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Report: DRC may lose US$3B in income, face legal action over new mining code

Mining companies warned the government of the Democratic Republic of the Congo that it could lose more than US$3 billion from the existing copper, cobalt and gold projects over a decade and face legal action if it implements a new mining code, Bloomberg News reported May 29.

President Joseph Kabila signed a new mining code into law March 9, despite opposition from mining companies.

A group of mining majors including Glencore PLC, Randgold Resources Ltd., Ivanhoe Mines Ltd. and China Molybdenum Co. Ltd. are pushing that the government abandon some aspects of the new mining code, and have said earlier they would accept 76% of the articles.

"There can be no ambiguity, from a governmental point of view, as to the intention of the mining companies to protect their rights" if the law is implemented, the companies said in an April 30 note to the government, which has not been made public yet.

The companies said they have "confidence in their legal position," adding that "the government will not consequently be able to collect the revenues expected" from the new code.

Two people familiar with the negotiations, who asked for anonymity, showed the note to the news wire.

The mining firms are seeking reinstatement of a stability clause and removal of a 10% tax on strategic minerals. The companies proposed earlier that they would allow royalty rates for copper, cobalt and gold to fluctuate with their international market prices in exchange for the elimination of a 50% windfall tax in the new code.

"The government will not benefit from any of the expected benefits of applying the current version of the mining code, since the mining industry will vigorously and collectively reject this application," the companies noted.

The note was written in response to questions from the government regarding potential financial impact of the new law. Mines Minister Martin Kabwelulu did not respond to Bloomberg's request for comment.