A powerful group of top mining executives, including Canadian mining tycoon Robert Friedland, has failed to derail the momentum of a controversial new tax code in the Democratic Republic of the Congo.
The multinational miners held a six-hour meeting with Congolese President Joseph Kabila on Wednesday, but the government said it will proceed with its planned tax increases without any changes.
The government did agree, however, to listen to the concerns of the mining companies after the tax code is signed into law. Their concerns will be addressed in regulations that are introduced after the tax law is approved, according to a statement on Thursday by Mr. Friedland's company, Ivanhoe Mines Ltd.
Ivanhoe's stock price dropped by 24 per cent in the week after the Congo parliament's decision to approve the new tax code in late January, although Mr. Kabila had not yet signed it into law. Ivanhoe's shares dropped by another 3 per cent by mid-afternoon on Thursday after it became clear that Mr. Kabila will sign the revised tax code into law.
Ivanhoe is developing the huge Kamoa-Kakula copper project in Congo. The mine could become the biggest copper mine in the world, according to Mr. Friedland.
The revised law will boost copper royalties from 2 per cent to 3.5 per cent and could also increase cobalt royalties from 2 per cent to as much as 10 per cent. If commodity prices rise faster than expected, it would create a 50-per-cent "superprofits" tax. The new law also eliminates a stability clause that had protected Congo's existing mining companies from tax increases for a period of 10 years.
Congo has become an increasingly important source of minerals in recent years. It is the world's top producer of cobalt, used in smartphones and electric cars. But its government has complained that it is not receiving enough revenue from its vast mineral resources.
The revised mining code has alarmed many of the world's top mining companies. They agreed to band together in a bid to fight the tax changes.
The importance of the issue was demonstrated vividly when the companies decided to send their highest executives in the delegation that flew to Congo's capital, Kinshasa, to meet Mr. Kabila. Among the delegation were Mr. Friedland, Glencore chief executive Ivan Glasenberg, Randgold Resources chief executive Mark Bristow and China Molybdenum executive chairman Steele Li.
The meeting with Mr. Kabila was "positive and constructive" and all sides had agreed to continue discussions to "resolve industry concerns" after the new tax law is promulgated, Ivanhoe said in its statement on Thursday.
Congo's Prime Minister, Bruno Tshibala, told the Reuters news agency on Thursday that he was certain that Mr. Kabila will sign the new tax law without changes. "It's not a question of finding a compromise," he said. "It only remains to sign it off."
At a mining conference in South Africa last month, Mr. Friedland urged investors not to "freak out" over the new tax code in Congo.
He said the international mining companies had been "gored" but they were like "a herd of antelopes with our horns pointing out" as they formed a united front against the tax changes.