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The Mining Law

Review

Law Business Research

Fifth Edition

Editor

Erik Richer La FlÈche

The Mining Law

Review

Fifth Edition

EditorErik Richer La FlÈche

Law Business Research Ltd

PUBLISHER Gideon Roberton

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i

The publisher acknowledges and thanks the following law firms for their learned assistance throughout the preparation of this book:

ADVOCAAT LAW PRACTICE

ANDERSON & ANDERSON LLP

CRA – COELHO RIBEIRO & ASSOCIADOS

EMERY MUKENDI WAFWANA & ASSOCIATES

FALCON & HUME INC

FÁTIMA FREITAS ADVOGADOS

GENI & KEBE

HERBERT SMITH FREEHILLS

HERGÜNER BİLGEN ÖZEKE ATTORNEY PARTNERSHIP

HOLLAND & HART LLP

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JOSH AND MAK INTERNATIONAL

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MAYER BROWN INTERNATIONAL LLP

MINTER ELLISON

MIRANDA & ASSOCIADOS

PÉREZ BUSTAMANTE & PONCE

PINHEIRO NETO ADVOGADOS

QUINZIO & CÍA ABOGADOS

ACKNOWLEDGEMENTS

Acknowledgements

ii

RSM BOGARÍN Y CÍA SC

SQUIRE PATTON BOGGS

STIKEMAN ELLIOTT LLP

VHG SERVICIOS LEGALES SC

WILLIAM FREIRE ADVOGADOS ASSOCIADOS

iii

Editor’s Preface ..................................................................................................viiErik Richer La Flèche

PART I MINING LAW ��1–242

Chapter 1 ANGOLA ................................................................................... 1Idalett Sousa and Hugo Moreira

Chapter 2 AUSTRALIA ............................................................................. 11Jay Leary and Nathan Colangelo

Chapter 3 BRAZIL .................................................................................... 24William Freire

Chapter 4 CANADA ................................................................................. 37Erik Richer La Flèche, David Massé and Jennifer Honeyman

Chapter 5 CHILE ...................................................................................... 48Marcelo Olivares

Chapter 6 COLOMBIA ............................................................................. 58Jose Vicente Zapata and Daniel Fajardo Villada

Chapter 7 DEMOCRATIC REPUBLIC OF THE CONGO ....................... 70Aimery de Schoutheete, Thibaut Hollanders and Gaetano Jannone

Chapter 8 ECUADOR ............................................................................... 80Jaime P Zaldumbide

CONTENTS

iv

Contents

Chapter 9 GUINEA ................................................................................... 87Stéphane Brabant and Nicolas Heurzeau

Chapter 10 IVORY COAST ....................................................................... 100Raphaël Wagner

Chapter 11 MEXICO ................................................................................ 111Alberto M Vázquez, Mauricio Heiras and Humberto Jiménez

Chapter 12 MONGOLIA .......................................................................... 128Sebastian Rosholt

Chapter 13 MOZAMBIQUE ..................................................................... 145Paulo Pimenta and Nuno Cabeçadas

Chapter 14 NIGERIA ................................................................................ 156Oladotun Alokolaro and George Ukwuoma

Chapter 15 PAKISTAN ............................................................................. 168Aemen Zulfikar Maluka

Chapter 16 PORTUGAL ........................................................................... 177Rui Botica Santos and Luis Moreira Cortez

Chapter 17 REPUBLIC OF THE CONGO ............................................... 190Emery Mukendi Wafwana, Antoine Luntadila Kibanga and Sancy Lenoble Matschinga

Chapter 18 SENEGAL............................................................................... 200Mouhamed Kebe

Chapter 19 SOUTH AFRICA .................................................................... 209Pieter Willem Smit

Chapter 20 TURKEY ................................................................................ 220Safiye Aslı Budak and Şimal Efsane Yalçın

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Contents

Chapter 21 UNITED STATES................................................................... 232Karol L Kahalley, Kristin A Nichols and Robert A Bassett

PART II CAPITAL MARKETS ��243–310

Chapter 22 AUSTRALIA ........................................................................... 245Simon Rear, Chris Rosario and Chanelle Tong

Chapter 23 BRAZIL .................................................................................. 257Carlos Vilhena and Adriano Drummond C Trindade

Chapter 24 CANADA ............................................................................... 264Erik Richer La Flèche, David Massé and Jennifer Honeyman

Chapter 25 MONGOLIA .......................................................................... 274David C Buxbaum, Ganzaya Tsogtgerel and Otgontuya Davaanyam

Chapter 26 TURKEY ................................................................................ 290Safiye Aslı Budak and Şimal Efsane Yalçın

Chapter 27 UNITED KINGDOM ............................................................ 298Kate Ball-Dodd and Connor Cahalane

Appendix 1 ABOUT THE AUTHORS ...................................................... 311

Appendix 2 CONTRIBUTING LAW FIRMS’ CONTACT DETAILS ....... 325

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EDITOR’S PREFACE

I am pleased to have participated in the preparation of the fifth edition of The Mining Law Review. The Review is designed to be a practical, business-focused ‘year in review’ analysis of recent changes and developments, their effects and a look forward at expected trends.

This book gathers the views of leading mining practitioners from around the world and I warmly thank all the authors for their work and insights.

The first part of the book is divided into 21 country chapters, each dealing with mining in a particular jurisdiction. Countries were selected because of the importance of mining to their economies and to ensure broad geographical representation. Mining is global but the business of financing mining exploration, development and – to a lesser extent – production is concentrated in a few countries, Canada and the United Kingdom being dominant. As a result, the second part of this book includes six country chapters focused on financing.

The advantage of a comparative work is that knowledge of the law and developments and trends in one jurisdiction may assist those in other jurisdictions. Although the chapters are laid out uniformly for ease of comparison, each author had complete discretion as to content and emphasis.

The mining sector continues to face challenging and uncertain times. The current down-cycle is longer than most and shows no sign of abating for most minerals. Stockpiles are high and production capacity has yet to be curtailed in a meaningful manner. Projections are for prices to remain generally soft until such time as supply and demand is rebalanced.

While times are tough, we know that mining is cyclical and that continued world population and economic growth as well as the depletion of current resources mean that growth in the mining sector will resume. The question is when.

To compound matters, when growth resumes it is likely to be uneven. Firstly, recovery is unlikely for some minerals. For example, the market for thermal coal is flat or declining as coal is being phased out in many plants and is being replaced by natural gas or renewable energy. Second, the use of rare earths and other ‘high-tech metals’ will continue to grow at a faster rate as the use of high technology and energy storage products becomes more generalised. Third, demand growth will be more diffused. China is the world’s largest consumer of commodities but it will no longer be sufficient to look only at China to understand the

Editor’s Preface

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market. China is moving away from mineral intensive infrastructure and export-led growth and moving to a slower, domestic service-led economy. The Indian subcontinent, despite impressive economic and demographic growth and sizeable infrastructure and other needs, is unlikely to replace China. As a result, it will be necessary to look at a selection of markets to understand future demand growth.

The mining world is thus condemned to adapt. To survive, miners must be lean, innovative, able to scale production according to demand and unafraid to close higher-cost facilities. This state of affairs has become the new normal.

As you consult this book you will find more on topics apposite to jurisdictions of specific interest to you, and I hope that you will find this book useful and responsive.

Erik Richer La FlècheStikeman Elliott LLPMontrealSeptember 2016

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Chapter 7

DEMOCRATIC REPUBLIC OF THE CONGO

Aimery de Schoutheete, Thibaut Hollanders and Gaetano Jannone1

I OVERVIEW

Mining represents a critical sector for the Democratic Republic of the Congo’s (DRC’s) development. According to the World Bank, the mining sector has dominated the Congolese economy since the early 1910s.

This domination is unsurprising, given that the country is incredibly rich in minerals. For example, the Katanga Copper Belt’s cobalt reserves total an astounding 5 million metric tons, making it the world’s largest known cobalt deposit. The DRC also possesses the largest known diamond deposits and the largest gold deposits in the world. Its copper reserves also make this region the second richest copper region in the world, with 70 million metric tons of copper, surpassed only by Chile. Other significant mineral resources in the DRC include tin, tantalum and tungsten.

Since peace has returned to the DRC, successive governments have faced significant challenges in their effort to (re)establish both industrial production and a legal framework for this key sector.

After several years of discussion, the current Congolese Mining Code was enacted by the Congolese Congress in 2002, replacing outdated mining legislation. This resulted in both an increase in foreign direct investments and a steady increase in copper production in the years prior to the global financial crisis of 2008. Despite this crisis, more than one million metric tons of copper were transported in 2014, up from 9,000 tons in 2003, the year a peace agreement officially ended Africa’s deadliest civil war.

1 Aimery de Schoutheete is senior partner and Thibaut Hollanders and Gaetano Jannone are senior associates at Liedekerke Wolters Waelbroeck Kirkpatrick.

Democratic Republic of the Congo

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II LEGAL FRAMEWORK

The current Congolese Mining Code2 was enacted by the Congolese Congress on 11 July 2002 (Mining Code). The implementing measures of the Mining Code are set forth in the Mining Regulations of 26 March 20033 (Mining Regulations).

The DRC is a member of several international organisations, including the World Trade Organisation, the World Bank Group, the Multilateral Investment Agency, and the International Centre for Settlement of Investment Disputes (ICSID). The DRC has also ratified the 1958 New York Convention on the recognition of foreign arbitral awards.

In addition, the DRC voluntarily adhered to the Extractive Industries Transparency Initiative criteria, and has entered into several bilateral investment treaties as well as into a convention for the avoidance of double taxation with Belgium.

Additionally, now that the stringent UK Bribery Act and US Foreign Corrupt Practices Act are in force, it is essential for any company doing business in the DRC to seek professional commercial and legal guidance to mitigate business and regulatory risks. Section 1502 of the US Dodd-Frank Wall Street Reform Act and the upcoming EU Regulation regarding conflict minerals are also relevant for businesses active in the DRC. Depending on the type of mineral traded (tin, tungsten, tantalum and gold), these laws impose extensive supply-chain due diligence obligations on both upstream and downstream companies.

At the regional level, in July 2012 the DRC joined the Organisation for the Harmonisation of Business Law in Africa (OHADA). OHADA law can only benefit further investment by providing companies doing business in the DRC with a single, modern, flexible and more reliable business law framework, which already applies in 17 OHADA Member States and which supersedes previous or subsequent national legislation. OHADA law is of particular interest to mining companies, as it primarily covers commercial, corporate, loan-guarantee, accounting and arbitration law. OHADA law entered into force in the DRC on 12 September 2012. In addition, a one-stop shop for business start-ups (Guichet Unique) was recently instituted and shows encouraging development.

Congolese law, which is based on civil law and closely modelled on Belgian law, in particular, will remain applicable in areas not governed by OHADA law. It will thus be of paramount importance to understand the myriad applicable pieces of legislation to properly navigate the remaining bureaucratic, legal, and especially, cultural and linguistic hurdles.

The Mining Cadastre receives applications for mining rights, grants mining rights and keeps records of mining rights, among other functions.4 Moreover, the DRC has created a national transparency initiative committee with respect to the management of extractive industries in the DRC5. Any regulation is issued by the Ministry of Mines, which

2 Act No 007/202 of 11 July 2002 establishing the Mining Code.3 Decree No. 038/2003 of 26 March 2003 on mining regulation.4 Decree No. 068/2003 of 3 April 2003 relating to the creation, organisation and functioning

of the mining cadaster, or ‘CAMI’.5 Decree No. 05/160 relating to the creation, organisation and functioning of the national

committee of the initiative for transparency in the management of extractive industries in DRC, in abbreviation ‘CN-ITIE/RDC’.


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supervises mining activities at national level. At the highest level, the President of the DRC is empowered to enforce the mining regulations and to classify mineral substances as reserved mineral substances, if applicable.

III MINING RIGHTS AND REQUIRED LICENCES AND PERMITS

i Introduction

Underground minerals belong exclusively to the state. However, any private party may be authorised by the state to engage in mining activities (from exploration to exploitation and distribution), provided that specific objectives of eligibility, priority and capacity criteria set forth in the Mining Code are met. The mining permits available in the DRC are the following: research permits, exploitation permits (including small-scale mines) and tailing exploitation permits. Specific legislation regarding ‘artisanal mining’ also exists.

Companies that wish to develop mining activities in the DRC are required either to incorporate a Congolese company or to elect domicile with a ‘mining agent’ as a condition of eligibility to obtain an exploitation permit. In addition, in order to be eligible for a mining permit, companies are obliged to either form a joint-venture with a state-owned company (such as Gécamines) that already holds the necessary permits, or freely assign a mandatory 5 per cent stake of its share capital to the DRC.

ii Surface and mining rights

Any person wishing to engage in prospecting or reconnaissance activities must make a prior declaration to the Mining Cadastre and seek a prospecting permit. This prospecting permit entails no priority whatsoever in relation with potential future exploration or exploitation rights.

An exploration permit may be granted to any eligible private company for a period of four years, renewable twice for two-year periods, with respect to gemstones, and for a period of five years, renewable twice for the same duration, with respect to any other mineral substances. To be eligible for an exploration permit, the company must demonstrate a minimum financial capacity of 10 times the total amount of the yearly surface rights payable for the area covered by the exploration permit. The surface rights approximately amount to US$0.03 per hectare for the first two years of the first validity period, US$0.31 per hectare for the remaining duration of the first validity period, US$0.51 per hectare for the second validity period and US$1.46 per hectare for the third validity period. In addition, the company will have to submit a rehabilitation and mitigation plan before starting any research activity. There are specific obligations to maintain the permit, including the requirement to start exploration works within six months after the delivery of the permit.

Should the holder of research permits demonstrate through a feasibility study the existence of an economically workable ore deposit (these include tailings, for which specific permits exist), as well as financial capacity sufficient for the development, construction and exploitation of a mine, the Minister of Mines may grant an exploitation permit for a duration of 30 years, renewable for successive periods of 15 years. The exploitation permit may be refused by the Minister of Mines only for specific reasons, which are exhaustively listed in the Mining Code. Obtaining an exploitation permit obliges the operator to transfer to


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the state a free carry participation of 5 per cent of the operator’s share capital. In practice, however, operators that are engaged in joint-ventures with state-owned permit-holders such as Gécamines are not required to transfer 5 per cent of their share capital to the state.

In addition to exploration and exploitation permits, the Mining Code also contains specific provisions with respect to artisanal or small-to-very small-scale mining rights, as well as quarry rights. Quarry rights relate to construction materials rather than mineral substances.

The timeline for obtaining an exploration or exploitation permit is as follows.The Mining Cadastre has 10 working days to examine the request and to take a

decision. Following this, the Directorate of Mines must conduct a technical investigation. The office in charge of the protection of the environment examines the environmental impact study and the environment management plan. These reviews must be conducted within a period of time set forth in the Mining Code for each type of request (typically, for exploitation permits, within 30 working days for the Mining Cadastre, 60 working days for the Mining Directorate and 180 working days for the environmental investigation). Should any of the aforementioned authorities fail to take a decision within the required time frame imposed by the Mining Code, the mining permit will be considered granted.

When a favourable decision is taken, the Mining Cadastre will then grant the mining permit to the applicant, provided that the relevant surface rights have been paid for within 30 business days.

All mining rights are conveyable under the Mining Code. A specific right of ‘amodiation’ (comparable to a long lease agreement) also entitles the holder of an exploitation permit to transfer all or part of such rights under a rental scheme. Exploitation permits can also be mortgaged. Finally, while mining rights are delivered only for specified mineral substances, permits can be extended to additional minerals through specific procedures.

iii Additional permits and licences

Processors of mineral substances who do not hold mining rights and whose activities are limited to processing activities must obtain a specific licence in this respect pursuant to the Mining Code.

iv Closure and remediation of mining projects

The holder of a research permit will also have to submit a rehabilitation plan for the site after its closure in order to be eligible for an exploitation permit. The closure of a research or exploitation centre must be promptly notified to the Mining Administration.6

The holder of the mining rights is required to obtain a financial guarantee in an amount sufficient to carry out environmental rehabilitation. The conditions under which such guarantee must be set up are detailed in Annex II to the Mining Regulation.

6 Article 218 of the Mining Code.


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IV ENVIRONMENTAL AND LABOUR CONSIDERATIONS

i Environmental, health and safety regulations

The Mining Code and the Mining Regulations contain several environmental and health and safety regulations. Environmental regulations are by far the most detailed.

While most health and safety regulations are contained in the Congolese Labour Code, and are therefore not specific to the mining sector, the Mining Regulations do contain specific safety directives regarding the use of explosives.

ii Environmental compliance

Environmental compliance obligations exist at every stage of a mining project:a The holder of an exploration permit must apply for the approval of a mitigation and

rehabilitation plan in which the measures taken to limit and remedy environmental damage caused by exploration works are described.

b Any person applying for an exploitation permit is required to submit an environmental impact study and a project environmental management plan, which must contain a description of the ‘greenfield’ ecosystem and of the measures envisaged to limit and remedy harm caused to the environment throughout the duration of the project.

As mentioned above, rehabilitation costs must be covered by a financial guarantee to be set up in accordance with the Mining Regulations.

iii Third-party rights

Under the Mining Code, occupants of the land covered by a mining permit have a right to be indemnified when their activities (such as agriculture) are affected by a mining project, in accordance with the conditions set out in the Mining Code.

Other rights include an obligation for the operator to consult with local authorities.Additional provisions of the Mining Code are intended to ensure the conservation of

any archaeological findings that occur over the course of the project.

iv Additional considerations

Generally speaking, the DRC’s infrastructure is either outdated or non-existent. In order to develop and maintain activities and personnel, mining operators are therefore frequently required to participate in local development, for instance by funding roadworks, hospitals, schools, etc.

V OPERATIONS, PROCESSING AND SALE OF MINERALS

i Processing and operations

The Mining Code authorises a permit-holder obtaining any further licences or permits to install and operate processing plants inside the perimeter of the concerned permit.

There are no specific restrictions on the import of equipment and machinery, or on the use of foreign labour and services, save for certain tax measures pursuant to the Mining Code.


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Expatriate labour may be hired, but the Mining Code provides that, assuming equal qualifications, priority must be given to the local labour force for the performance of mining operations.

ii Sale, import and export of extracted or processed minerals

Sale and processing of mineral substances is unrestricted under the Mining Code: the exploitation permit-holder is free to sell the products to the customers of his or her choice, at freely negotiated prices.

However, there is one exception to this principle. The export of raw minerals for processing abroad is subject to authorisation by the Ministry of Mines. The permit-holder must prove that it is not possible to process the minerals in the DRC at a reasonable cost, and is required to explain how the authorisation to export the minerals concerned will benefit the DRC.

iii Foreign investment

Generally, there are no legal restrictions on foreign investment in the mining sector, and currency exchange provisions are quite liberal.

There are, however, some basic obligations with which operators must comply, including the following:a payments to be made abroad (including dividends, commissions, royalties, purchase

of equipment or rental monies, etc.) relating to the licensed activities of an operator are authorised, provided that all applicable taxes and duties are paid in advance;

b similarly, shareholder loans may be reimbursed, provided that the ratio between borrowed funds and capital does not exceed 75/25;

c the Mining Code provides that payments made to affiliated companies abroad must be justified in view of the local market prices for similar goods or services; and

d the permit-holder is permitted to maintain bank accounts abroad, but has an obligation to open an account with a local bank. Details of all these accounts need to be disclosed to the Central Bank of the Congo. There are also reporting obligations in this respect. There are rules regarding the manner in which the proceeds of the sale of mineral products may or must be kept in those accounts. Essentially, at least 40 per cent of these proceeds must be repatriated in the local bank account held by the permit-holder.

The Mining Code contains certain guarantees offered by the DRC to mining operators, such as the rule of law, recognition of rights of ownership, etc. Under the Mining Code, ICSID arbitration is encouraged under some circumstances.


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VI CHARGES

The tax and customs regime applicable to DRC mining companies is exhaustively set forth in the Mining Code.7 The regime is investor-friendly, as the rates applicable under the general tax regime are substantially reduced, and some operations are even tax exempt. In addition, this advantageous tax and customs regime is applicable to affiliates and subcontractors of mining companies.

The main taxes levied on mining companies include the following: surface taxes and rights, corporate income taxes, royalties, taxes on dividends and interest rates, and taxes on wages.

The value added tax (VAT) regime entered into force on 1 January 2012.8 Since then, import of goods is subject to VAT at a rate of 16 per cent. The tax base equals the cost, insurance and freight value plus any (customs) duties and taxes (with the exception of VAT itself ). Import of goods is deemed to take place when the goods cross the border of the DRC, but VAT is only due upon the declaration for release of the goods.

In June 2016, the DRC government announced that mining companies would not be subject to VAT, with retroactive effect from 1 January 2016.

i Royalties

Royalties (i.e., specific mining tax) are due on the revenue generated by the sale of all commercial products, reduced by some specific costs (e.g., transport, analyses, insurance and marketing). Royalties are due starting from the exploitation phase of the project and amount to 0.5 per cent for iron or ferrous metals, 2 per cent for non-ferrous metals, 2.5 per cent for precious metals, 4 per cent for gemstones, 1 per cent for industrial minerals and 0 per cent for common construction materials.

Although mining royalties are deductible expenses for the determination of the corporate income tax, they are due regardless of the mining company’s profitability.

Finally, the holder of a mining permit benefits from a tax credit amounting to one third of the royalties paid on the products sold to a processing entity established on the DRC territory.

ii Taxes

The corporate income tax rate is set at 30 per cent of turnover, as compared with 35 per cent under the DRC’s common regime.

Specific taxes, such as taxes on rental revenues, real estate contributions (for surfaces falling outside of the scope of the mining surface taxes or rights) and taxes on vehicles and roads are subject to the standard or common tax regime.

The tax rate on expatriate remunerations only amounts to 10 per cent, while the ius commune tax rate is set at 25 per cent.

The withholding tax rate payable on dividends is set at 20 per cent of the gross amount. Note that dividends paid to an ‘active’ shareholder of a company other than a company by shares are not subject to withholding tax. A shareholder of a company is considered as ‘active’

7 Article 220 et seq. of the Mining Code.8 Ordinance-Act No. 10/001 of 20 August 2010 relating to the introduction of the Value

Added Tax.


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if it is involved in the day-to-day management of the company, in other words, if it effectively and regularly contributes by its work and performance of services to increasing the value of the company.

In principle, withholding tax on interest is levied at the ordinary rate of 20 per cent on the gross amount.

However, interest paid in respect of loans granted from abroad in foreign currency is not subject to withholding tax provided that the interest rate and other loan conditions are at least as favourable as the ones that the company could obtain from unaffiliated companies.

iii Duties

The customs regime9 applicable to mining companies includes some exemptions, particularly for temporary (for up to 18 months) imports, furniture imported by expatriates, etc. In addition, various preferential rates on imports apply to mining companies. These rates increase as the project progresses: a 2 per cent for all goods and products strictly for mining use, which are imported

before exploitation of the mine has commenced.b 5 per cent for all goods and products strictly for mining use, which are imported after

exploitation of the mine has commenced.c 3 per cent for fuel, lubricants, reagents and consumer goods, which are destined for

mining activities throughout the duration of the project.

The preferential rates of 2 per cent and 5 per cent only apply to goods that appear on the list that the holder of the mining licence must submit to the Congolese authorities, which must be approved by a joint Decree issued by the Ministry of Mines and the Ministry of Finance.

iv Other fees

Any holder of mining permits (namely, research and exploitation permits) is subject to a surface right, the rate of which also increases as the project progresses (see above).

VII OUTLOOK AND TRENDS

In early 2013, the Congolese government initiated a review of the 2002 Mining Code. This review has been interpreted by some commentators as a purely political action in view of the prospective 2016 presidential elections. The fact that some international institutions, such as the Carter Centre and the World Bank, have pointed out several flaws in the 2002 Mining Code has also undoubtedly influenced the Congolese government’s decision to initiate such a major review of the Code.

In addition, this review of the 2002 Mining Code is in line with a move by African countries, such as Ivory Coast and Gabon, to significantly reform their legal frameworks with regard to natural resources.

The Ministry of Mines recently stated that the draft bill amending the Mining Code had been put on hold and would not enter into force in the short term. However, it could be approved after the next presidential elections.

9 Article 225 et seq. of the Mining Code.


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According to the prospective new Code’s explanatory statement, the new Mining Code will aim, in particular, to:a enhance the government’s control over the mining sector; b further regulate elements related to the social and environmental responsibility of

mining corporations; and c incorporate the latest changes in the Congolese administrative context, for instance

the introduction of the VAT in the Congolese tax regime.

It is likely that, in addition, the new Mining Code would seek to address financial and accounting manipulations (such as high interest rates applied by the operator’s affiliate companies acting as lenders) used by mining companies to funnel company profits to their foreign shareholders’ groups, dramatically decreasing the potential royalties due to the DRC state or to the state-owned company Gécamines.

Due to the several potential tax increases, current investors have legitimate concerns regarding this draft new Mining Code, its entry into force, and the impact it could have on their current and contemplated investments.

In this respect, the current Mining Code provides for a 10-year stability guarantee. This stability guarantee provides that rights attached to valid mining rights at the promulgation date of the Act modifying the Mining Code will remain unchanged and vested for a 10-year period.

This 10-year period will start either from:a the entry into force of the Act modifying the Mining Code, for mining rights which

are valid at that time; orb the date a mining right is granted, provided it has been granted under a valid research

permit that existed at the time of the entry into force of the Act modifying the Mining Code.

From a political point of view, the redefinition of the DRC’s provinces is also likely to have some impact on operators. Since July 2015, after the government gave effect to the increase in the number of provinces, from 11 to 26, mandated in the 2006 constitution, the main copper-producing region – Katanga – has been split into four separate provinces. The 400-kilometre (249-mile) journey from Kolwezi to the Zambian border now crosses two provinces – Haut-Katanga and Lualaba – instead of just one.

Miners in Africa’s biggest copper-producing region, which is also the world’s largest source of cobalt, will have to navigate new provincial governments, ethnic issues, and, potentially, new local taxes. The new borders alter the balance of Katanga’s ethnic groups, which may intensify conflicts over land, political positions and jobs.

However, these changes could also spur upgrades to infrastructure such as roads and power lines. A huge project constructing new rail and road transport routes to Angola and Zambia could reduce costs for miners.

Minerals, ores and metals such as copper and cobalt, both used notably in electronic product manufacturing, constitute the foundation of the Congolese economy. From an economic point of view, the low metal prices and rather opaque Chinese demand perspectives significantly affect the local market, with Freeport McMoRan recently announcing the sale of its controlling interest in Tenke Fungurume Mining, the largest copper mine in Katanga.


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The adverse economic conditions are taking a high toll on several local mining companies, which are frequently managed primarily for the benefit of foreign shareholders, to the detriment of the companies themselves. Under these circumstances, the already long-lasting drop in metal prices could have a dramatic outcome for some operators.

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Appendix 1

ABOUT THE AUTHORS

AIMERY DE SCHOUTHEETELiedekerke Wolters Waelbroeck Kirkpatrick SCRLAimery de Schoutheete has extensive experience in drafting and negotiating commercial contracts and in handling litigation before the Belgian courts, but also in other jurisdictions as well as arbitration proceedings (ICC, Swiss Chambers and CEPANI). He has particular expertise in the fields of distribution, mining, international sale of goods and commodities, manufacturing, chemicals, agribusiness as well as Congolese law. He is currently the senior partner of the firm and also heads Liedekerke’s Africa desk.

THIBAUT HOLLANDERSLiedekerke Wolters Waelbroeck Kirkpatrick SCRLThibaut Hollanders is part of the corporate and finance practice group of Liedekerke. Since January 2015, Thibaut has headed up the activities of Liedekerke’s DRC subsidiary, Liedekerke Africa SASU, based in Kinshasa. He advises international and national clients in relation to multi-jurisdictional and cross-border transactions in the areas of M&A (including private equity) and corporate (re)structuring (outside insolvency), with a particular focus on mining (including extensive experience on francophone Africa).

GAETANO JANNONELiedekerke Wolters Waelbroeck Kirkpatrick SCRLGaetano Jannone is a senior associate at Liedekerke, focused on commercial contracts and litigation and arbitration, with specific interest and practice in the mining and metals sector. He regularly assists clients active in the DRC.

About the Authors

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LIEDEKERKE WOLTERS WAELBROECK KIRKPATRICK SCRLLiedekerke Africa SASUAvenue des Batetela 70Commune de la GombeKinshasaDemocratic Republic of the CongoTel: +243 854 854 [email protected]

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