Gold Mine CEO Says ‘No New Mining Taxes In DRC’

Gold Mine CEO Says ‘No New Mining Taxes In DRC’

The Democratic Republic of Congo is rich in minerals but doing business there is so difficult that proposed tax hikes for mining companies will stifle new investment, according to a Reuters report in MiningWeekly.

Companies that mine DRC’s rich reserves of gold, diamonds, cobalt and copper have, until now, paid corporate taxes of 30 percent. A proposed tax hike to 35 percent and a new windfall tax of 50 percent are an effort by the government to boost mining revenue — the country’s main source of gross domestic product, Reuters said.

Given the political instability and the country’s poor infrastructure, DRC’s regulatory environment needs to be particularly attractive to investors, mining companies say.

Randgold, a British mining company headquartered in the Channel Islands, operates the $2.5-billion Kibali gold mine, one of DRC’s largest.

Randgold poured its first Kibali gold in September 2013 and and said in an October statement that it expects to produce 650,000 ounces of gold per year for the next 10 years, according to TheAfricaReport.

Under the current tax proposal, Kibali would never have been developed, Randgold CEO Mark Bristow told Reuters during a phone interview while he was en route to Congo to lobby the government to roll back the proposal.

Bristow said the Kibali mine and others in the country were protected by a 10-year stability clause so they wouldn’t have to pay new taxes for 10 years after any new tax proposals became law. Only new mining ventures would be hit by these new rules.

Black Americans Have the Highest Mortality Rates But Lowest Levels of Life Insurance
Are you prioritizing your cable entertainment bill over protecting and investing in your family?
Smart Policies are as low as $30 a month, No Medical Exam Required
Click Here to Get Smart on Protecting Your Family and Loves Ones, No Matter What Happens

“All those (proposals) really hurt, to a point where a standard gold mine doesn’t make a return for the investors so no one will invest,” Bristow told Reuters.

Congo’s Prime Minister Augustin Matata Ponyo has been vocal about the need to increase revenue from Congo’s mining sector, according to a 2014 report in TheAfricaReport.

He said by 2016 he plans to almost double mining revenue from the current 14.5 percent to 25 percent of the national budget.

Congo’s economy was long been crippled by corruption, bad management and 20 years of armed conflict in the east.

But investors are now rushing to cash in on largely undeveloped reserves of copper, gold, and cassiterite, according to TheAfricaReport. The economy has been forecast grow by as much as 10 percent in 2015, thanks in part to the expanding mining sector.

What DRC doesn’t have is good geological information, a population with job skills and political stability. Lack of these leads to risky investment, Bristow said in TheAfricaReport.

“This country can’t afford to make itself even less competitive than it is today,” he said.

Randgold and Johannesburg-based AngloGold Ashanti each own 45 percent of Kibali. Government-owned Sokimo owns 10 percent.

DRC is one of Africa’s largest producers of copper, according to TheAfricaReport. Phoenix, Arizona-based Freeport-McMoRan Inc — one of the world’s largest gold and copper producers — and Switzerland-based Glencore Plc have large copper investments in DRC.

Several African countries including Zambia, Ghana, Mali, and Cote d’Ivoire have tried in the last few years to boost mining revenue with higher taxes, only to later back down, according to Reuters.

Bristow told Reuters he was confident the DRC government would also back down.