DRC MINING EXTRACTS, #3

UNCLAS SECTION 01 OF 02 KINSHASA 000413

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EMIN ETRD PGOV CG
SUBJECT: DRC MINING EXTRACTS, #3

REF: A. KINSHASA 387

B. KINSHASA 178


1. (U) Summary. The DRC's Minister of Mines ordered the
suspension of negotiations on new mining agreements. The
Canadian CEO of Gecamines, the DRC's copper/cobalt mining
parastatal, was briefly suspended. Canadian company First
Quantum claims millions of USD in losses as a result of the
Katanga Governor's suspension of the export of unprocessed
ore. Several miners and guards died on the concession of
MIBA, DRC's diamond mining parastatal, and MIBA's foreign
shareholders are discussing plans for the parastatal's
restructuring. The Governments of Rwanda and DRC have signed
a Memorandum of Understanding to monitor and potentially
exploit methane gas from Lake Kivu. End summary.

MINING LICENSES
--------------


2. (U) The Minister of Mines, Martin Kabwelulu, ordered on
March 27 that all state and parastatal managers suspend
negotiations on new mining contracts, pending a review of
existing agreements. All partnership agreements concluded in
breach of this order are void, and violators will face
unspecified sanctions. Further, Kabwelulu required that
documentation regarding all existing mining agreements be
filed with his office by April 4. According to a Ministry of
Mines counselor, the GDRC is setting up a contract review
commission that will include representatives from the
Ministry, the Presidency and the Parliament, with a July work
deadline.

COPPER/COBALT
--------------


3. (U) In early March, SOFRECO, a French consulting firm,
briefly suspended Canadian Paul Fortin, CEO of Gecamines
(DRC's copper/cobalt mining parastatal). Fortin, who has held
the position since January 2006, was reinstated after
government officials, including Katanga Governor Moise
Katumbi, objected to the removal. Gecamines' workers went on
strike to protest Fortin's removal. SOFRECO is under
contract with COPIREP, the DRC agency responsible for
parastatal reform, to help reform Gecamines.


4. (SBU) The managing director of Canadian First
Quantum/Comisa's DRC operations told EconOffs the company
restarted operations on April 3 at its plant on the
DRC-Zambian border in Katanga province, after posting a USD
325,000 bond. FQ estimates it lost USD 9 million in profits
during the month-long export suspension that Governor Katumbi
ordered and that the GDRC lost USD 2.7 million in tax revenue
(reftel A).


5. (U) Following a tender offer, Gecamines awarded rights to
the disputed Kipushi zinc/copper mine to a foreign company,
United Resources. Gecamines will hold a 37 percent interest
in the joint-venture project. First Quantum and South
African company Exxaro (formerly known as Kumba Resources)
have sued Gecamines in Belgium court over their alleged right
to the Kipushi concession.


6. (U) The criminal case in Katanga province involving Anvil
Mining (reftel B) remains stalled in the preliminary trial
stage, following replacement of the prosecutor several weeks
ago.

DIAMONDS
--------------


7. (U) Several diamond diggers died in an April 3 night-time
mine collapse on the Eastern Kasai concession of MIBA, DRC's
diamond mining parastatal. April 4, local media reported that
illegal diamond diggers on MIBA's concession shot MIBA guards
on patrol, killing three and wounding two.


8. (U) London AIM-listed company Mwana Africa (a twenty
percent owner of MIBA) has begun formal discussions with
MIBA's management to restructure the parastatal, according to
international trade press and the Ministry of Mines'
Kimberley Process Counselor. MIBA's production continues the
decline begun in 2006. It has produced only about 100,000
carats since thus far in 2007, according to the Ministry of
Mines.

GOLD
--------------


KINSHASA 00000413 002 OF 002



9. (U) Prior to the Mines Minister's suspension of contract
negotiations, the DRC's Mining Register awarded fourteen
exploration permits to Banro Congo Mining, a subsidiary of
Canadian Banro Corporation. The permits cover sites in
Maniema and South Kivu provinces. Banro already has mining
rights to three other concessions in the DRC, although it has
not started any mining operations.


10. (U) The dispute between Canadian Moto Goldmines and OKIMO
over their joint venture in Orientale province remains
unresolved. Moto recently launched an appeal to various
diplomatic missions in Kinshasa for support. Its Managing
Director told EconOff if the company were unable to resolve
the matter through these efforts, it would likely resort to
litigation.

METHANE GAS
--------------


11. (U) The GDRC and Government of Rwanda formalized their
intention to begin exploiting methane gas from Lake Kivu in a
March 28 Memorandum of Understanding (MOU). The DRC's
Minister of Hydrocarbons and the GOR's Minister of Energy and
Communications signed the MOU, which calls for the countries
to study the lake's methane gas and develop financing
mechanisms for the studies. The MOU is valid for 24 months.
MEECE