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The big news from the Democratic Republic of Congo's (DRC) mining industry in the first half of 2009 was the news in March that the country plans to accept US$9bn in investments from China, to be spent on mining and infrastructure despite the opposition of the IMF, according to a mining report on DRC released by Researchandmarkets.

The IMF has expressed concern that this deal which was originally agreed at the end of 2007 - will only add to DRC's current debt burden. According to a report by Bloomberg, the deal will see China build roads, railways, hospitals and schools in return for metals worth some US$50bn at current prices.

Reuters also reported that negotiations on an initial US$6bn-worth of public works and mining infrastructure projects have already been finalised, with both sides still discussing the terms of the remaining US$3bn in funding. It is reported that this US$3bn will be used to fund Sicomines Sarl, a mining joint venture between state-owned metals producer La Générale des Carrières et des Mines (Gécamines), and various Chinese miners. This new joint venture- to become operational in 2011 is reportedly set to produce up to 400,000 tons of Copper and 19,000 tons of Cobalt per annum. China's ambassador to DRC, Wu Zexian, has denied that the country will be burdened with debt as a result of the deal, also saying that the work is being carried out by China Railway Engineering Corporation and Sinohydro Corporation, who have in turn received funding from China Exim Bank and China Railway.

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DRC is home to vast reserves of a wide variety of natural resources - primary among them metals such as cobalt, copper, gold, and precious stones including diamonds. DRC is believed to contain around 4% of the world's copper reserves and one-third of its cobalt reserves. The mining industry, like the rest of the economy in the central African nation, has suffered from the unstable political environment coupled with widespread strife caused by the six-year civil war that ended in 2003. However, for some time it appeared that, given high prices of minerals on global markets, investors would be willing to discount the political risk premium of investing in the DRC. But recent plummeting mineral prices and escalating costs have, according to the government, quoted by Reuters, already seen some 40 of the mining companies working in Congo suspending exploration, development and production operations.

All mineral deposits in the DRC are state-owned and the holder of mining rights also gains ownership of the mineral products for sale. Governed by the National Mining Code, the Ministry of Mines regulates the Mining Registry, Directorate of Mines, and the Geological Directorate in the DRC. A peculiar feature of the mining industry in the DRC is that artisanal mining (i.e. non-mechanised small-scale mining) accounts for 70% of the national diamond production. Thus, in spite of being the world's third largest diamond producer in terms of output, the country is ranked only seventh in terms of value. Furthermore, use of archaic mining techniques has restricted possible growth in the diamond mining segment.

Outbreaks of violence and civil unrest, and the looting of minerals and precious stones by armed militia continue to drain the country's rich natural resources. Though things looked up after the formation of a new government following the 2006 elections, analysts do not expect the macroeconomic and political environment to stabilise any time soon. Indeed, a fresh wave of fighting between a rebel group led by renegade general Laurent Nkunda and government forces swept through North Kivu province, eastern Congo from late August 2008. In addition, although multinational miners have started investing in the country's mineral and metals sector, the physical infrastructure remains extremely poor or even nonexistent at times.

Speaking to Reuters, Deputy Mines Minister Victor Kasongo announced in December 2008 that the government review of 61 mining contracts had been completed. State-controlled miner Gécamines - which is seeking greater ownership of the mining sector - had asked for more time to complete contract review talks, aimed at overhauling deals signed in the chaos for the 1998-2003 war. Of the current 61 mining contracts under review, Reuters cites 14 as being 'green' (or acceptable), 26 as 'orange' (needing further agreement), and 21 as 'red' (facing cancellation).

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