KATANGA COPPER BELT: MANY ARTISANAL MINERS, MANY

C O N F I D E N T I A L SECTION 01 OF 03 KINSHASA 001590 SIPDIS SIPDIS E.O. 12958: DECL: 10/05/2016 TAGS: EMIN PGOV ECON ETRD CG SUBJECT: KATANGA COPPER BELT: MANY ARTISANAL MINERS, MANY APPROACHES REF: A. 04 KINSHASA 430 ¶B. KINSHASA 1500 ¶C. KINSHASA 1234 Classified By: ECONOFF WBRAFMAN FOR REASONS 1.4 B/D. ¶1. (SBU) Summary. Artisanal mining is one of the major issues facing the extractive industries sector, as it moves towards industrialization. The GDRC is ill-equipped to address this issue adequately, leaving mining companies to forge their own solutions with only nominal government support or input. In Katanga province, copper/cobalt mining companies are developing various proposed solutions. End summary. ¶2. (SBU) EconOff met with representatives of several major mining companies during a September 27-29 visit to Katanga province, including Phelps Dodge, Anvil, Adastra/First Quantum and BHP Billiton. Although each company has at least some artisanal miners on its concession, the extent to which their presence causes problems varies. Accordingly, each company handles this issue differently. BACKGROUND -------------- ¶3. (U) Under the current Mining Code, adopted in 2002, it is illegal for artisanal miners to occupy and mine any concessions. Mining outside of concession property remains legal so long as the artisanal miners register with the Ministry of Mines and purchase a permit. Artisanal mining in the DRC began in earnest, and with little government prohibition, in the 1980s, when a decrease in government control and an increase in unemployment drove many to seek income by independently mining reserves of gold (reftel C), copper, cobalt, diamonds (septel) and other natural resources throughout the DRC, sometimes on sites that parastatal mining companies partially excavated. Estimates are that perhaps one million artisanal miners work in the Congo, including an estimated 100,000 to 150,000 in the Katanga copper/cobalt sub-sector. Few, if any, of these miners register or obtain a permit. ¶4. (SBU) Before 2005, hazardous working conditions and the illegal export of natural resources were the most significant problems linked to artisanal mining (reftel A). However, in 2005, several major international mining companies, including American Phelps Dodge, began earnest exploration, and plans for tailings processing and sub-soil mining, notably in the Katanga copper belt. Many of these companies anticipate beginning mining production in 2008. Artisanal miners are reportedly present on essentially all major Katanga concessions, selling to "negociants" (middlemen) and to traders such as Lebanese-owned Bazano Group, Indian-owned Chemaf and several Chinese companies. (Note: EconOff saw many Chemaf, Bazano and Chinese-owned trucks loaded with bags of ore both on and off concessions in Kolwezi and Lubumbashi, in Katanga province. End note.) The GDRC has demonstrated no capacity to grapple with this complex issue. Hence, mining companies are taking the lead addressing the many problems the artisanal miners' presence causes. ¶5. (U) All major mining representatives with whom EconOff spoke in Katanga agree that artisanal miners must ultimately be removed from the concession areas in which the companies will operate. They also agree, at least in principle, that the companies must provide some social support for neighboring communities and displaced artisanal miners. Beyond this basic consensus, however, the proposed solutions vary widely, particularly in the context of security and other logistical matters. APPROACHES VARY ACCORDING TO NEEDS -------------- ¶6. (C) U.S. copper mining company Phelps Dodge (PD),the operating partner of one of the DRC's potentially most lucrative copper/cobalt concessions. PD has told EconOff that it removed all artisanal miners from its concession in the past year, with the assistance of both the GDRC's Mine Police and private security, though it declined the GDRC's offer of military assistance in removing the diggers. PD's Lubumbashi-based Managing Director and its security chief told EconOff that now it discourages the entry of additional miners by strictly controlling entry/exit points and by seizing any ore that trespassers possess. The DRC director of an American NGO, PACT, said the prior Katanga-based managing director was removed in part because of his heavy-handed methods in removing the miners. According to KINSHASA 00001590 002 OF 003 PACT's interpretation, PD is not conforming to the International Finance Corporation's Equator Principles, which holds that persons occupying or generating income from land are entitled to compensation if forced to leave the property or are denied access, even if that occupation is or became illegal under national law. ¶7. (C) Anvil Mining is currently taking a different approach, in part as the result of a confrontation with miners in April ¶2006. Before this incident, in which three persons died, Anvil had been pushing artisanal miners off its Kolwezi concession, in the process of ramping up its tailings processing operation. (Note: Some in the mining community claim Chemaf provoked the incident to discourage Anvil from removing the artisanals from its concession. End note.) Since the April incident, an increasing number of miners have re-entered the concession, and an estimated 4,000-7,000 now work there daily, although Anvil has reportedly been able to get the diggers to agree to stay out of areas in which Anvil is working. Although Mine Police and Anvil's private security circulate through the property in teams, Anvil is reluctant to use force to limit entry (perhaps to avoid additional negative press attention) despite the fact that it incurs losses as a result of the ore removal. (Note: An Anvil financial manager claimed that mining companies in Kolwezi may be losing as much as USD 400,000 per month in profit through illegal mining. End note.) To try to limit losses and trespassing "negociants," Anvil is buying ore directly from the artisanals on their concession. However, according to Anvil's private security, the artisanals and "negociants" still illegally transport the ore off the concession at night, a trade in which the Mine Police often act as negociants. In fact, several members of Anvil's security team remarked that most Mine Police are considered to be corrupt. ¶8. (C) BHP Billiton (BHP) and Adastra/First Quantum (FQ) have different approaches to the artisanal issue, tailored to the seemingly more limited presence of diggers on their concessions. BHP's Exploration Manager told EconOff that "only" a few hundred artisanal miners are on its 620 square miles of non-contiguous exploration sites, because little or no excavation has occurred yet, making artisanal mining difficult. He said that BHP has employed some of these diggers as manual laborers, although he noted that many do not keep their jobs for long. He also said BHP uses only private security, and not GDRC Mine Police, to protect its concessions. EconOff visited a BHP exploration site a few miles outside of Lubumbashi and saw only a handful of persons who appeared to be artisanally mining. ¶10. (C) EconOff also visited FQ's Kingamyambo tailings site in Kolwezi, a project in which the World Bank's International Finance Corporation (IFC) has a 7.5 percent interest (totaling USD 6 million in equity financing). EconOff saw no more than 50 artisanal miners on the site. The security manager told EconOff that FQ does not employ mine police, but that it has been able to keep some miners out of the most dangerous areas of the site, including the large mountains of tailings prone to collapses, by posting (somewhat disingenuous) signs warning of radioactivity. The difficult accessibility of other areas of the site may also discourage artisanals, although EconOff did see a few working along the steep, hazardous cliffs of a pit that was several hundred feet deep and wide, with a deep lake at the bottom. ¶11. (C) Metorex, which operates Ruashi mine, currently permits hundreds of artisanal miners to dig in an open pit on its site, although a cave-in recently killed and injured several miners (reftel B). Entry onto the site is said to be virtually uncontrolled, and according to PACT, attempts to remove the miners, who number perhaps 1500 per day, could easily result in violence. (Comment: Metorex may ultimately feel pressure to alter its artisanal mining policy in light of this recent mining accident. End comment.) In addition, Metorex has recently launched a tailings processing operation on a separate part of its property, and is working with mine police and private security to protect its concession, thus far without serious incident. COMMENT -------------- ¶12. (C) The need for the GDRC, mining companies and other relevant actors to develop a comprehensive strategy to address the artisanal mining issue is clear and pressing, and the rights of artisanal miners on concessions is a topic that could become highly contentious in this discussion. This issue may become even more urgent once the mining companies KINSHASA 00001590 003 OF 003 begin producing, attracting diggers to newly-opened pits. It should be a high priority for the new government, if it is to support an environment that both promotes industrial economic growth and social development. End comment. DOUGHERTY