Congo’s $ 6 billion mining deal with China ‘unacceptable’, draft report says

DAKAR, Oct. 8 (Reuters) – The Democratic Republic of the Congo is set to renegotiate its $ 6 billion mineral infrastructure deal with Chinese investors, according to draft report commissioned by a global anti-corruption body made up of governments, businesses and activists.

The draft, seen by Reuters, describes the deal that was first signed in 2008 as “unreasonable” and urges the Congolese government to reverse an amendment secretly signed in 2017 that sped up payments to Chinese mining investors and slowed down payments. reimbursements of infrastructure investments.

The final report is expected to be released this month by the Extractive Industries Transparency Initiative (EITI), which tracks revenue flows in the oil and mining sectors and has more than 50 countries, including Congo, among its members. .

The report has no legal force but, if the main conclusions of the project remain, it could reinforce the pressure of the Congo to obtain more favorable terms of mining contracts with Chinese investors. Read more

The government of President Felix Tshisekedi is reviewing the 2008 contract and reserve levels at China Molybdenum’s Tenke Fungurume mine (603993.SS) after saying Congo was not getting a fair deal.

Prime Minister Sama Lukonde Kyenge said at a mining conference on Thursday: “There has to be some adjustment.”

These measures represent a rare setback on the part of the Congo, the world’s largest producer of cobalt metal for batteries and Africa’s leading copper miner, against Chinese investors who control most of its mining industry.

As part of the 2008 deal with the government of former President Joseph Kabila, Chinese state-owned companies Sinohydro Corp (SINOH.UL) and China Railway Group Limited agreed to build roads and hospitals financed by profits. of the Congolese cobalt and copper joint venture Sicomines.

Critics say few of these projects have been completed.

The Congolese government spokesperson said he had not read the draft and could not comment. The EITI Congo office referred Reuters to the mission’s terms of reference and declined to comment further. A representative from Sicomines did not respond to requests for comment.

China Railway did not immediately comment. Sinohydro did not respond to a request for comment.

Fred Zhang, a senior Sicomines official, defended the deal in comments to Reuters last week, saying it had boosted the development of the Congolese people and that Sicomines would disburse more funds as production increased.

‘DENUNCIATION’

The project, written by two Congolese consultants, recommends “the denunciation by the Congolese state of the unreasonable nature of the joint venture agreement of April 22, 2008 and the return to the negotiating table by the shareholders of Sicomines”.

He says that the 68% stake of Chinese companies in Sicomines is too high since the Congolese have contributed all the mining assets and 32% of the initial capital.

He condemns the previously undisclosed 2017 amendment.

Under the 2008 contract, all Sicomines profits would initially go to reimbursing investments in Congo’s most urgent infrastructure projects. It is on this basis that the Parliament has agreed to exempt Sicomines from all taxes, says the project.

Under the 2017 amendment, seen by Reuters, only 65% ​​of Sicomines profits should initially be used to repay investments while 35% go to shareholders.

The change could further slow the pace of infrastructure projects, according to the project. To date, less than $ 1 billion of the expected $ 3 billion has been invested, about $ 1 billion less than expected at this point, he says.

“This amendment constitutes an attack on the security of the interests of the Republic”, specifies the project.

The draft report calls for a reassessment of Sicomines’ reserves, claiming a 2010 feasibility study was flawed and voiding another contract with the same Chinese investors for the construction of a hydroelectric dam.

Reporting by Aaron Ross in Dakar and Helen Reid in Johannesburg; Additional reporting by Sophie Yu in Beijing; Editing by Edmund Blair

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