Randgold Resources CEO Mark Bristow has sounded a stern warning to the government of the Democratic Republic of Congo (DRC) over the negative consequences of its proposal to review the country’s 2002 mining code.
He said the review, “could be catastrophic to the DRC economy” and cautioned that changes to key sections of the code – such as the “stability clause” – were likely to be challenged in the international courts.
Yet Bristow remained confident of reaching a positive outcome through “robust” engagement between the country’s mining industry and the government pointing out it was this kind of interaction that resulted in the 2015 proposals to change the mining code being dropped.
He told Miningmx, “ Unlike South Africa, the DRC is a country where you can engage in an open forum with government and 90% of the time the commercial logic will prevail. But it’s crucial that the mining companies step up to the plate. That’s what I’m doing. I’m joining the debate after the President’s announcement to Parliament about the review and I believe that if we have a positive engagement then we will come out with a better Mining Code.”
The DRC government’s actions come as Randgold’s Kibali mine gears up to commission its underground mining operations. The mine is forecast to produce about 610,000oz of gold this year compared with 585,000oz in 2016 but this will rise to about 750,000oz from 2018 when the underground operation hits full output.
Bristow said the existing 2002 Mining Code had been good for the country stating, “the key fact for me is that we built Kibali on the basis of the 2002 Mining Code and we never had to ask for any intervention outside of the law. The rules were good and we did not have to ask for any favours.”
He said the Kibali mine would not be affected by any changes that might be made to the existing code but such changes could affect Randgold’s continuing exploration programme looking for new gold mines to develop in the DRC. He commented, “right now, the DRC needs friends. It should be focused on retaining its existing investors and attracting new ones. It’s certainly not the time to harvest more from less for short-term gain.”
Bristow was critical of aspects of the government’s application of the existing 2002 Mining Code pointing out that it did not apply to many informal miners as well as to a number of major mining companies in the country which were operating under “exclusive conventions” which they had negotiated.
He maintained Government should first focus on collecting revenues due from the informal operators who were not complying with the Code and commented, “ it takes time to build confidence with investors and destruction of trust happens in a very short space of time. The positioning of the DRC as a mining destination should not be harmed as the extractive industries are the only industries with the potential to change the wealth of the DRC significantly.”
Turning specifically to Kibali he said the DRC government was currently “in violation of the Mining Code” on a number of issues including VAT returns and duty refund claims as well as “recoupment of the overpayment on the now reversed rate of minimum corporate tax.” As of March 31, Kibali was due more than $200m in unpaid VAT claims and duty refunds.
Bristow said it was critical that the DRC government clearly outline its objectives because “as with the previous proposed review the expressed aim is to maximize state revenue but without any other defined objectives.”
Major proposed changes in the shelved 2015 draft mining code included: the stability clause for a new project would drop from 10 years to 5 years; mining royalties would increase from 2.5% to 3.5% ; corporate tax would rise from 30% to 35%; state participation would increase from 5% to 10% and there would be steep increases in customs duties on fuel and intermediate goods.
Bristow cited the law on sub-contracting promulgated by the DRC president in February as an example of bad legislation commenting, “it emerged out of a political and populist position rather than a well thought law. “