Last Updated : 17 December 2011 at 12:30 IST
Political unrest in DRC may not impact copper mining: Barclays
The unrest following the victory of Joseph Kabila in the presidential election of November 28 presents a potential threat to the mining industry but copper mining sector in Democratic Republic of Congo (DRC) is epxected to continue to expand at a healthy pace as it had in the previous years, according to an assessment by Barclays Capital.
Iran's oilmeal imports from India reached 789,031 tons during April-November period this year, ro..
By Col. Ajay
As per financial astrology, transit OD Sun in Saturn house is ..
KINSHASA, DRC (Commodity Online): The unrest following the victory of Joseph Kabila in the presidential election of November 28 presents a potential threat to the mining industry but copper mining sector in Democratic Republic of Congo (DRC) is epxected to continue to expand at a healthy pace as it had in the previous years, according to an assessment by Barclays Capital.
From a mining-sector perspective, the increased risk of unrest, particularly in Katanga province (where most of the country's copper mines are located) presents a potential threat to existing mine operations as well as to planned investment in projects., Barclays Capital said.
However, there have yet to be any statements or indications to that end from mining companies, who are clearly awaiting greater clarity on the post-election landscape. Generally speaking, the expansion of the copper mining sector has been a great success story for the DRC over the past decade. Copper production has risen significantly, from just 28Kt in 2002 to close to 500Kt expected in 2011. This strong growth has been supported by the incentive of higher copper prices and the adoption of a more attractive environment for investment. This framework subsequently supported firms such as Freeport McMoran, Katanga Mining, First Quantum and Anvil Mining in developing projects in the DRC in conjunction with Gecamines, the state mining company.
The development and ramp-up of copper mines such as Tenke Fungurme (121Kt output in 2010) and Kamoto (69Kt output in 2010) have represented some of the more successful project developments, even at a global mining level. The path has not always been smooth, however, with a three-year mining contract review from 2007-10 causing great uncertainty about the risk of nationalisation or at least of enforced higher ownership stakes for Gecamines. Such nationalisation fears were confirmed in the dispute between First Quantum Minerals (FQM) and the DRC government regarding the expropriation of FQM's Kolwezi and Frontier copper assets at the end of 2009.
Looking ahead, assuming that post-election instability does not spiral out of control, the DRC copper mining sector is expected to continue to expand at a healthy pace. Production forecasts point to output rising to 750Kt by 2013. On current projections, over the next two years the ramp-up of output at KOV mine (Katanga mining), Kipo (Tiger Resources) and Mutanda (Glencore) mines will add close to 200Kt of additional copper production.
In terms of projects under consideration for development in the country, there has also been apparent progress. Ivanhoe Mining applied for a mining license for its Kamoa copper project in June this year, a project the company has previously described as having the potential to be one of the top five largest copper deposits ever discovered. Another company, Mawson West, announced in July that it had started building activities at its Kapulo project, with a 2013 commission target and expected initial capacity of 20Kty copper production. Also positive alongside these project plans was the announcement that Moise Katumbi, the governor of Katanga province and perceived ally of foreign mining companies, is planning to remain in politics and will stand in provincial elections.
Beyond the risks from adverse developments on the political landscape, we see a couple of reasons for constraint in production expectations. First, the ongoing audit by Gecamines of its joint ventures at least presents the risk that perceived unfavourable results from certain relationships may contribute to government action to rectify terms. The aim of the audit is to support the goal of raising $930mn for Gecamines, which will reduce the $1.5bn in debt the company currently holds. Second, a more clear-cut constraint potential production comes from the limited quality of the infrastructure in the country and, in particular, the domestic power deficit.
The rapid expansion of the copper mining sector has resulted in power demands sharply outrunning supply growth, with the current energy deficit in the country of 110MW projected to worsen to 132MW by the middle of this decade. This deficit represents a turnaround from previous years, when the country's hydro-electric capacity enabled it to export electricity, but it is now in a position of needing to import from Zambia, a country that also faces a sizeable power deficit (Although there are clear possibilities for developing sources of hydro power generation in the country, not least the Inga 3 dam project on the Congo River (which could generate 4300MW), so far investment has been limited.
In addition, transport infrastructure is in a poor state, with a costly and inefficient export mechanism that runs predominantly by road down through Zambia and then on to either Durban or Dar es Salaam, both of which can take up to 30 days to complete. There has been a move, as seen also in Sierra Leone and Liberia, to encourage the mining companies to provide investment support for an initiative to develop the country's rail system. Such investment has been hampered so far, particularly after delays in Chinese financial support for the $600mn rail revamp plan announced back in May.
- Weather, drop in stockpiles may keep US Natural Gas above $4 for near term
- US Steel markets may witness bullish trend in December 13: TSI
- Coriander likely to make a kill, Buy recommended
- Short covering supports US Gold, Crude Oil steady; MCX Gold negative
- A pretty picture for Silver demand in industry, better future
- Wearable and flexible Textile Battery developed