2nd UPDATE: Freeport Gets Thumbs Up For Congo's Tenke License
22 Oktober 2010 - 1:49PM
Dow Jones News
Freeport McMoRan Copper & Gold (FCX) has finally been given
the thumbs up by the government of Congo following a review of its
mining operation license that has lasted several years and resulted
in a number of concessions to the state.
The U.S. copper producer, the second largest in the world after
Chile's Codelco, can breathe easy, now its investments in Congo are
in good standing.
"This important milestone provides the basis for future
cooperation and enables Tenke to pursue additional investments to
develop this massive project to its full potential," said
Freeport's Chief Executive Richard Adkerson.
Just 10 days ago, Adkerson told Dow Jones Newswires in an
interview in London that he was optimistic a resolution was very
close.
The situation is very different for Canada-listed First Quantum
Minerals (FM.T). As part of the same review process, its licenses
have been removed and the company is now taking Congo's government
to international arbitration for breach of international law.
The government has raised its stake in the mineral-rich Tenke
Fungurume copper and cobalt mine to 20% from 17.5% previously,
leaving Freeport with a 56% stake from 57.75% beforehand and Lundin
Mining Corp (LUN.T) with 24%, from 24.75% previously, the company
told Dow Jones Newswires.
Freeport will pay an additional royalty of $1.2 million for each
100,000 metric tons of proven and probable copper reserves above
2.5 million tons, and will make additional payments totaling $30
million in six installments upon reaching certain production
milestones.
Freeport has also agreed to convert $50 million in intercompany
loans to equity and pay $5 million for surface area fees.
Tenke's key fiscal terms, including a 30% income tax rate, 2%
mining royalty rate and 1% export fee, will continue to apply and
are consistent with the rates in Congo's current mining code.
The mine, in Katanga Province, has been fraught with problems
since early 2009, when the Congo government said Freeport had
failed to meet the requirements of its mining license review.
The African country suffered immensely in the 1980s and 1990s
when copper prices tanked and miners downed tools. The license
review, which started in June 2007, was designed to make sure the
same won't happen again, should copper prices fall from their
current elevated levels.
Congo is Africa's largest cobalt producer and the continent's
second-largest copper producer after neighboring Zambia.
Gecamines' participation in the mine's management will be
expanded, Freeport said, reiterating the company's commitment to
use local services and Congolese workers.
Copper production at Tenke started last year, with the current
annual capacity of 250 million pounds of copper and 18 million
pounds of cobalt being expanded to around 290 million pounds of
copper starting in 2011.
About $370 million in tax and related payments have been made to
government institutions or in the form of transfer bonuses and
social spending since the project's inception to June 30.
-By Andrea Hotter, Dow Jones Newswires; +44 (0)20 7842 9413;
andrea.hotter@dowjones.com
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