UPDATE ON KATANGA SUSPENSION OF UNPROCESSED ORE

C O N F I D E N T I A L SECTION 01 OF 02 KINSHASA 000387

SIPDIS

SIPDIS

E.O. 12958: DECL: 04/02/2017
TAGS: EMIN ETRD ECON PGOV CG
SUBJECT: UPDATE ON KATANGA SUSPENSION OF UNPROCESSED ORE

REF: A. KINSHASA 346

B. KINSHASA 330

Classified By: EconOff W. Brafman for reasons 1.4 b/d.


1. (SBU) Summary. Katanga Governor Moise Katumbi has
permanently banned the export of non-refined metal from the
province. All major exporters but one have a six-month grace
period within which they may continue to export certified ore
concentrate. Export traffic has begun to normalize, although
about 400 trucks with ore, not claimed by their owners, have
been stopped at the main Katangan customs border since the
export suspension began. Katumbi has threatened to resign
from the governorship if the GDRC does not begin retroceding
to Katanga state revenues generated there. End summary.


2. (SBU) Katumbi has made permanent his March 6 suspension of
unprocessed ore. For the next six months, companies may
continue to export laboratory-certified concentrate, but
thereafter they may only export refined metal. The Vice
Minister of Mines, Victor Kasongo, told EconOff on March 29
that the Ministry of Mines supports these measures and has
submitted the proposals to the Council of Ministers for
approval.


3. (C) The only large foreign company that remains unable to
export its ore is First Quantum/Comisa (FQ),despite its
assertion of earlier Ministerial permission to do so. The
company has a facility on the DRC-Zambian border, with a
copper mine in the DRC and a conveyor belt that carries raw
ore into Zambia for processing. The Mining Code prohibits the
export of unprocessed ore unless the exporter can show: 1) it
is not economically viable to treat the raw substance in the
DRC; 2) the DRC will realize "advantages" upon granting the
waiver. (Note: The Mining Code does not define "advantages."
End note.) In 2003, FQ obtained a waiver from the Ministry
of Mines to conduct this operation. In a March 26 letter to
FQ, Minister of Mines Martin Kabwelulu said the waiver "did
not respect the spirit of the Mining Code" because it did not
demonstrate that the DRC accrued any benefit as a result.
Vice Minster of Mines Kasongo told EconOff that FQ had agreed
to pay the GDRC taxes on the value of the metal refined in
Zambia, but was instead only paying taxes based on the value
of the unprocessed ore. In his letter, the Minister demanded
that FQ henceforth treat the minerals in the DRC, launch a
social development program, and hire 800 employees of the
essentially-defunct DRC mining parastatal Sodimico. FQ's
managing director told EmbOffs it is not cost effective to
build a refinery, although it is building a concentrator.


4. (C) Traffic at Kasumbalesa, the main customs border in
Katanga, is reportedly beginning to return to normal,
although about 400 trucks remain abandoned there. MONUC's
Lubumbashi head of office, Slobodan Didi, said that until
March 28 about 500 ore-bearing trucks (not claimed by
companies after the suspension) were stuck at Kasumbalesa
with their drivers, who have inadequate food and water.
According to Didi, on March 28, following a request of the
Zambian government, about 100 Zambian drivers and their
trucks were able to return to Zambia upon payment of a
symbolic fine. Customs authorities seized the ore in the
trucks. Didi said MONUC has neither the mandate nor the
resources to allow its Indian border police in Katanga to
conduct border control activities, as the provincial
government had requested (reftel A). However, he has proposed
that MONUC provide training to the DRC border police.


5. (SBU) At a recent briefing, Governor Katumbi announced
that he expects Gecamines, the DRC's copper/cobalt mining
parastatal, to begin purchasing and processing the ore seized
at the border as well as all artisanally-mined minerals. A
mining consultant told EconOff that Gecamines would not have
the capacity even in six months to handle all this ore -
which could amount to several hundred thousand tons. Very
few functioning ore refineries exist in Katanga.


6. (C) Katumbi told EconOff that although tax revenues
generated in the province have grown by 30 percent since the
export suspension, this increase has not benefited Katanga.
The provincial government has not been able to retain these
proceeds, as Katumbi previously said he would make happen
(reftel B),because customs officials are sending the money
directly to Kinshasa. Katumbi claims he will resign if
Katanga does not begin receiving the retrocessions, because
he does not want to break his promises to the Katangan
population.

KINSHASA 00000387 002 OF 002



COMMENT
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7. (C) Katumbi's threat to resign is likely a bluff,
especially since he has not made it publicly, but he is quite
serious about increasing state revenues and decreasing
customs fraud. His demand that within six months all ore be
refined in Katanga, however, is not feasible. End comment.
MEECE