiled in a legal dispute with Freeport over Tenke Fungurume, the DRC’s largest copper mine, where the two companies were partners.

Freeport announced plans in May to sell its controlling stake in Tenke to China Molybdenum.

Last week the deal was completed after Canada’s Lundin Mining, which owns 24 per cent of Tenke, said it had agreed to sell its stake to BHR Partners of China for $1.1bn.

Gecamines, which owns 20 per cent of Tenke, said the deals involving Freeport and Lundin ignored its pre-emptive rights to buy the stakes.

Gecamines has taken its case to an international court in Paris in an attempt to block the Freeport deal.

“We’re not blocking the Chinese,” said Mr Yuma, who claimed Gecamines had financial backing to buy Freeport’s stake. “We are blocking Freeport who want to sell without respecting our rights.”

A copper processing plant in Katanga province, in the Democratic Republic of Congo © Bloomberg

Meanwhile, in an effort to secure dividends and royalties from existing mines involving overseas companies, Gecamines is planning to audit all major projects in the DRC to see whether it has been treated fairly as a minority investor.

“We are conducting various audits in all the joint ventures we have because, I am sorry to say, generally speaking we are not happy with most of them,” said Mr Yuma.

He added the new partnership with China Nonferrous Metal Mining — under which the Chinese company has agreed to spend $2bn to build and operate a copper processing facility in the mineral-rich Katanga province — could be a suitable model for future joint ventures.

China Nonferrous Metal Mining will have a 51 per cent stake in the facility, with Gecamines holding the remainder, and Mr Yuma said the Chinese company would have its investment repaid through copper sales. Once this was done, he added Gecamines would aim to secure control of the project, suggesting that would happen within eight to 10 years.

“That’s the new vision,” he added, indicating Gecamines initially wanted stakes as high as 49 per cent in future joint ventures, rather than the smaller ones it has in existing partnerships with overseas mining companies.

“If you are not ready to do that … we’ll pull you out, push you out and if we have to fight in court to have a decision, we’ll do it,” he said.

Analysts said Mr Yuma’s ability to execute his plan to increase production of copper and cobalt in the DRC could be hampered by the country’s political crisis.

Joseph Kabila, president, was due to step down this December but elections have been delayed until April 2018, raising tensions in the country. Angry opposition parties have promised to escalate their protest movement if Mr Kabila clings to office.

Campaigners have called on Gecamines to be more transparent and also question whether the company can raise financing for projects.

“They are a black box in the middle of the Congolese mineral system,” said Nathaniel Dyer of Global Witness. “They haven’t been able to demonstrate on a large scale the ability to carry out these copper projects themselves. They would need to massively up their game in terms of corporate governance.”

Freeport and Lundin declined to comment on Mr Yuma’s complaint about dividends.

However, one person familiar with Tenke said it had not paid dividends because the mining companies needed to recover their costs and the funds invested in the project. He added the companies had paid taxes and other monies for exploration to the DRC.

Glencore declined to comment. While its DRC operations have not issued a dividend, last year Glencore paid $600m in taxes and royalties to the country.

Ivanhoe was not immediately available for comment.

Additional reporting by John Aglionby and Tom Burgis

This article has been amended to clarify that Joseph Kabila had been expected to step down as DRC president in December 2016.