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Randgold Resources, Glencore Plc, and other mining companies are fighting a new mining bill in the Democratic Republic of Congo that would raise taxes and boost the government’s stake.
The new code, which the country’s Parliament has approved, would increase taxes on what are known as strategic—or critical—minerals such as cobalt from 30 percent to 35 percent and raise the government’s stake in new mining projects from 5 percent to 10 percent. Lawmakers also approved a 50 percent super profits tax and raising royalties from 2 percent to 3.5 percent.
The measure awaits President Joseph Kabila‘s signature.
The Democratic Republic of Congo is the world’s largest producer of cobalt—as it has about two-thirds of the global deposits. Cobalt is a main battery component of electric vehicles, and it has defense and aerospace uses. It’s also one of the minerals the countries like the U.S. stockpile in case of national emergencies.
More than $750 million of mining revenues paid by mining companies to state bodies in the Democratic Republic of Congo was lost to the treasury between 2013 and 2015, according to Global Witness, the London-based nongovernmental organization.
Most of the country’s mining revenue was lost through corruption, tax holidays, inefficient tax collection, fraudulent declarations to the tax authorities, and embezzlement, the organization said.
But in the past five years, a resurgent economic patriotism has been spreading in this central African country, with calls to have taxation sections of the current mining laws amended or scrapped altogether, it said.
“The new mining code will make mines a true motor of the development of this country,” DRC Mining Minister Martin Kabwelulu told senators last month.
The major international mining companies, including Ivanhoe Mines Ltd., China Molybdenum Co. Ltd., and Rangold, have asked Kabila not to sign the new law.
At the African Mining Indaba conference in Cape Town, South Africa, Mark Bristow, Randgold’s chief executive, warned that African mining is at crossroads and higher government taxes on minerals like cobalt would have consequences.
“Start making unreasonable demands, and investors will vote with their feet,” Bristow told delegates Feb. 6.
But Robert Friedland, executive chairman of Ivanhoe, said his company was willing to pay the higher taxes and royalties, provided the move would be counterbalanced by stability, accountability, and transparency.
While Friedland was careful not to break ranks from other companies such as Rangold and their hard-line position that the new code must be renegotiated. The Democratic Republic of Congo’s government should honor previous agreements as outlined in the country’s 2002 mining code, Ivanhoe Mines said in a news release.
But the mining companies in general are keeping up a united front and are vowing to oppose the code.
“If this fails, however, we shall seek to enforce our rights including those which provide for international arbitration,” Bristow said in a Feb. 4 statement of the companies’ efforts.
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