Proposed Mining Tax Hike will endanger Investment

Any increase by the Democratic Republic of Congo in the taxes it levies on mining will stifle new investment in the mineral-rich African country, gold miner Randgold Resources’ chief executive said. Congo’s draft mining code – which proposes to raise corporate taxes to 35% from 30% and introduce a new 50% windfall tax – is an effort by the government to boost revenue from an industry that has been the main driver of GDP growth. “All those (proposals) really hurt, to a point where a standard gold mine doesn’t make a return for the investors so no one will invest,” CEO Mark Bristow told Reuters by phone, while on his way to Congo to lobby the government to roll back the proposal.

Randgold operates the US$ 2.5bn Kibali gold mine in the central African country. Bristow said Kibali would never have been developed under the current proposal. Bristow said the Kibali mine, and other existing mines in the country, were protected by a 10-year stability clause, which means they would not have to pay the new taxes for 10 years after such proposals were passed into law. It is only new mining ventures that would be hit by these new rules.

Congo holds the world’s largest cobalt reserves and a significant amount of diamonds, gold and copper. But it is among the most difficult places in the world to invest in, ranking 184 out of 187 in a World Bank list that measures the ease of doing business in countries. Mining companies say that Congo’s regulatory environment must be particularly attractive to draw investors, given the country’s poor infrastructure and political instability. The Kibali mine is among the biggest in Congo. Randgold and AngloGold Ashanti own 45% each in Kibali, with state miner Sokimo holding the rest. Mining giants Freeport-McMoRan Inc and Glencore also have large copper investments in the country, which is one of Africa’s largest producers of the metal. Neither company could be immediately reached for comment.

We can only hope for the sake of a healthy investment climate that the DRC will come to its senses in the same way as Zambia, Zimbabwe, Mali and Cote d’Ivoire.

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