Congo’s $6 bln China mining deal ‘unconscionable’, says draft report

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  • The infrastructure agreement for minerals was first signed in 2008.
  • Subsequent amendments slowed down infrastructure plans, says draft
  • The report has no legal force, but it could help the Congo retreat
  • PM says ‘some adjustments have to be made’
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DAKAR, Oct 8 (Businesshala) – The Democratic Republic of the Congo has to deal with Chinese investors on a mineral deal for its $6 billion infrastructure, according to a draft of a report commissioned by a global anti-corruption body of governments, companies and activists Need to talk again.

The draft, seen by Businesshala, describes the deal that was first signed in 2008 as “unconscionable” and urges the Congolese government to repeal an amendment it secretly signed in 2017 that allowed Chinese mining Paid investors and slowed reimbursement of investments in infrastructure.

The final report is expected to be released this month by the Extractive Industries Transparency Initiative (EITI), which tracks revenue flows in the oil and mining sectors and counts more than 50 countries, including Congo, as members.

The report has no legal force, but if the main findings of the draft remain, it could add to Congo’s pressure to secure more favorable terms from mining contracts with Chinese investors.

President Felix Tshisekedi’s government is reviewing a 2008 contract and reserve levels at the China Molybdenum (603993.SS) Tenke Fungurum mine, after saying Congo was not getting a fair deal.

Prime Minister Sama Lukonde Kyenge told a mining conference on Thursday: “Some adjustments have to be made.”

The moves represent a rare pushback by Congo, the world’s leading producer of the battery metal cobalt and Africa’s top copper miner, against Chinese investors, who control most of its mining industry.

Under a 2008 deal with the government of former President Joseph Kabila, construction of roads and hospitals financed profits from a joint venture between Chinese state-owned firm Sinohydro Corp (SINOH.UL) and China Railway Group Ltd. agreed to.

Critics say that few of those projects have been realized.

A Congolese government spokesman said he had not read the draft and could not comment. EITI’s office in Congo referred Businesshala to the mission’s terms of reference and declined to comment further. A Sicomines representative did not respond to requests for comment.

China Railway had no immediate comment. Sinohydro did not respond to a request for comment.

A senior Sikomines official, Fred Zhang, defended the deal in comments to Businesshala last week, saying it had spurred growth for the Congolese and that Sikomines would distribute more funds as production increases.

‘Condemnation’

The draft, written by two Congolese consultants, recommended “congolese state condemnation of the subliminal character of the April 22, 2008 joint venture conference and a return to the negotiating table by Sekomine shareholders”.

It says Chinese companies hold a whopping 68% stake in Seikomine as Congo contributed 32% of all mining assets and initial capital.

It condemns a previously unknown 2017 amendment.

Under the 2008 contract, all profits of Sikomines will initially go to reimbursement of investments in Congo’s most urgent infrastructure projects. On this basis, Parliament agreed to exempt Sikomines from all taxes, the draft said.

Under the 2017 amendment, seen by Businesshala, only 65% ​​of SeikoMines’ profits should initially go toward reimbursement of investments, while 35% goes to shareholders.

The draft said the change could further slow down the pace of infrastructure projects. So far, less than $1 billion of the expected $3 billion has been invested, which is less than the $1 billion estimated at this stage, it says.

“This amendment is a violation of the protection of the interests of the republic,” the draft said.

The draft report called for a re-evaluation of Seikomines’ reserves, stating that the 2010 feasibility study was flawed, and the cancellation of another contract to build a hydroelectric dam with the same Chinese investors.

Reporting by Aaron Ross in Dakar and Helen Reid in Johannesburg; Additional reporting by Sophie Yu in Beijing; Editing by Edmund Blair

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