• Amendment of the 2018 mining code: challenges ahead for companies in the DRC

    17 April 2018

    On March 9, a new mining law was signed by President Joseph Kabila of the Democratic Republic of Congo (DRC) despite protests from international mining corporations operating in the DRC, including Randgold, Glencore, China Molybdenum and Ivanhoe. The code reportedly entails an increment in royalty payments on cobalt, a windfall tax as well as the removal of a clause that protects mining operators from changes to the fiscal and customs regulations for 10 years. The government’s move to revise the mining code, which has not been amended since 2002, indicates that President Kabila’s administration is well aware of its strategic power on cobalt’s rising demand from tech giants like Apple, Samsung and automotive firms that require lithium-ion batteries for products such as computer chips, smart phones and electric cars.

    The new mining code recognizes cobalt as a “strategic mineral” and as the country produces about two thirds of the world’s cobalt production, analysts believe that royalty payments on cobalt exports are likely to increase from 2 to 5 or 10 percent. Although some reports suggest that international arbitration is still possible for the amendment, exact details of when and how such arbitration would take place are currently unknown. Recently on April 4, it was reported that international mining companies have issued a joint statement and have submitted to the Ministry of Mines in DRC an appeal against the 2018 code. In its statement, the companies reportedly agreed to 76 percent of the code and have proposed changes to the remaining parts. The letter addressed the challenges faced by mining companies on the increased tax payment and had proposed a scheme that would benefit and be effective for all parties, including the DRC government.

    Although some reports suggest that presidential elections are being planned in December 2018 in DRC, President Kabila, whose legal term ended in 2016, is likely to continue to stay in power through the financial income generated from cobalt’s natural resources. As international mining companies fight to amend the new code, some instability in the price of cobalt can be expected due to the uncertainties surrounding the royalty payment scheme. Customers who wish to understand the full context of cobalt, Resilience360’s Special Report on the cobalt supply chain, operational challenges in the DRC as well as the outlook for automotive industries and tech giants that require cobalt for lithium-ion batteries may provide additional insights.

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