DUBLIN--(Business Wire)--
Research and
Markets(http://www.researchandmarkets.com/research/f91c0e/democratic_republi)
has announced the addition of the "Democratic Republic of Congo Mining Report Q3
2009" report to their offering.
The Democratic Republic of Congo Mining Report provides industry professionals
and strategists, corporate analysts, mining associations, government departments
and regulatory bodies with independent forecasts and competitive intelligence on
the Democratic Republic of Congo's mining industry
The big news from the Democratic Republic of Congo's (DRC) mining industry in
the first half of 2009 was the news in March that the country plans to accept
US$9bn in investments from China, to be spent on mining and infrastructure
despite the opposition of the IMF. The IMF has expressed concern that this deal
which was originally agreed at the end of 2007 - will only add to DRC's current
debt burden. According to a report by Bloomberg, the deal will see China build
roads, railways, hospitals and schools in return for metals worth some US$50bn
at current prices.
Reuters also reported that negotiations on an initial US$6bn-worth of public
works and mining infrastructure projects have already been finalised, with both
sides still discussing the terms of the remaining US$3bn in funding. It is
reported that this US$3bn will be used to fund Sicomines Sarl, a mining joint
venture between state-owned metals producer La Générale des Carrières et des
Mines (Gécamines), and various Chinese miners. This new joint venture- to become
operational in 2011 is reportedly set to produce up to 400,000 tons of copper
and 19,000 tons of cobalt per annum. China's ambassador to DRC, Wu Zexian, has
denied that the country will be burdened with debt as a result of the deal, also
saying that the work is being carried out by China Railway Engineering
Corporation and Sinohydro Corporation, who have in turn received funding from
China Exim Bank and China Railway.
DRC is home to vast reserves of a wide variety of natural resources - primary
among them metals such as cobalt, copper, gold, and precious stones including
diamonds. DRC is believed to contain around 4% of the world's copper reserves
and one-third of its cobalt reserves. The mining industry, like the rest of the
economy in the central African nation, has suffered from the unstable political
environment coupled with widespread strife caused by the six-year civil war that
ended in 2003. However, for some time it appeared that, given high prices of
minerals on global markets, investors would be willing to discount the political
risk premium of investing in the DRC. But recent plummeting mineral prices and
escalating costs have, according to the government, quoted by Reuters, already
seen some 40 of the mining companies working in Congo suspending exploration,
development and production operations.
All mineral deposits in the DRC are state-owned and the holder of mining rights
also gains ownership of the mineral products for sale. Governed by the National
Mining Code, the Ministry of Mines regulates the Mining Registry, Directorate of
Mines, and the Geological Directorate in the DRC. A peculiar feature of the
mining industry in the DRC is that artisanal mining (i.e. non-mechanised
small-scale mining) accounts for 70% of the national diamond production. Thus,
in spite of being the world's third largest diamond producer in terms of output,
the country is ranked only seventh in terms of value. Furthermore, use of
archaic mining techniques has restricted possible growth in the diamond mining
segment. Outbreaks of violence and civil unrest, and the looting of minerals and
precious stones by armed militia continue to drain the country's rich natural
resources. Though things looked up after the formation of a new government
following the 2006 elections, analysts do not expect the macroeconomic and
political environment to stabilise any time soon. Indeed, a fresh wave of
fighting between a rebel group led by renegade general Laurent Nkunda and
government forces swept through North Kivu province, eastern Congo from late
August 2008. In addition, although multinational miners have started investing
in the country's mineral and metals sector, the physical infrastructure remains
extremely poor or even nonexistent at times.
Speaking to Reuters, Deputy Mines Minister Victor Kasongo announced in December
2008 that the government review of 61 mining contracts had been completed.
State-controlled miner Gécamines - which is seeking greater ownership of the
mining sector - had asked for more time to complete contract review talks, aimed
at overhauling deals signed in the chaos for the 1998-2003 war. Of the current
61 mining contracts under review, Reuters cites 14 as being 'green' (or
acceptable), 26 as 'orange' (needing further agreement), and 21 as 'red' (facing
cancellation).
However, Reuters also reported that six major companies had walked away from the
talks, including USbased Freeport McMoran, which is developing the Tenke
Fungurume project, due to come on line in late 2009. Several firms denied this,
stating that they were waiting to be invited back to the talks. Kasongo
announced that the talks would be extended by 45 days to allow the remaining six
contracts to be addressed. In December 2008, DRC's central bank governor cited
the dragging process as a factor contributing to the acute downturn of the
mining sector.
During the review, Kasongo had announced that the government would seek to
privatise some of the state-owned mining companies. He indicated that the first
flotation would take place within 12 months. At the time of going to press, it
is unclear whether these plans have been affected by economic developments.
BMI launched coverage of DRC's tin mining sector in Q408. Congo is Africa's
largest producer of tin and the east of the country is host to extensive
cassiterite reserves. Over the long term, tin could play an increasingly
important role in DRC's wider mining industry.
Though the long-term outlook appears sanguine, the outlook for the sector in the
near term remains clouded. Armed groups continue to dominate illegal tin mining
in the still war-ravaged east of DRC. This is preventing legitimate mining
concerns from exploiting this resource successfully. In the most recent example,
Kivu Resources announced in early October 2008 that it was declaring force
majeure at its Mpama Bisiye mine in Kivu province, having failed to reach an
accommodation with the Congolese soldiers who have occupied the site since
December 2004.
Global Overview
It is not just DRC in which China is actively purchasing mining assets. On page
7 of this report, the analyst examines the phenomenon of increased Chinese
activity in the global mining sector and what this means for the industry moving
forward.
Industry Forecast
The DRC is ranked third in the world in the production of diamonds in volume
terms. However, whereas this area was seen as a strong growth prospect for the
country, the current slump in demand for diamonds is forcing producers to cut
back on production and exploration. For example, in November 2008, Gem Diamonds
announced the immediate suspension of all alluvial and dredging exploration in
the DRC. Meanwhile, copper and cobalt mining has also been severely dented by a
massive decline in demand particularly from China - and plummeting prices.
Consequently, numerous operations have been suspended and projected copper
production for 2009 has been halved. The analyst believes that growth, in real
terms, will be negative over our forecast period, although the nominal value of
the industry will climb.
Posts
No comments:
Post a Comment