Chinese mining giant CMOC announced that it has settled a years-long dispute with the DR Congo’s state-run mining company Gécamines that both sides hope will conclude a bitter feud between the two firms over royalty payments from the massive Tenke Fungurume mine (TFM), one of the world’s largest copper and cobalt mines.
Tuesday’s announcement puts an end to the dispute over royalties claimed by Gécamines, which accused CMOC of understating the mine’s reserves.
The deal comes less than a week after CMOC announced the resumption of its copper and cobalt exports from TFM, which had been blocked as a result of the dispute.
In its press release, CMOC said it will pay Gécamines $800 million in royalties over a 6-year period, from 2023 to 2028, and “Gécamines will be entitled to 20% of the total value of the project’s subcontracting and the right to acquire a production volume proportional to its 20% stake in TFM at market conditions and in compliance with Congolese laws.”
In addition, “TFM will cumulatively pay Gécamines a minimum of $1.2 billion in dividends over the current life of the project from and including 2023.” According to the Mining Data Solution website, the current life of the project extends to 2046.
In total, Gécamines should receive $2 billion in compensation from CMOC over a period of at least six years.
Who Got What?
- GÉCAMINES THE LOSER? With $2 billion spread over several years, we’re a long way from the $7 billion that Gécamines originally asked for. It’s worth noting that, of the $2 billion, $1.2 billion comes from TFM dividends and is therefore conditional on TFM making a profit over this period. Beyond the financial compensation, the CMOC press release does not indicate whether Gécamines will receive any other compensation in the form of contributions or technology transfers or even investments in the processing of strategic minerals and the production of EV batteries. Except for a sentence in the press release reiterating the desire of both parties to “strengthen their partnership and jointly extend their cooperation in areas such as the new energy industry”, nothing very concrete seems to have been obtained.
- CMOC THE WINNER? CMOC seems to have come out on top in this tug-of-war. Not only did it obtain a drastic reduction in Gécamines’ financial demands, but it also successfully negotiated a payment spread over almost decades, with most of the payment being conditional. In other words, it avoids having to pay upfront. In the end, CMOC does not appear to have made any major concessions.
We will certainly have to wait for the eventual publication of this agreement to measure the extent of the trade-offs and gains made by each party.
If there is one thing this announcement proves, it is CMOC’s dexterity and ability to maneuver in the Congolese political environment. Right from the start of the crisis, it was able to win the support of certain Congolese politicians and put off talks for a long time.
It’s possible that the pressure of this year’s upcoming general elections worked in CMOC’s favor, by putting pressure on the government to produce a deal without giving it sufficient time to negotiate it.
SUGGESTED READING:
- Bloomberg: China’s CMOC Strikes $2 Billion Deal to End Congo Mining Dispute by Mark Burton
- Reuters: China’s CMOC resumes copper, cobalt shipments from Congo TFM mine by Felix Njini
