Miners and explorers knew that the Democratic Republic of Congo would be raising taxes and royalties, but were blindsided on Wednesday when lawmakers of the country voted in favour of an immediate lifting of a provision exempting licence holders of compliance with the new code for 10 years.
That means mines and projects run by companies including Glencore, Randgold Resources, China Molybdenum, Eurasian Resources Group, MMG and Ivanhoe Mines will immediately be subjected to higher royalties on metals including copper, cobalt and gold, as well as a new 50% tax on so-called super profits.
Super profits are being defined as income realized when commodity prices rise 25% above levels included in a project’s bankable-feasibility study. Given the improvement the price of most metals over the past couple of years – copper is up 67% since January 2016 and cobalt +150% – having to deal with the new levy is more than just a possibility.
The new code also permits the DRC to raise the royalty on cobalt to 10% from 2% if the government categorizes the mineral as a “strategic substance.”
Cobalt has become the hottest commodity in mining over an expected boom in demand from electric vehicles, most of which will be powered by nickel-manganese-cobalt batteries.
Annual production of the raw material is only around 100,000 tonnes primarily as a byproduct of nickel and copper mining with more than 60% coming from the DRC, where fears about political instability and the challenges of ethical sourcing combine to supercharge supply concerns. The country is only set to tighten its grip on supply as Glencore restarts its Katanga mine, ERG’s $1 billion RTR operation comes on stream later this year and Nzuri Copper’s advanced Kalongwe project enters production.
Bloomberg reports the central African nation’s parliament went ahead with the changes to the 2002 code even after Glencore CEO Ivan Glasenberg visited the country and met personally with President Joseph Kabila.
The instant application of the new measures appears to have come as a surprise to Congo’s mining industry. The tax increases “can in no way affect the current titleholders before the expiry of a 10-year period from the planned revision,” according to a statement published by Glencore, Randgold, Ivanhoe and MMG on December 11.
Source: Mining.com
