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DRC Halts Mining Subcontractors to Enforce Local Ownership Laws

Congo's Clampdown on ERG Mines Targets Greater Local Benefits

by Adenike Adeodun

In a move that has stirred the mining sector, the Democratic Republic of Congo (DRC) has suspended operations of nine subcontracting firms at Eurasian Resources Group (ERG)’s prominent cobalt and copper mines. This decision, announced on March 14 and reaffirmed after discussions with the Kazakhstan-backed ERG, underscores the Central African nation’s intensifying scrutiny over the mining industry’s compliance with local ownership laws.

The DRC, a pivotal player in the global cobalt market and a significant copper producer, is taking stringent measures to ensure that mining subcontractors are majority-owned by Congolese nationals, as mandated by the country’s legislation. This policy aims to foster greater local participation and benefit from its abundant mineral resources, which are critical to the world’s energy transition.

The government’s directive targets companies operating at ERG’s two key projects in Congo: the Metalkol mine, a leading global cobalt source, and the Frontier mine, a substantial copper producer. Despite the potential for these sanctions to disrupt operations, the DRC’s Regulatory Authority for Subcontracting in the Private Sector, led by Director General Miguel Kashal Katemb, has provided ERG with a transitional period to onboard compliant subcontractors, mitigating immediate impacts on output.

This confrontation highlights ongoing tensions between ERG and the DRC, with the state miner Gecamines expressing interest in acquiring some of ERG’s assets and citing the firm’s delayed project developments. Additionally, ERG has faced environmental allegations, leading to the suspension of one of its copper projects.

ERG, maintaining that it adheres to all local legal and regulatory requirements, asserts that a significant portion of its expenditures within the country benefits Congolese suppliers. The company is actively engaging with regulatory bodies to align its operations with DRC laws, emphasizing its commitment to local content requirements.

The legislation enacted in 2017, designed to reserve subcontracting opportunities for Congolese-controlled businesses, is at the heart of the issue. However, discrepancies have emerged regarding the genuine control and management of the implicated firms, despite corporate filings suggesting compliance with the ownership criterion.

This regulatory action is not isolated; similar measures were previously taken against Chinese subcontractors at the Sicomines copper/cobalt joint venture, signaling a broader governmental initiative to reclaim control over the country’s mineral wealth and ensure local stakeholders significantly benefit from mining activities.

Amid these regulatory challenges, ERG announced plans for an $800 million overhaul of its dormant Comide project, promising copper and cobalt production for approximately 20 years once operational. This development, expected to commence next year, signifies ERG’s ongoing investment in Congo’s mining sector despite the current legal and regulatory hurdles.

As the DRC continues to enforce its local ownership and control laws within the mining sector, the implications for foreign-backed mining operations and the broader industry remain a focal point of interest. This scenario underscores the delicate balance between attracting international investment in critical mineral production and ensuring that such activities translate into tangible benefits for the host nation and its people.

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