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South Africa: Mining Sector 'Confused' By Leaked Congo Licence Report
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Business Day (Johannesburg)
6 November 2007
Posted to the web 6 November 2007
Charlotte Mathews
Johannesburg
THE leak of a document at the weekend, pre-empting the outcome of the long-awaited Democratic Republic of Congo government review of mining licences, has thrown SA's mining sector into confusion.
Mining companies with activities in the Congo include Nikanor, Metorex, AngloGold Ashanti, BHP Billiton, Anvil Mining, Katanga Mining, First Quantum, Freeport McMoran and De Beers.
Some of these companies have invested considerable sums not only in mining operations but also in supporting infrastructure. This year Anvil will spend $65m on capital projects in the Congo and it has spent $3m on social projects.
Nikanor estimates the cost of rehabilitating the KOV pit will be about $1,8bn. It will generate 5000 indirect jobs, beyond the 1400 people employed directly. Nikanor is also investing in roads, water and electricity. All the mines have social projects involving health care and education.
According to Reuters and Bloomberg, 61 mining licence contracts were reviewed in a process that has been under way since March. The Congo concluded that 38 contracts would have to be renegotiated and 23 cancelled.
But mining industry sources said Congo Deputy Minister of Mines Victor Kasongo had appeared on TV on Sunday to say the report obtained by the wire services was not the final version.
When the final report was ready, it would be submitted to the mines minister who would make recommendations to the Congo cabinet.
Yesterday the share prices of some of the smaller companies, for whom their Congo activities are more influential than for the multinationals, fell 5%-10%, with Anvil Mining 12% weaker on the Australian Stock Exchange, Nikanor down 5% on London's AIM by early afternoon and Metorex 6% lower on the JSE. But resources stocks were generally weaker yesterday on falling base metals prices and general market unease, with companies such as Xstrata, Rio Tinto and Billiton about 4% lower.
The Congo government has been reviewing mining contracts with private companies that were negotiated during the 1998-2003 war and the following three-year transitional government period. A United Nations report concluded there had been "mass-scale looting" of natural resources during the war.
Brinkley Mining and Camec have so far been reported to have invalid contracts. A court ruled in September that Camec's licence was invalid but a verdict is awaited after a subsequent court hearing last month. Camec said it had invested $150m in the Congo and was confident of the validity of its licences. Brinkley said it did not have a licence but it had a memorandum of understanding and legal agreements on forming a joint energy company.
BHP Billiton spokeswoman Bronwyn Wilkinson said the group supported the mining licence review as it was a move towards greater transparency and part of the government's initiatives to create a good investment climate.
"We have been encouraged by the recent positive political developments in the Congo , especially the holding of successful democratic elections, and are further encouraged by various initiatives undertaken by the government to bring peace and stability to all parts of the Congo . The government is working hard to put in place investment conditions conducive to attracting companies such as ours to invest in the Congo ."
Billiton is involved in one contract under review, a joint venture with Miba on early stage diamond exploration in the Kasai region. The group had not been contacted by the Congo government or the commission about the report, Wilkinson said.
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AngloGold executive officer of corporate affairs Steve Lenahan said AngloGold had one concession in the Congo which was not yet a mining project, and it had said previously it was happy to have the licence reviewed. It had been contacted by the commission during the review and had had several dealings with it. AngloGold did not know officially how advanced the mining licence review process was and had not seen a report, Lenahan said.
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