Identifier
Created
Classification
Origin
04KINSHASA1866
2004-10-06 15:21:00
CONFIDENTIAL
Embassy Kinshasa
Cable title:
MINISTER OF PLAN AND PHELPS-DODGE MINING PROJECT
how-toThis record is a partial extract of the original cable. The full text of the original cable is not available.
C O N F I D E N T I A L KINSHASA 001866
SIPDIS
E.O. 12958: DECL: 10/06/2014
TAGS: EMIN ETRD ECON CG
SUBJECT: MINISTER OF PLAN AND PHELPS-DODGE MINING PROJECT
Classified By: Econoff Peter Newman for reasons 1.4 b/d
C O N F I D E N T I A L KINSHASA 001866
SIPDIS
E.O. 12958: DECL: 10/06/2014
TAGS: EMIN ETRD ECON CG
SUBJECT: MINISTER OF PLAN AND PHELPS-DODGE MINING PROJECT
Classified By: Econoff Peter Newman for reasons 1.4 b/d
1. (C) Ambassador and econoff met with Minister of Plan
Alexis Thambwe on September 27 for an introductory meeting
and to discuss Phelps-Dodge's mining project at Tenke
Fungurume. Thambwe told the Ambassador that he was committed
to getting the project off the ground and was asking the
government to impose an agreement on Gecamines, the
copper/cobalt mining parastatal. The Ambassador thanked
Thambwe for his interest in the case and emphasized the
importance of closing this deal that has been in the works
for several years. As a major US company and a leader in the
field of copper mining, Phelps-Dodge is well positioned to
relaunch mining activity in Katanga and act as a success
story that will encourage other companies to consider
investing in this mineral rich country.
2. (C) Thambwe gave the Ambassador a copy of a Sept 24 letter
which he submitted to Vice President Bemba, head of the
Economic and Financial Commission. The key points of the
letter were that Gecamines' share of the joint venture would
be reduced from 45 percent to 15 percent in exchange for the
venture being subject to the tax code. The 15 percent would
be the 10 percent that PD was offering plus the 5 percent
that the mining code reserves to the government ceded to
Gecamines. He also included an up-front total payment of USD
100 million (Note. This does take into account USD 50 million
already paid by Lundin in 1996/97. Phelps-Dodge would only be
responsible for the remaining USD 50 million. End Note.) with
a negotiable payment schedule. He is clearly frustrated with
Gecamines' stalling, and Thambwe accuses them of changing
position without good reason. He asks that the Vice President
recommend to the President that Gecamines be forced to agree
as it is 100 percent owned by the Congolese state.
3. (C) Thambwe's language regarding Gecamines was very blunt
and made clear that neither he nor others in the government
approved of Gecamines' position or recent threats. These
threats included requesting the reduction of the Tenke
Fungurume concession, launch a new open tender for the
project, and to go to international arbitration to resolve
the payment of the original fees - which reach a total of USD
250 million - in the original mining convention. Thambwe
wrote:
Begin Translation:
The leaders of Gecamines, politically supported and
manipulated, multiply the hindrances as you can note in
reading their notes in the annex.
My point of view, expressed in a clear manner, is that the
Government can settle this dossier in little time if the
political will to push this project to completion is real.
The current procrastination around this dossier does not
profit either our country or Katanga.
In my opinion, it is indispensible to bring this project to
completion by imposing a point of view on Gecamines, which in
the present context, is perfectly incapable of re-launching
this project.
End Translation.
4. (C) Phelps-Dodge previously agreed to a maximum lump-sum
payment of USD 100 million over a duration reaching the first
production of copper from the project, but not earlier as it
would distort project financing and the internal rate of
return. Phelps-Dodge asked to retain a tax exemption (on a
tax of 15 percent over dividends) present in the initial
Lundin-Gecamines Mining Convention of 1996 to compensate for
lost profit due to the USD 100 million lump-sum payment.
5. (C) Comment. Thambwe's willingness to push this project
forward is a good thing for both the American firm and the
economy of Katanga. It is not certain that both sides will
reach an quick agreement on the lump-sum payment due to
Phelps-Dodge's previous request for tax relief in
compensation. Gecamines is the largest employer in Katanga
and was at one time an important foreign currency earner. As
the GDRC pushes Gecamines to compromise, they must be careful
not to appear to disregard the rights of the company or they
may face popular opposition to the project when it finally
gets started. End comment.
MEECE
SIPDIS
E.O. 12958: DECL: 10/06/2014
TAGS: EMIN ETRD ECON CG
SUBJECT: MINISTER OF PLAN AND PHELPS-DODGE MINING PROJECT
Classified By: Econoff Peter Newman for reasons 1.4 b/d
1. (C) Ambassador and econoff met with Minister of Plan
Alexis Thambwe on September 27 for an introductory meeting
and to discuss Phelps-Dodge's mining project at Tenke
Fungurume. Thambwe told the Ambassador that he was committed
to getting the project off the ground and was asking the
government to impose an agreement on Gecamines, the
copper/cobalt mining parastatal. The Ambassador thanked
Thambwe for his interest in the case and emphasized the
importance of closing this deal that has been in the works
for several years. As a major US company and a leader in the
field of copper mining, Phelps-Dodge is well positioned to
relaunch mining activity in Katanga and act as a success
story that will encourage other companies to consider
investing in this mineral rich country.
2. (C) Thambwe gave the Ambassador a copy of a Sept 24 letter
which he submitted to Vice President Bemba, head of the
Economic and Financial Commission. The key points of the
letter were that Gecamines' share of the joint venture would
be reduced from 45 percent to 15 percent in exchange for the
venture being subject to the tax code. The 15 percent would
be the 10 percent that PD was offering plus the 5 percent
that the mining code reserves to the government ceded to
Gecamines. He also included an up-front total payment of USD
100 million (Note. This does take into account USD 50 million
already paid by Lundin in 1996/97. Phelps-Dodge would only be
responsible for the remaining USD 50 million. End Note.) with
a negotiable payment schedule. He is clearly frustrated with
Gecamines' stalling, and Thambwe accuses them of changing
position without good reason. He asks that the Vice President
recommend to the President that Gecamines be forced to agree
as it is 100 percent owned by the Congolese state.
3. (C) Thambwe's language regarding Gecamines was very blunt
and made clear that neither he nor others in the government
approved of Gecamines' position or recent threats. These
threats included requesting the reduction of the Tenke
Fungurume concession, launch a new open tender for the
project, and to go to international arbitration to resolve
the payment of the original fees - which reach a total of USD
250 million - in the original mining convention. Thambwe
wrote:
Begin Translation:
The leaders of Gecamines, politically supported and
manipulated, multiply the hindrances as you can note in
reading their notes in the annex.
My point of view, expressed in a clear manner, is that the
Government can settle this dossier in little time if the
political will to push this project to completion is real.
The current procrastination around this dossier does not
profit either our country or Katanga.
In my opinion, it is indispensible to bring this project to
completion by imposing a point of view on Gecamines, which in
the present context, is perfectly incapable of re-launching
this project.
End Translation.
4. (C) Phelps-Dodge previously agreed to a maximum lump-sum
payment of USD 100 million over a duration reaching the first
production of copper from the project, but not earlier as it
would distort project financing and the internal rate of
return. Phelps-Dodge asked to retain a tax exemption (on a
tax of 15 percent over dividends) present in the initial
Lundin-Gecamines Mining Convention of 1996 to compensate for
lost profit due to the USD 100 million lump-sum payment.
5. (C) Comment. Thambwe's willingness to push this project
forward is a good thing for both the American firm and the
economy of Katanga. It is not certain that both sides will
reach an quick agreement on the lump-sum payment due to
Phelps-Dodge's previous request for tax relief in
compensation. Gecamines is the largest employer in Katanga
and was at one time an important foreign currency earner. As
the GDRC pushes Gecamines to compromise, they must be careful
not to appear to disregard the rights of the company or they
may face popular opposition to the project when it finally
gets started. End comment.
MEECE