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Congo resolves dispute over copper mine

October 27, 2010

“Freeport-McMoRan, the US copper mining group, has resolved a long-standing dispute with the Democratic Republic of Congo over control of a vast copper mine by giving cash and shares to the government.

The Tenke Fungurume project, which could be ranked among the world’s top 10 new sources of copper, has been plagued by uncertainty since 2007, when Congo’s government decided to review all mining licences signed during the war in the country between 1998 and 2003.

More than a year of negotiations, thought to have involved the US government in support of Freeport, led to changes to the Tenke licence. Under the new terms, Gecamines, the state mining company, will own 20 per cent of Tenke, an increase from 17.5 per cent. Freeport will pay $30m to Congo “in six instalments after reaching certain production milestones”, as well as $5m in “surface area fees”. “

Source: Financial Times, October 26 2010

Observations:

  • The development of the deposit, staring early 2009, has not stopped during the dispute. However, full production has not yet been reached.
  • The Tenke deposit is owned by Freeport-McMoran and Lundin Mining. Furthermore Gecamines, the state-owned mining company of Congo, holds 20% of the mine’s shares.

Implications:

  • The arrangement between Freeport-McMoran and the government of Congo could be seen as a model for other land right and mining arrangements between foreign mining companies and African governments. A fee for access to the land helps the government to invest in infrastructure, while the parties both commit to the success of the project by tying the payments to production milestones and by both holding a shares of the project.

©2010 | Wilfred Visser | thebusinessofmining.com

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