Aug. 28 (Bloomberg) -- Congo's government wants to more than double its stake in a joint venture with Freeport-McMoRan Copper & Gold Inc., which is developing one of the world's largest unexploited copper and cobalt deposits in the country.
The state wants to increase its share of the $1.9 billion Tenke Fungurume project to 45 percent, from the current 17.5 percent, Gaby Matshafu, deputy Chief of Staff at Congo's Mines Ministry, said in an interview late yesterday in Kinshasa. Lundin Mining Corp. owns a quarter of the venture.
Congo, which has a third of the world's cobalt and 4 percent of all copper, is seeking to boost revenue from mining by improving the terms of contracts with mining companies in the government's favor. Deals being scrutinized include those with Freeport McMoRan Copper & Gold Inc., the largest publicly traded copper producer, and AngloGold Ashanti Ltd., Africa's biggest gold miner.
The original Tenke Fungurume contract was concluded ``after an international call for tender,'' Matshafu said. ``They have to live up to their commitments.'' Freeport and Lundin will also be asked to increase their signing bonus to $250 million, from $100 million.
In 1996, when Lundin signed the original contract on Tenke Fungurume, the company agreed to pay a $250 million signing bonus and for the government to own a 45 percent stake. Those terms were amended in 2005, reducing the signing bonus to $100 million and Congo's shares to 17.5 percent. Freeport acquired 57.75 percent of the project when it bought Phelps Dodge Corp. last year. Lundin currently owns 24.75 percent of the project.
Mining-Contract Review
The government will today announce the terms of reference on which agreements with mining companies are to be renegotiated, Matshafu said.
The Mines Ministry's terms of reference will be based on a November 2007 report by a government commission, which studied the individual contracts and proposed changes, Matshafu said.
``At some points the ministry has left the commission's recommendations though,'' he said. The 2007 report suggested Congo reconstitute the terms of the original Tenke Fungurume agreement.
The state also wants to take majority stakes in projects that haven't submitted feasibility studies to the Mines Ministry, Matshafu said. At least sixteen of the 61 contracts being reviewed by the government have provided project proposals, he said.
``We said we want 51 percent for all those without a feasibility study,'' Matshafu said. ``Where there's already a functioning operation, we're not going to push in and disturb things.''
Freeport, Katanga, Anvil
Companies that have submitted feasibility studies to the Mines Ministry include Phoenix-based Freeport, Katanga Mining Ltd. of Canada and Australia's Anvil Mining Ltd. and Moto Goldmines Ltd., Matshafu said. Those agreements will remain largely unchanged, he said.
Freeport and Lundin are ``an exception,'' Matshafu said, referring to the government's plans to increase its stake in the Tenke Fungurume project. The ministry's terms are negotiable.
``The terms of reference are a guideline,'' he said. ``There's room for movement on either side.''
No one answered the phone when Bloomberg News contacted Freeport's head office in Phoenix outside regular business hours. An e-mail to the company seeking comment wasn't immediately responded to. Lundin spokesman Robert Eriksson was not immediately available for comment when contacted at the company's office in Sweden.
Last month, Freeport said it is cooperating with the government to resolve unspecified matters, while continuing with its project-development activities.
``Our mining contract was negotiated transparently and approved by the government of the DRC following extended negotiations, and we believe it is fair and equitable, complies with Congolese law and is enforceable without modifications,'' William Collier, Freeport's spokesman, said in an e-mailed response to questions on July 10.
To contact the reporter on this story: Franz Wild in Kinshasa via Johannesburg at [email protected].
