Ouch -- Kat and others to pay 50% windfall tax Congo rejects mining industry proposal to soften new law
Reuters Staff
* New mining code signed into law earlier this month
* Fiercely opposed by industry
* Miners proposed paying more to produce if exemptions maintained
* Mines minister rejects the proposal (Adds details and context)
By Amedee Mwarabu
KINSHASA, March 23 (Reuters) - Democratic Republic of Congo’s mines minister rejected a proposal by mining companies on Friday to soften some provisions in a new mining code in exchange for higher royalties.
Mining companies had said earlier on Friday that they were willing to pay the government more to produce cobalt, gold, copper and other minerals if the government agreed to respect 10-year exemptions to changes to fiscal and customs regimes for existing projects, and cancel certain taxes.
It was miners’ latest attempt to curb the impact of a strict new code that includes a 50 percent windfall profits tax on mining companies and was signed into law by President Joseph Kabila this month in the face of fierce industry opposition.
“We cannot change anything in the mining code,” Martin Kabwelulu said at the start of talks between the government and the industry over how to implement the law.
“The taxation as laid out in the mining code is untouchable. It stays,” he said.
Randgold executive Willem Jacobs, speaking on behalf of mining companies operating in Congo, had pushed for the government to respect the 10-year exemptions and scrap the windfall profit tax, which applies if commodity prices rise above certain levels.
In a meeting before he signed the code on March 9, President Kabila assured the companies, including Randgold, Glencore, China Molybdenum and Ivanhoe that their concerns would be considered in follow-up talks to draft regulations for the sector.
The miners had warned that the new code would scare off investment and violate existing agreements. Randgold had threatened to challenge it through international arbitration too, although the companies struck a more conciliatory tone ahead of the latest talks.
Congolese officials have stuck to a hard line on the code, though, insisting that compromises reached in the new talks cannot contradict provisions in the code.
The office of Prime Minister Bruno Tshibala also appeared to pre-empt those negotiations last week by announcing that the government planned to designate cobalt a strategic substance and possibly copper as well, which would increase their royalty rate fivefold.
Congo mines about 60 percent of the world’s cobalt, which is a key ingredient in lithium-ion batteries. World prices have more than tripled in the last two years due to surging demand for electric vehicles.
Congo is also Africa’s top producer of copper, of which it mined more than 1 million tonnes last year. (Reporting By Amedee Mwarabu; Writing by Aaron Ross; Editing by Edward McAllister/David Evans/Susan Fenton)