Country Focus: DRC 2018-2019

Cap�tale mond�ale du cobalt. Country Focus: DRC 2018-2019

MACIG 2019 PRE-RELEASEEDITION

Table of Contents 4. Introduction 5. Doing Business in the DRC Dear Readers, 11. Interview with Michael Demey, Regional Manager, BCDC The Central African Copperbelt hosts some of the most important copper reserves in 12. Production & Exploration the world. Boasting grades as high as 4%, the sediment-hosted style deposits are esti- 17. Interview with Chetan Chug, MD, SOMIKA mated to contain around 5 billion tonnes of copper ore, and around 40% of the planet’s 18. Interview with Navin Dalmia, MD and cobalt reserves can also be found in the region. This 450 km stretch of mineral-rich land CEO, Rubamin 21. Service Providers falls almost entirely between two African nations — the Democratic Republic of the 24. Infrastructure Congo (DRC) and Zambia — which unsurprisingly represent the first and second larg- 27. Interview with George Ioannou, Head of est producers of copper on the continent, respectively. As the commodity cycle wheels Africa, Polytra Group 29. Interview with Anaiah BEWA, Executive back into a boom phase, the price of copper has recovered substantially and cobalt Head of Corporate Affairs, Vodacom prices have soared to historic heights. Congo 30. Power In the first pre-release for one of our cornerstone productions, the Mining in Africa Coun- 33. Conclusion try Investment Guide (MACIG), GBR dives into the key factors that will either inhibit or 34. Interview with Costas Coursaris, Founder, encourage investment flows into these two Kings of Copper. Although they both claim Katanga Business Meeting (KBM) a share of the Copperbelt, the opportunities and challenges of investing in these neigh- boring countries diverge entirely from one side of the border to the next. Zambia, long considered one of the most stable and peaceful nations in Africa, does not offer the high grades nor the same potential for cobalt found in the DRC. Conversely, while the mineral potential in the DRC is unmatched perhaps even globally, ongoing conflict and an uncertain political environment are simply unpalatable for the risk averse investor. The lingering impact of the copper downturn has depressed the services sector in both regions, but the recent upswing is breathing new life into the mining ecosystem. In the DRC, a new mining code has been met with loud rebuttals from many prominent international investors, and companies are adjusting to the new regulatory framework as an impending election contributes to a heightened sense of unease. Zam- bia continues to attract the attention of investors eager to tap into its well-established mining tradition, but diversification into other minerals will be critical for the continued success of the country’s mining industry. The sharp eye will notice that the cover image for these reports is not copper; the Kagem emerald mine in Zambia and the Kibali gold mine in DRC demonstrate that while these countries’ mining industries may be defined by copper, excellent prospects in other resources warrant greater attention. In the pages that follow, we share with you some of the developments occurring in both jurisdictions ahead of our final MACIG 2019 report, to be released in February 2019 at the Mining Indaba in Cape Town, South Africa. We extend our deep gratitude to all of the industry leaders that took the time to share their valuable insights with us, and we present our preliminary analysis of both countries on the basis of their experiences. As 2019 approaches, we will continue our research across the continent and readers can look forward to our second pre-release focused on the West Africa region later this year. To all our readers, we always welcome your feedback or interest in being interviewed; please feel free to contact me at [email protected]. Enjoy the read!

Lindsay Davis, Project Director and Journalist Lina Jafari, Project Coordinator Emma Johannes, Project Coordinator

Country Focus: DRC MACIG 2019 Pre-release

This research has been conducted by Lindsay Davis, Lina Jafari and Emma Johannes. Edited by Mungo Smith Graphic design by Özgür Ergüney Cover photo courtesy of Randgold. A Global Business Reports Publication For updated industry news from our on-the-ground teams around the world, please visit our website at gbreports.com, subscribe to our newsletter by signing up to our VIP list through our website, or follow us on Twitter: @GBReports Global Business Reports PRE-RELEASE | MACIG 2019 www.gbreports.com Introduction Risk — and opportunity — grows in the DRC

An election year in any African nation is despots such as Ivanhoe’s Kamoa was well the outcome of an uncertain 2018 before met with trepidation by international in- as several others looking at underground taking the plunge. Perhaps this is prudent, vestors, but particularly so in the DRC, options presents an opportunity for the but there are indications that the country where political upheaval and chaos are country’s services and equipment sector. has made substantial progress in reach- essentially institutionalized strategies for Heavier flows of imports and exports have ing a relative degree of stability in the last state control. Eight days after the assassi- created a particular buzz for logistics oper- decade. The DRC officially implemented nation of his father Laurent Kabila in 2001, ators, which must cope with the country’s the OHADA principles in 2012, which, al- current President Joseph Kabila took the poor infrastructure to facilitate the activity though still unclear, established a stronger reigns of the country and has remained in generated by the mining upswing. accounting and auditing legal framework. power despite his two-term limit expiring At the end of the day, business as usual The country also began participating in in December 2016. Elections have been continues in the DRC, albeit punctuated the Extractive Industries Transparency repeatedly postponed on the grounds by heightened tension as the election Initiative (EITI) in 2014, meaning that that polling infrastructure was inadequate date draws nearer. While the political situ- now information on the revenues gained to ensure a fair vote, but an energized ation is complicated and shifts in the regu- from the country’s mineral resources are civil society has pushed continuously for latory environment have brought about regularly reported. Large multinational democratic due process, often encounter- much criticism, key partners within gov- companies like Epiroc and AEL Intelligent ing deadly force in response. While many ernment remain committed to supporting Blasting are investing in developing in- in the local mining community and inter- private investors. In the Lualaba province, country assets, serving as a testament to nationally still question whether the elec- the Hon. Governor Richard Muyej Mangez their faith in the nation’s potential, and, tion will indeed take place as scheduled Mans has gained significant praise for his despite the undeniable challenges, many in 2018, as the December 23 date hurtles initiatives to promote opportunities to in- of the world’s top mining companies forward, a buzz of campaigning activity vest in his jurisdiction and his willingness persist in their operations in the country. indicates that there may indeed soon be to work closely with the private sector, With commodity prices picking up and the a new president in the DRC. including hosting an event in September country’s established mining community Contributing to the intensifying climate is 2018 to bring together key stakeholders doubling down to wait out any disruption, the recent promulgation of a new mining in dialogue about the state of the mining the perfect storm is upon the country and code, which was heavily opposed by some industry. Despite the attractive commod- only time will tell if 2019 will be the year of the country’s most important investors. ity prices, it is likely that several potential that Congo takes off, or takes two steps Nonetheless, even as the industry adjusts investors are lurking in the wings, awaiting backwards into chaos. for new layers of regulation and grapples with incorporating increased taxation into their cost profiles, production is ramping "The motivation behind the new mining code is the search for up and new exploration across a host of balance. Many of the countries mines have been operating under resources suggests that new investment legislation that does not adequately account for the problems has not been entirely deterred. Copper faced in our country. We were not well-positioned when the first and cobalt remain the standout perform- mining code was passed, so it is not surprising that we have now ers in the region, but the country’s impres- decided to amend the mining code to better benefit the DRC. It sive credentials in other minerals — 1,100 impedes development when investors minerals and precious metals ranging come here without engaging with from diamonds to lithium — are captur- local businesses, and it is unfair ing the imagination of the international to take advantages of the DRC’s investment community with projects like mineral wealth without sharing the AVZ’s lithium deposit in Manono, which profit with the government. Moving was recently declared the largest deposit forward, the objective ion the new globally, garnering significant interest mining code is to stop this inequity.” abroad. Increasingly, mines are going under- Hon. Richard Muyej Mangez Mans, ground in the DRC. The Glencore-owned Governor of Lualaba Kamoto operation was the first, but giant

4 Global Business Reports | MACIG 2019 PRE-RELEASE Global Business Reports www.gbreports.com COUNTRY FOCUS: DRC Doing Business in the DRC Politics, regulation and the economy

POLITICS the southern Katanga province and part gion may still one day attempt secession, When the DRC won its independence of the Kasai region independent from the the businessman-turned-politician was from Belgium in 1960, the country quick- rest of the country. This region contains forced into exile and, in 2015, Katanga ly fell into chaos as different political par- the majority of the nation’s mining activi- was split into four separate provinces in ties and internationally-backed proxies ties in which Belgian, French and British a move that effectively decentralizes the attempted to destabilize the control of actors had a vested interest. Eventually region’s power. the new government. The nation’s first the U.S. and UN military forces brought According to the constitution, President elected prime minister, Patrice Lumum- the secession attempt to an end in 1963, Kabila cannot run for a third term and ba, had been a leading figure in the DRC’s when Tshombe stepped down from his senior government officials have indi- path to independence, and his relations declared role as President of the State of cated that he will step down. Katumbi with the Soviet Union and strong com- Katanga. has remained on the fringe of Congo- mitment to pan-Africanism and Marxist- While the actors may have shuffled, lese politics and, in January 2018, put inspired principles marked out the Con- nearly 60 years on and following one of forth his candidacy for the presidency. At golese politician as a threat to Western the deadliest wars in modern history, publication, Katumbi had been blocked powers. Shortly after being forced out of the DRC’s complicated geopolitics still from entering the country to complete office, Lumumba was later assassinated. cripple the country’s ability to achieve the registration process by the deadline, The American and Belgium governments, sustainable economic progress — the ex- and his chances look uncertain. In total, after years of both nations exercising con- ception being the wider Katanga region, 25 have joined the running, notably the trol over the DRC’s vast resource wealth, which, in recent years, has seen relative ex- Vice President Jean-Pierre Bemba, were suspected of involvement and in growth and stability compared to neigh- a former warlord recently acquitted of the era of the Cold War, the country’s boring provinces. Particularly under the war crimes by the International Criminal mineral assets — and particularly its high leadership of former governor Moïse Ka- Court, Vital Kamerhe, leader of the Union grade uranium — were too vital to fall un- tumbi, the province saw an economic re- for the Congolese Nation party, and Félix der the control of what was feared could vival through initiatives such as a ban on Tshisekedi, leader of the country’s oldest become a radical regime. the export of raw minerals that increased and largest opposition party, the Union Less than two weeks after the DRC state tax revenue gathered in the region from for Democracy and Social Progress. had been born, supported by a force of US$80 million in 2007 to over US$3 bil- While it appears that President Kabila western-supported mercenaries, Congo- lion by 2014. Given Katumbi’s mounting will ostensibly respect democratic pro- lese national Moise Tshombe declared power and perennial fears that the re- cess, rumors abound as to which candi-

Global Business Reports | MACIG 2019 PRE-RELEASE 5

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date could serve as a puppet figure for his mining royalties on non-ferrous metals challenge is to ensure that companies can continued influence over state affairs. In- have increased from 2% to 3.5% and no- find subcontractors capable of delivering ternational powers are also quietly taking tably a new “strategic substance” desig- the specific services that they need to the sides, with rumors circulating that China nation could require companies to pay standards that they require. Many compa- and Russia have been courting President a royalty as high as 10% on metals such nies already struggle to use the 40%,” he Kabila to maintain his position. China as cobalt, which could produce a world- said, adding, “However, putting the new has benefited immensely under the cur- wide ripple effect given that the DRC con- law in perspective, in a country like Zam- rent President’s regime, taking control tains nearly two thirds of global cobalt bia there is no requirement to repatriate of well over half of the country’s mines. reserves. “Cobalt will play a globally sig- export proceeds, whereas some places However, speculation that the United nificant role in the rapidly growing green in West Africa require 100% of export pro- States has stepped in with incentives to industries such as batteries and electric ceeds be repatriated. The challenge is to encourage President Kabila to step down vehicles. This means there will need to be find the appropriate balance and pro- suggests that, while overt American influ- dialogue between the mining community moting initiatives to lift up the standards ence has largely exited the county, the and the DRC to create a win-win dynamic of local subcontractors so that they can United States remains interested in the that respects the development needs of compete.” DRC’s fate. the local population, while continuing to The import and export process in the Historically, the DRC has suffered im- attract mining investors from around the DRC is already notoriously complex and, mensely under the strain of too many world to promote sustainable growth,” to keep track of this complicated and interested parties vying for power. Often said Michael Demey, regional manager ever changing regime, mining compa- used as the quintessential example of the of the Katanga region for BCDC, a leading nies typically enlist the services of local Resource Curse, the country’s extreme Congolese bank that has been operating banks that can support them through the natural wealth has fueled this political for more than 100 years. process through intimate knowledge of feuding, and investors worldwide will Generally, the updated code puts more the many nuances in the system. “BCDC only become more cautious as election emphasis on generating revenue for the is particularly adept in assisting in fol- day approaches. local economy, but mining companies lowing import and export processes. To have argued that some of the new re- import goods in support of production, THE NEW MINING CODE quirements are not feasible given the sig- licenses must be obtained that are ac- The DRC’s controversial new mining code nificant challenges of operating in the DRC companied with considerable paperwork was ultimately signed into law in May and their associated costs. For example, that must pass through several institu- 2018, following a dramatic public battle the new mining code also requires the tions, ultimately resulting in thousands between government and some of the total export earnings repatriated into the of documents that must be closely moni- world’s largest mining companies, includ- country to increase from 40% to 60%, and tored to avoid huge penalties and fines,” ing Glencore and Ivanhoe. The previous that those funds be utilized in the DRC. explained Demey. “After exportation, a code, promulgated in 2002, was thought Serge Bilambo, mining and metals head certain percentage must be repatriated to be one of the more investor-friendly for Standard Bank in the DRC, explained within a particular period of time with regulatory frameworks in Africa. Now, the concerns over this obligation: “The accompanying documents, which is an even riskier undertaking. BCDC has a long tradition in providing mines this critical service from our large back-office support team.” Dr. Mark Bristow, CEO of Randgold, which operates the Kibali gold mine, raised the issue of the new windfall tax, which he believes will have disastrous consequences. He explained: “Essentially, the tax rate is determined by the commodity price when the mine starts operating, rather than by the grade of the deposits. Mines in Katanga that were developed at different times will be affected differently: for example, if a company is mining two orebodies at the same time, but started mining one when the copper price was $3 and the other when the price is $2, one is penalized and will become a loss-making exercise because of the windfall tax. It is Photo courtesy of Ivanhoe. worth pointing out that in 2013, mines

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closed in Katanga because the copper price collapsed.” Dr. Bristow, one of the key voices among investors opposed to the changes in the new mining code, explained how the de- bates had led to a falling-out between some of the country’s most prominent investors and the nation’s key industry asso- ciation, Federation of Congo Enterprises (FEC). “When we were discussing the mining code with the President, the mining industry sat on one side of the table, and the government sat on the other side of the table with FEC. This presented a huge conflict of interest that we were uncom- fortable with. We approached the Minister of Mines and said that we would like to represent ourselves,” he said. If the increased revenue generated by these changes is reinvested into critical development projects, the financial ef- fects felt by the mining community could theoretically be offset by improving the country’s overall economic well-being. “The new mining code certainly has financial implications for us, including new taxes to pay on imports and exports. Howev- er, as long as commodity prices continue to remain strong, we do not expect much impact. If the government will contribute more support to the mining industry through this added revenue by strengthening key infrastructure like transport and power, then I believe we will ultimately see a positive impact,” said Chetan Chug, CEO of SOMIKA, a diversified mining company operating in the DRC since 2001. The key question going forward will be how existing investors are treated under the new code. Mining companies operating under international investment agreements can use the stabilization clause in the 2002 code to engage the government in costly arbitrations over a protracted time period — a lose-lose situation for all stakeholders. “For new investors, these are the new rules and the new status quo. For existing investors, discussions are ongoing to reach a compromise that benefits all stakeholders. Existing investors have made significant investments at a time when the environment was more complicated. They should then benefit from their early commitment as they invested in a difficult period for the country,” said Yannick Mbiya Ngandu, director for Trust Merchant Bank (TMB). Global Business Reports PRE-RELEASE | MACIG 2019 www.gbreports.com

Ultimately, the objective of the changes is to bring increased benefit of the “We propose that a sliding royalty system would benefit the country’s natural wealth to its popula- industry and the country immensely. It has already proved tion. Whether or not the new code will beneficial in Côte d’Ivoire, Senegal and Burkina Faso. Our achieve this amid a state apparatus sliding scale proposal, given the current price, would give the riddled with corruption remains to be government an immediate step up in revenue. It would also seen. be beneficial in terms of industry sustainability; under the current ECONOMY AND FINANCE system, the average grade of a While the split of the Katanga province copper mine in the DRC is 3%, not may underpin an undercurrent of geo- because that is the typical grade political strategy, it also aims to con- of the resources, but because that centrate more energy into the develop- is what you need in order to mine ment of smaller territories. The country profitably and competitively.” depends heavily on mining as the largest single contributor to GDP followed Dr. Mark Bristow, CEO, Randgold by the telecommunications sector, and when commodity prices crash, as they did in 2015, the entire economy suffers. While opening investment to new sectors making leasing activities more attractive. To counter this effect, provincial gov- to decrease reliance on mining will help, “Leasing fees are now tax deductible,” ernments are promoting alternative in- the financial impact of the new mining explained Mbiya. “Rather than buying vestment opportunities in their regions, code and the political risk remain deter- equipment, companies can take advan- with agriculture and tourism identified rents. The government has begun to make tage of this opportunity to lease equip- as the industries with the most potential use of other fiscal tools to design a more ment, utilizing borrowing structures pro- within the Copperbelt region. Governor favorable environment for investment. vided by banks like TMB.” Richard Muyej of the Lualaba province, For example, the recent liberalization of Overall, the palatability of the high-risk, which hold’s the largest share of the the insurance sector, which was formerly high-reward paradigm of the DRC will country’s mining assets, is leading an monopolized by a state-owned com- not come down to small gains in leasing energized campaign touting his juris- pany, could soon help to lessen interest or lower interest rates. And, despite the dictions touristic potential. Highlighting rates for loans in the DRC. To secure suf- impending election and shaky relations everything from the dramatic waterfalls ficient capital for projects, companies are with the country’s top investors, new in- of Kayo in the Lubudi territory to the largely obliged to seek financing from investment continues to come in. While construction of a new fountain plated ternational lenders, but local alternatives some investors may be waiting the out- with malachite in the capital city of Kol- should bring the cost of interest down. come of 23 December, many more are wezi, Governor Muyej is determined to Another new development from the Cen- braving the uncertainty to take advantage change the face of the Lualaba province tral Bank attempts to incentivize com- of the country’s vast potential as the min- through diversification. panies to make use of the SME sector by ing uptick surges forward.

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Michael "Congolese banks can best assist international investors Demey by helping to navigate challenges around the complex Regional Manager, BCDC regulation of DRC."

BCDC has experience operating in the DRC that agreement with SNEL in order to pre-finance the project extends over 100 years. How have you seen the in deduction of the future invoice to be paid to SNEL by impending election and new mining code impact the miners. National banks can play a role of advisors in investor sentiment and what role is the Bank cur- order to smooth the operation and the negotiation. rently playing to assist clients with mitigating the associated risks? How has the influx of Chinese investment impacted The new mining code is on the way to be released. On the the Congolese banking sector? top of that, the political election scheduled to take place We have been closely watching the ongoing trend in at the end of the year contributes to an atmosphere of Chinese interest in the region. This movement of Chi- uncertainty in the DRC. For over a century, BCDC has nese investment into the DRC is mostly related to their been involved with most of the significant mining assets interest in cobalt. It’s seen as a strategic move in order to in the wider Katanga region, and we are therefore closely secure their future investment saying that cobalt would monitoring these developments. be one of the next strategic commodities. Given the fact that most of mines in DRC are now operated by Chinese Can you elaborate on the most common risks your interest, it represents a shift to the sector and we have to clients’ encounter and how BCDC can provide assis- adapt to it. For instance, BCDC has recently hired a Chi- tance? nese officer in Lubumbashi and a BCDC delegation has Large-scale mining investment takes place outside the just returned from China. We are closely following the country. Congolese banks can best assist international mining trends of Chinese companies and we are adapt- investors by helping to navigate challenges around coming our strategy in order to answer to this new kind of plex regulation of DRC. This is critical given the huge customer investments made by the mining in DRC and the penalties associated in case of non-respect of the rules. BCDC What final message would you give to our interna- is then particularly adept in assisting in following their tional readership about the reality of operating in import and export processes. From the importation of the DRC? goods in support of production to the exportation of the The international community is closely watching the ore, licenses must be opened by the Congolese banks in DRC because the country contains huge deposits of cop- order to validate the process and allow for importation per and cobalt. Cobalt could play a globally significant and exportation. role in the rapidly growing green industries. The run on Cobalt price is vertiginous with the largest reserves How are mining companies coping with the large known in the world based in DRC. Whether we want it or power deficit in the DRC, and to what extent can the not, DRC is a strategic place for the next coming years. local banking sector play role in financing power- A strong political vision and pragmatic approach from related projects? different companies will help to bring up DRC’s overall Many of the mining companies are engaged in their own economy and standing. This compromise between the generation projects to power their activities. Most of the mining community and the DRC will create a win-win dy- time, this includes rehabilitation of ongoing infrastruc- namic that respects the development needs of the local ture owned by the public electricity company called population, while continuing to attract mining investors “SNEL“. This kind of deal could be concluded through an from around the world to promote sustainable growth.

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SOME HIGHLIGHTS IN COPPER + mt of copper and 23,900 mt of cobalt. The ling case study of a model being pursued COBALT Kamoto Copper Company (KCC), which around the continent, whereby mining Despite fierce backlash over the new min- is operated by Glencore’s Katanga Min- rights are exchanged for the construction ing code and apprehension over the up- ing subsidiary in a joint venture with Gé- of key infrastructure projects. coming election, copper and cobalt pro- camines, has commissioned a new acid Several recent transactions have granted duction has ramped up in the DRC as both plant to be completed in 2019 in order to Chinese companies control of some of new and old operations are picking up reduce its dependency on import of sulfu- the country’s most notable assets, such pace, sparking a flurry of activity through- ric acid, which had held production back. as the Tenke Fungurume mine (TFM), out the entire mining ecosystem. Reuters Ivanhoe’s Kamoa-Kakula project, con- which is one of the world’s largest cop- reported that in Q1 2018, the country pro- sidered to be the world’s largest unde- per-cobalt deposits and spreads over an duced 296,717 metric tons (mt), up 8.2% veloped high-grade copper discovery, is area of 1,500 square km on two conces- from the same period on year prior, and hotly anticipated by local subcontractors sions. TFM recently changed hands from cobalt production increased by an even that see significant opportunity once the American-based miner Freeport McMo- greater margin of 34.4% to 23,921 mt. With project begins operations. However be- Ran when the company sold its 70% cobalt prices soaring to a record high of yond its copper credentials, the company share in the asset for US$2.65 billion to US$90,000 and a general improvement in also recently updated the indicated min- China Molybdenum (CMOC). Over the the price of copper, companies are well- eral resource at its Kipushi zinc project to next two years into 2019, the company incentivized to push forward with their 11.8 million mt at 35.34% zinc, contain- retains a contingent consideration to operations. ing 9.2 billion pounds of zinc, 8.7 million earn US$60 million if the copper price Glencore, which is the largest copper ounces (oz) of silver and 24.4 million oz of breaches US$2.5/lb and an additional producer in the country and contributes germanium. US$60 million if cobalt exceeds US$20/lb. over 25% of the world’s cobalt output, has Within the Lualaba province, several Chi- China Nonferrous Metal Mining (CNMC), been entangled in a series of legal battles. nese companies are operating alongside recently began construction of a smelter The company was slapped with sanctions Ivanhoe and Glencore; notably, China in the Lualaba province that is expected by the U.S. in December 2017 because of Railway in a joint venture with Sinohydro to produce 120,000 tonnes of copper blis- its affiliations with Israeli diamond mogul operates the Sicomines copper-cobalt ter by 2020, representing an investment Dan Gertler. Nonetheless, its subsidiaries mine, which exported 115,000 mt of cop- of US$440 million. These two large Chi- in the DRC have continued operations per concentrate and 20,000 mt of copper nese companies seem likely candidates and, in Q4 of 2017, Mutanda’s sourced pro- cathodes in the first half of 2017, accord- to potentially purchase the Frontier duction reached historic highs of 51,500 ing to Bloomberg. Sicomines is a compel- mine, currently owned by Kazakistan- based mining conglomerate Eurasian Re- sources Group (ERG). ERG also operates "Currently 100% of the country’s tin, tantalum and tungsten, copper-cobalt operations Boss Mining and around 20% of cobalt and copper originates from ASM and Comide, and is attempting to put its production. The DRC Mining Code addresses ASM operations Frontier mine on the market once more and efforts are on-going to further formalize and regulate the after failing to sell it several years prior. sector. We believe that responsible public and private businesses SOMIKA, a fully integrated mine-to-metal have an important role in the ASM company with ties to India, started 2018 ecosystem especially as it relates by taking 100% control of its concession to workplace health and safety, Luputo 2590, where previously its Iver- responsible environmental practices, land subsidiary held 80%. Theses plans and working with communities in align with the company’s ambitious vi- and around artisanal mine sites sion to increase its copper production to help with long-term sustainable to 70,000 mt/y and its cobalt produc- development initiatives.” tion to 7,000 mt/y by 2020. Rubamin, another Indian company, expects it 2018 Yves Kabongo, DRC Managing copper prodcution to reach 2,000 mt/y Director, Cobalt Blockchain Inc. and cobalt production to reach 2,000 mt/y. The company’s current capacity is

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DIAMONDS: AN OLD FRONTIER WITH COPPER PRICE NEW PROSPECTS The DRC has long been known for its diamonds, and its industrial diamond pro- 2.83 USD/lb duction falls second only to Russia, with 9 AUG 2018 75% of the world’s crushing bout —the lowest grade diamond used in steel mor- 3.05 tars — coming from Congo, according to Britannica. However, when the price of 3 copper and cobalt became more attractive than the labor intensive process of 2.95 diamond extraction, exports dropped to 2.9 just 17.1 million carats in 2015, compared to 33 million carats exported 10 years prior. 2,85 Part of the DRC’s recent failure to recognize its full diamond potential can be attrib- 2,8 uted to a lack of investment into adequate infrastructure and exploration activities. 2,75 Societé Minière de Bakwanga (MIBA), the 2,7 state-owned diamond mining company, is largely a dormant entity that suffers from 2,65 a debt crisis. Instead, the task has been jul 2 jul 6 jul 12 jul 18 jul 24 jul 30 Aug 3 Aug 9 largely left to illegal miners scouring river- 2018 2018 2018 2018 2018 2018 2018 2018 beds and sifting through gravel in search of the valuable stones. Furthermore, the sectors reputation has been tainted by Source: www.infomine.com shadowy associations with funding armed conflict in the DRC and Angola, as well as 25,000 mt/y of copper, and some facili- tap into this sector by using a blockchain the scandal following Israeli billionaire ties have been diverted take advantage platform to certify mineral traceability Dan Gertler, who is said to have made bil- of the attractive trajectory of cobalt. By in compliance with OECD due diligence lions from corrupt dealings that gave him a 2020, Rubamin aims to increase its cop- procedures. “Think of a permission-based monopoly over the DRC diamond industry. per output to 20,000 mt/y and cobalt to platform that automates trust between There are indications that things may be 4,000 mt/y. “Our seventh furnace will be supply chain participants with each ac- changing. “More recently, we have diversi- commissioned by the end of June 2018, tor building a trust score over time,” ex- fied into the middle of the country to as- which will allow us to restart our produc- plained Yves Kabongo, DRC managing sist diamond mining companies. Exploi- tion of cobalt concentrate and we are director of the company. “A block-chain tation of diamonds has been slower to also constructing a plant to make cobalt or distributed ledger is a consensus of rep- develop in the DRC, but the fact that [our hydroxide,” said Navin Dalmia, MD and licated, shared, and synchronized digital clients in the region] have started consum- CEO of Rubamin. data geographically spread across mul- ing our products tells us that production Artisanal miners and the associated prob- tiple sites, countries, or institutions. Such has begun,” said Maximilien Emedi Mad- lem of illegal mining are not unique to the a system would have advantages over jani, financial director of AEL Intelligent DRC, but the country may soon serve as the incumbent paper-based systems or Blasting in the DRC. an example for how to resolve the issue. a centralized database in terms of trans- As the first entrant into the DRC blasting Most educated estimations suggest that parency, security and immutability of the sector after its privatization, the company artisanal miners contribute roughly 15% data, which are essential concerns in an is leveraging its in-country experience and of the DRC’s annual cobalt production, environment such as that encountered in historical expertise with diamonds to tap which makes them a significant source of post conflict zones like the DRC.” into the opportunity. “Our clients are look- global supply. However, in a region often COBC, which currently has supply agree- ing to exploit kimberlite rock in the DRC, associated with problems such as funding ments in place with the Lualaba province’s and that technology and know-how has conflict and child labor, cobalt obtained leading cooperatives, intends to work with been in the AEL family for years because through artisanal mining is often seen as artisanal miners to provide much-needed of our long experience working with large taboo, with the likes of Apple cracking modern infrastructure and technical train- diamond producers in South Africa such down on their supply chain management. ing. If successful, the implications of such as De Beers, where AEL Intelligent Blast- A Toronto based company called COBC, a system could be huge for global artisanal ing has been instrumental in the devel- leveraging experience souring conflict- mining operations by helping to enhance opment of the Venetia mine,” explained free metals in the region, is hoping to safety and productivity. Madjani.

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The DRC’s Kasai-Oriental and Kasai Occidental provinces hold in the Maniema province for tin as well as tantalite, despite the much of the country’s diamond reserves, which are thought to logistical challenges presented by the region. be the second largest globally and occur mostly in kimberlite Randgold, which operates the Kibali gold mine in a joint ven- and alluvial deposits. Although it suffers from periodic out- ture with AngloGold Ashanti, should beat its 2017 production breaks of violence and severe poverty, a few players have ven- of 596,225 oz by 22% to generate 730,000 oz of gold in 2018. tured into the region. Société Anhui Congo d’Investissement In an on-going quest to fully optimize its mining operation, in Minier (SACIM), a 50-50 joint venture between the China-based July 2018, Kibali transitioned to a Congolese led underground Anhui Foreign Economic Construction Group and the DRC gov- mining operation without any mining contractors. “We are ernment, has a mining presence in the region. In the southeast committed to developing the Congolese industry so we never of the country near its border with Angola, Sweden-based Africa use international service providers that do not use a local rep- Resources AB has declared an inferred resource of more that 2.4 resentative. We have the same attitude towards our own staff. million carats at its concessions on the Tshikapa river, a historic The best underground miners in the world are Australians; we site for diamond mining. have been bringing them over to Africa and paying them to teach our workers so that we can transfer that skill and technol- 3TG: Tin, tantalum, tungsten and gold, (3TG), while controversial as designated conflict minerals, nonetheless offer interesting in- “There are many exciting exploration vestment potential in the DRC if they can be sourced in a re- opportunities in the DRC beyond copper, sponsible manner. such as a belt of tin and lithium found from Alphamin’s high grade tin deposit, located in the North Kivu Manono all the way to Kalemie. The next province, is slated to come online in 2019 and reach steady pro- great discovery is out there if the mining duction by the end of that year. The company expects to be one community uses of the lowest cost tin mines in the world, producing 9,642 mt/y the data available tin at a cash cost of US$8 837 per mt produced, and to experi- from geology ence a payback period of just two years. SOMIKA, which is cur- studies to support rently the country’s largest tin producer, is exploring thought their exploration the wider Katanga region while also looking into opportunities initiatives.” Susa Maleba, DRC Country Manager, SRK

“I cannot emphasize enough, how important complete and transparent engagement with our host communities is to providing a platform of security; symbiotic relationships; sustainable development and growth. Historically, due to a number of circumstances, Banro has alienated its host communities over the past several years. This has led to disruptions, work stoppages, security issues and other social problems that have affected the mines’ ability to be a high performing, low cost producer. We need to re-establish that trust and those relationships by acting / executing and delivering on our obligations and promises made in the past.” Brett Richards, CEO, Banro Corp

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"The tin market is growing Chetan Chug because in addition to cobalt, nickel and lithium, the MD, SOMIKA development of electrical vehicles also requires tin."

Can you share any recent updates for SOMIKA and we are also looking at opportunities in the Maniema how they will help the company achieve its 2019 vi- province in the Kindu area. Because of logistical chal- sion? lenges, we have slowed down a little, but that remains an We began 2018 by taking 100% control of our concession area of interest for the expansion of our tin and tantalite ‘Luputo 2590’. Our subsidiary, Iverland, used to hold 80%, business. with another partner holding 20%. We were also able to discuss with Gécamines the transfer of the B2590 amo- How will the new mining code impact SOMIKA? diation from Iverland to Somika because of our strength The new mining code certainly has financial implica- in terms of processing. Somika is now a fully integrated tions for us, including new taxes to pay on imports and mine to metal operation, and we are now planning the exports. However, as long as commodity prices continue expansion of 70,000 mt/y of copper by 2020 and 7,000 to remain strong, we do not expect much impact. If the mt/y of cobalt and these changes will make this even government will contribute more support to the mining more achievable. industry through this added revenue by strengthening key infrastructure like transport and power, then I believe SOMIKA is currently the largest exporter of tin in the we will ultimately see a positive impact. country, but Alphamin is set to come online in 2019. How do you expect this increased production to im- How has SOMIKA seen the artisanal mining of cobalt pact SOMIKA and the local tin market? evolve following the company’s initial support of The tin market is growing because in addition to cobalt, international controls? nickel and lithium, the development of electrical vehi- Cobalt discovery and entry into the market first began in cles also requires tin. The development of Alphamin can this country in 2002 through artisanal mining, which is only be a good thing because the increased quantity of often unsafe and done without proper training or equip- product exiting the country will help streamline certain ment. Over time, this dynamic has changed and today, conversations between the government. I believe the in terms of volumes, artisanal mining of cobalt accounts global market will be happy to see there is another valu- for around 10 - 15% of market production. This move- able mineral available from the DRC. Rather than viewing ment towards structured mining and processing opera- each other as competitors, Alphamin and SOMIKA will tions will continue, which is a positive development, but share complementary knowledge and experiences about artisanal mining is a livelihood and if you take that away processing and exploration strategy. without providing an alternative option, problems will SOMIKA operates across a full range of different metals. arise. As a mining company, we are searching for other Where will be the primary focus for the company heading options for artisanal workers to see how we can help. into 2019? SOMIKA expects to implement a strategy in 6-8 months We will continue to be stronger in copper and cobalt than to put in place an education system for the children of tin and tantalite. We are also starting to look into lithium artisanal miners, in addition to providing training in cer- businesses. We will also continue to look for future op- tain soft skills. portunities in rare earths by evaluating potential of different concessions. By 2019 and 2020, we may began to What vision does SOMIKA have for itself going for- strengthen the diversity of our portfolio with other valu- ward? able metals. SOMIKA will continue to focus on reaching our copper and cobalt production targets, but apart from that, we Where does SOMIKA see the most opportunity for will also look to develop our other services-based com- exploration of tin and tantalite? panies in our Group. These companies ensure alternative Currently we are remaining focused within the four new sources of employment, sustainable local entrepreneur- provinces that comprise the former Katanga region, but ship, and reduced imports.

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"The 2018 first quarter supply of Navin Dalmia cobalt of this country was 25,000 mt, and with the current trajectory MD and CEO, Rubamin of production, the DRC alone will be able to produce around 100,000 mt/y."

What is the current production expectation for meet international standards, and our core recovery re- Rubamin, and what are your objectives heading into cord is very strong. We have created our own niche in the 2019? market and invested US$2 million and purchased six new Expected production of copper for 2018 will be 12,000 machines in 2017, so we are very bullish about this mar- mt, in addition to 2,000 mt of cobalt. Currently our capac- ket. We see the majority of exploration interest coming ity is 25,000 mt/y of blister copper, and we have diverted from China, however there are still several junior compa- some of our facilities to produce cobalt given the positive nies coming from Canada and Australia. These new play- trends in the cobalt market. By 2019/20, we are aiming ers in the market see the potential in DRC, especially for at taking an advantage of the rising metal prices and in- cobalt and lithium in addition to copper. Once the power crease the copper output to 20,000 mt/y and cobalt to issue has been addressed, we expect levels of productiv- 4,000 mt/y. This will depend on how the market evolves ity will be very high. because cobalt pricing is dependent on so many factors. When it comes to optimizing your operations, can What trends have you identified as critical for driv- you highlight what presents the greatest challenge ing the price of cobalt? in terms of cost-efficiency? At the moment, world demand for cobalt is 100,000 mt/y, Logistics presents a major challenge, particularly because and around 70% of the supply comes from the DRC. The of the lack of manufacturing in this country means that the 2018 first quarter supply of cobalt of this country was level of imports and exports do not match. For example, 25,000 mt, and with the current trajectory of production, sometimes there is a shortage in the chemicals required the DRC alone will be able to produce around 100,000 for the leaching plants. The DRC is not processing sulfide mt/y. Therefore, we believe the current price is not sus- ore, and sulfuric acid is expensive to procure because it tainable, and when the prices inevitably decline, we will must either be imported or made my burning sulfur. see many smaller players forced to exit the market. For Rubamin, a price at US$30 will allow us to make a reason- How do you see the evolving situation around the able return as long as we maintain our focus on efficient new mining code playing out? mining practices. Once the new mining code has been fully implemented, I believe any flaws that are detrimental to the industry Can you elaborate on the investments Rubamin is will be revealed and the government will take appropri- making into its facilities to take advantage of rising ate action to solve these problems. I am very optimistic commodity prices? that this will be the case just as it has been in the past. Our seventh furnace will be commissioned by the end of The majority of the country’s revenue is dependent on June 2018, which will allow us to restart our production of mining, and the government cannot afford to lose these cobalt concentrate, and we are also constructing a plant major investors. to make cobalt hydroxide. Additionally, we are bolstering the capacity of our engineering services, including motor What is the vision and growth strategy for Rubamin rewinding and transformer repairing and adding several over the next 2-3 years? machines for drilling, so overall the company is gearing We are looking to double our current levels across all up in anticipation of significant growth. parameters. In terms of efficiency, we ARE taking advantage of the opportunities presented by training up lo- With increased exploration dollars available in the cals, because at the moment manpower is a significant market, how is Rubamin’s drilling service experienc- challenge given the shortage in capable drivers and op- ing the change in the market? erators. However, these are all temporary issues for us, Despite increased competition from the Chinese, we are so Rubamin is very optimistic for the future. As per our seeing significant demand for people looking for the yearly review of circuits and projections, we are looking high-quality service we offer. Our recovery machines to invest more in the country.

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ogy to our own workforce. We will always have professional experts to help guide us, but our main workforce, both on the sites and in management, will always be Congolese,” said Dr. Bristow, CEO. The other large gold operator in the region, Toronto-based Banro, has suffered from acute security issues at its Namoya and Twangiza mines. The company has brought in a new CEO, Brett Richards, to stabilize the company and turn its fortunes around. In addition to stabiliz- ing and optimizing the company’s two mines, Banro will also work towards the development of its Lugushwa and Kamituga gold projects with the vision of eventually bringing four operational mines to the region. Richards has stated that core to his strategy will be evaluating how to better engage with neighbor- ing communities. “The new strategy is to reshape and re- structure the company in every area of the business, and in every discipline of the company, in order to increase production / lower costs and return to positive cash flow,” he said, adding, “We will be diligently working to rectify all of these technical and social issues, through putting the “right people, in the right places, doing the right things, all of the time.”

EXPLORATION Despite claims that the new mining code will deter new investment into the country, exploration has picked up as appetite increases with rising commodity prices. “This year we are seeing many new faces, especially out of Australia and Canada, looking for exploration prospects in copper and especially cobalt, as well as other battery minerals such as lithium and nickel,” said Tobias Posel, director of GeoQuest, a consultancy and contracting business focused on exploration, environmental services, hydro- geology, geo-technical services, GIS and related services. “The demand began last November and picked up through the festive seasons, when it was possible to visit sites, draft reports, verify projects and propose the deals to new clients,” he added, noting that much of the new Greenfield projects and advanced Brownfield exploration is taking place within the wider Katanga region. Global Business Reports PRE-RELEASE | MACIG 2019 www.gbreports.com

Photo by GBR. African Battery Metals, seeing an opportunity to take advantage of Notably, ASX-listed AVZ Minerals’ discovery of what is thought the trend towards renewable energies, has recently acquired cop- to be the world’s largest untapped lithium deposit in the per-cobalt concessions in the DRC that will now take priority over Tanganyika province sparked a race to better understand the its Ferensola iron/gold/coltan project located in the north of Sierra DRC’s lithium potential in the concessions surrounding the Leone. However, while copper and cobalt remain the favorites, discovery. Companies have seen their market capitalization the DRC has impressive credentials in other minerals that should rocket upwards through “nearology” arguments, but AVZ re- not be overlooked. Ivanhoe’s Kipushi project hints at the country’s mains the clear frontrunner for investment. potential for zinc, and limestone, iron ore and coal are all also The company recently completely a 15,000 meter diamond present, albeit less attractive when weighing the risk factor. A high- core drilling campaign and announced its maiden mineral grade uranium trend south of Kolwezi that runs to Shinkolobwe resource at 259.9 million tonnes grading OF 1.63% lithium remains an untapped resource because of restrictive policies that for 4.25Mt of contained lithium oxide, confirming that it is allow the president to maintain the right to reject applications. the world’s largest lithium deposit with the second highest grade globally. Overall and despite the sense of heightened risk due to a new mining code and the upcoming election, exploration does not seem to have suffered and is in fact drawing more investment. “We have seen our price increase on the back of expectations of the resource being confirmed,” confirmed Nigel Ferguson, managing director of AVZ. “In fact, we have not seen any slow down in investment other than a short period during the tran- sition from the old code to the new one.”

“The positive vibes are stronger than any negative sentiment, with companies out of Perth and Toronto visiting with increased frequency that previously would not have ventured into the DRC. The decentralization in the southern part of the country has concentrated power in places like Kolwezi, making it possible to do deals outside of Kinshasa, which has helped investors swallow expenses of operating in the country to hit the ground running.” Tobias Posel, Director, GeoQuest

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A well-established community of distrib- proach to both geographic and industry utors, OEMs and mining contract services diversification. The company is looking are largely based between Lubumbashi to open an office in Goma, and relocated and Kolwezi. A push towards under- its country headquarters to Kinshasa in ground mining and geographic and geo- order to support its activity in the agri- logical diversification, as well as new culture sector. “Previously, we were de- opportunities in other industries, has al- pending on the mining sector and the Ka- lowed service providers in DRC to remain tanga region, but the decision to develop afloat despite tough conditions in recent agriculture allowed us to survive the im- years. As the DRC’s mining landscape in- pact of unattractive commodity prices. creasingly picks up pace, new entrants Diversifying into different sectors is an are venturing into the fray. Leveraging its important part of our core strategy be- experience providing underground roof cause the downturn in mining will inevi- support systems in Zambia and in South tably happen again,” explained Gaëtan Africa, New Concept Mining (NCM) sees Falesse, GM for DEM Group DRC. an opportunity to enter the DRC market. DEM is also expecting to see new de- “DRC represents a growing opportunity mand for its line of GHH products given for us because a number of underground a recent trend towards underground mines that were closed before have since mining in the DRC. Ivanhoe’s massive been reopened, thus availing us a chance Kamoa project is an underground opera- to put our products into this market,” tion, and Glencore’s Mutanda operation said Ivor Chanda, sales director for Africa is also looking at opportunities deeper at NCM. below the surface. Reliant Congo, an un- For companies with mature in-country derground subcontractor with its roots in operations, diversification in other sec- Peru, opened its DRC operations in 2009 tors has allowed for some relief when to service KCC. The company has grown unattractive commodity prices dry up to include a presence in Kolwezi in ad- the available capital to spend on sub- dition to its Lubumbashi office, and has contractors or new equipment. “Mining also found work in the East with Alpha- represents around 90% of our Congolese min. Using professionals from experi- business, while construction and trans- enced underground mining nations Peru port are growing every year,” said said and South Africa, the company is able Mamadou Sow, country manager for to pass savings to its clients by training BIA DRC. “There is a significant market locals to work in underground environ- for construction and transport because, ments. “Reliant eventually plans to start where there is mining, there is a need for a mining school to provide technical large power and transport solutions,” he training,” said Joseph Sandon, director. added. “We will bring Simulators because un- With claims that the gold-rich Eastern derground machines are very expensive region of the country could become “the and a bad operator can easily destroy a new Katanga,” many service providers machine.” and equipment companies are exploring Within the equipment sector, increased the possibility of expanding to this region demand for automation suggests that with the aim of supporting projects like the DRC mining industry is maturing. Banro’s two gold mines, as well as tap- Large mining companies in particular ping into the opportunities in agriculture are looking for mechanisms to enhance throughout the country. DEM Group, the efficiency and increase productivity to official distributor of John Deere, is a take optimal advantage of rising com- prime example of this two-pronged ap- modity prices. Automated processes cut Global Business Reports www.gbreports.com

"We first evaluate the level of automation that a customer can handle, which includes assessing their network capabilities. Support starts with understanding what the customer can do and what they need, and also their capacity to work with our technologies.” Stephane Goupil, Country Manager, Epiroc DRC labor costs and use advanced technology are huge opportunities in providing to identify even the smallest gains in ef- more low-cost equipment to the market. ficiency. Epiroc, a global leader in inno- Founded just recently, Rex provides min- vation, has recently experienced interest ing support services with the objective of for the first time in automated features demonstrating that a quality result can such as auto drill and leveling and GPS be achieved with less expensive equip- control navigation. “Within our range of ment as long as good maintenance and products, we have the more basic equip- support comes along with it. “We pre- ment as well as the high-end, fully auto- dict that, as the market becomes more mated and fully navigation and informa- competitive in a volatile economy, more tion controlled designs. The large global clients will look to mitigate risk by pay- mining companies that are already using for an asset over one year versus two ing these tools elsewhere in the world or three years. Our services will become are now starting to look at this option more invaluable as we provide mainte- for their DRC operations,” said Stephane nance services that create the same life Goupil, country manager for Epiroc DRC, expectancy as a premium product,” said adding that because automated equip- Paul Cuyler, chairman at Rex. “We believe ment are easier to use, the burden of that through using a combination of his- finding highly specialized laborers in the toric machine data, oil sampling results, DRC is also lessened. and satellite tracking to inform mainte- Automation has also gained traction be- nance we can lower operating costs and cause of its ability to predict malfunction extend the longevity of any type of equip- in the machinery before it arises, cutting ment,” he added. the costs of maintenance significantly. Along with the increased presence of Chi- “The CAT Connect Suite represents a nese mining companies, several Chinese range of products that are linked to ma- equipment providers have begun to set chine monitoring, payload technology up shop and are fighting against the no- and safety systems. These systems con- tion that lower cost represents poor qual- nect to a control center where they can ity. Group Thema, the official distributor monitor machine and operator perfor- of Sinotruk, argues that its trucks benefit mance simultaneously, providing real- from the influence of German design, but time tracking of machine parameters and come at a third of the price of premium operator efficiency,” said Deon Heyns, European counterparts. “The country’s CEO of Congo Equipment, the official infrastructure challenges are an area distributor for CAT in the Katanga re- where we see potential to assist, and the gion. “The purpose is to detect problems investment in the necessary construction before they arise because preventative work can be reduced if DRC leverages ac- maintenance is much more cost-effec- cess to the less expensive construction tive, as well as to ensure equipment is be- equipment available from China. We also ing used optimally, which also allows for see potential to assist in government-led significant cost savings,” he confirmed. projects through the provision of reason- On the other end of the spectrum, some ably priced trucks,” said Patrick Thema, in the field of equipment believe there director general of the company.

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You, your project, and the Infrastructure financier are on different continents... Transport and Telecommunications

With production ramping up to take ourselves strategically on the five main advantage of the global mining boom, corridors by taking control of the means We’re your the poor state of the DRC’s transporta- to facilitate greater volumes,” he added. tion network gives reason for concern. Exploring alternative corridors, as well common Increased volumes of both imports and as alternative methods of transporta- exports with limited numbers of trans- tion, are vital exercises that will re- porters available has put pressure on the quire capital investment. Roadworks ground. country’s already worn roadways. How- in the Luapula province will support ever, dealing with the congestion on the cargo heading to and from ports in the roads represents an opportunity for lo- east; Dar es Salaam remains a popular Integrated solutions at every gistics companies present in the region course, and the Tanzania International phase of your project. that can provide innovative solutions to Container Terminal Services (TICTS) re- the challenges at hand. “Capacity is a ported a 35.5% increase in the contain- significant problem that will continue to ers handled at port in 2017 following the grow, and the company that will make an removal of VAT on transit cargo enacted impact in the logistics space in DRC will in 2016. However many of the country’s be one that is asset based and makes an main operators are located in Lualaba, .com investment into infrastructure projects, and the Lobito corridor may be a viable specifically road and rail,” said George solution as developments in the railway Ioannou, head of Africa, for the Polytra connect the DRC and Angola. Noneth- Group, which recently joined forces with less, the corridor leading south through Swiss-based freight-forwarding com- Zambia remains a critical passage that pany Fracht AG. “In the next two years, must be better developed. “There is a there will be a shortfall in the capacity significant need for more exit ports like of road and, although many are talking Dilolo or the Kolwezi-Solwezi route. It about rail, we see little action. The main is very challenging to explain to people focus for Polytra is therefore to position outside of the country how the massive

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Photo courtesy of Ivanhoe. volume we deal with is being forced through a single border port is a much more manageable,” pointed out Eric Kalala, di- post. The situation has created a real bottleneck and more exit rector general for Bolloré DRC. points must be developed,” said Jeroen Braet, key account In response, service providers in the logistics space are be- manager at Bolloré. come more integrated to provide a one-stop-shop so their Even if more exit points can be developed, inadequate man- mining clients can get more value and focus on their core busi- agement at border posts means that the customs clearings ness activities. “Today it is critical to be able to provide a bun- process, already a complicated endeavor, becomes even more dle of services rather than focusing only on transport, clearing, tedious — and expensive. “The poor transportation network or any of the other services separately. A package that includes creates significant impact on the cost of doing business. The door-to-door services is what our clients are looking for, and mining region in DRC is landlocked, and if a truck has to wait what Cargo Congo can provide,” said Daniel Tyloo, managing for hours at the border, the DRC loses its competitive advan- director of freight forwarding company Cargo Congo. tages to countries like Chile, where the distance from mine to While transport remains an obvious point in a discussion on infrastructure, the relationship between telecommunications and mining is less examined, but it is one of increasing im- portance. Particularly as mines in the DRC begin to embrace the benefits of automation, strong telecommunication infrastructure to establish access to secure and reliable networks will be vital. “Whether operating underground or on the surface, as long the client has access to a strong network, up to three machines can be operated by a single person from a remote bench and there has been a lot of interest in the resulting efficiencies,” noted Stephane Goupil, country manager for Epiroc DRC. Additionally, with many investors coming from all around the globe, it is vital to establish reliable communication channels with outside stakeholders. The vast size of the DRC means that, particularly in the exploration sector, connection can be a challenge. Vodacom, the leading mobile operator in the DRC, earlier this year became the first in the DRC to launch 4G connectivity, and the company also provides an array of corporate services to address the needs of the entire mining value chain. “At all levels of the production channel and, particularly at the research, extraction and processing levels, the industry is highly dependent on connectivity and optimal data management. We offer services and products that improve the connectivity of the mines, however, our capability is beyond fix and mobile services. For example, ‘Vodacom Business Solu- tions’ is a platform dedicated to supporting the mining sector’s ICT needs through a portfolio of technologies to achieve better productivity and safety, as well as reduce the operational costs for mine sites,” said Anaiah Bewa, executive head of corporate affairs for Vodacom Congo.

26 Global Business Reports | MACIG 2019 PRE-RELEASE Global Business Reports www.gbreports.com COUNTRY FOCUS: DRC

"Capacity is a significant problem that will continue to grow, and the George company that will make an impact in the logistics space in DRC will be Ioannou one that is asset based and makes an investment into infrastructure Head of Africa, Polytra Group projects, specifically road and rail."

Can you briefly outline the strategic focus for Poly- How important is compliancy to your clients and tra heading into 2019? what steps has Polytra taken to ensure them that We continue to grow on the back of developments in the you are operating to the highest standards? mining sector, both on freight forwarding as on customs We have realized that compliance and ethics are hugely clearing – as such we have recently taken on Glencore as important to our clients, and we have just nominated a a customer in custom clearance. global HESEC manager with experience in Africa to re- Through our continued focus on services, we are target- view all our processes and positioning in the market in ing growth of at least 30% per year. Capacity is a signifi- terms of Health and Safety and Ethics. There is a trade- cant problem that will continue to grow, and the compa- off between achieving complete compliancy and hav- ny that will make an impact in the logistics space in DRC ing solutions and capacity. Oftentimes suppliers are not will be one that is asset based and makes an investment what you wish they would be, but you use them in order into infrastructure projects, specifically road and rail. to find solutions for the customer. We have implemented In the next two years, there will be a shortfall in the capac- a new strategy to help our suppliers grow and move to ity of road, and although many are talking about rail, we the next level. see little action. The main focus for Polytra is therefore to position ourselves strategically on the five main corridors A bottleneck has formed at Kasumbalesa, creating by taking control of the means to facilitate greater vol- even greater challenges in terms of capacity. How umes. We strongly believe in the Copperbelt, evidenced do you see this situation evolving? by our initiatives to invest through the construction of Kasumbalesa is a huge challenge because the conges- assets that we wish to operate ourselves. We have been tion is a result of poor management at the border. The in the DRC since 1974, and our initial strategy was to be President is discussing the possibility of a dry port at the asset-lite but today, you have to think out of the box to site that may help the situation, but in the meantime, it be successful in the freight-forwarding business and we remains a huge frustration for us. Trucks already take 20 are committed to demonstrating our commitment to the days to clear, and when they arrive it takes a further five market. days to cross. Increasing volumes suggest things will only get worse, which is why rail is a promising alternative be- How are you intending to fund the construction of cause there is much less congestions. these assets? The future of Polytra will rest in the hands of Fracht AG of With rising commodity prices and an increasingly Switzerland, since Baron Maurice Velge (Polytra’s founder) complex logistical challenges looming, what is your and Mr. Rudolf Reisdorf (Owner and CEO of Fracht group) vision for Polytra? made a very positive decision in this respect. Fracht AG We are very confident that we are in the right place at runs 90 offices present on all continents, employs 1,200 the right time, and we want to be part of the growth we people all over the world, with a strong focus on Africa. foresee in this region. Polytra has been here since the 70s Baron Velge opted, that the best solution for his compa- and has had both great moments and suffered through ny’s future lies within the network of Fracht AG. Polytra’s difficult times. We are ready for what is coming, and we knowledge, digitized set-up, professionalism in the field of believe the current growth is just a scratch on the surface 4PL FFWD will be able to deploy its wings all over the world of the potential this country has if there are some posi- based on a strong network of sister companies. tive changes.

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Global Business Reports www.gbreports.com COUNTRY FOCUS: DRC

"The link between mining and Anaiah BEWA the telecommunications sector has not yet been widely discussed Executive Head of Corporate despite the fact that connectivity Affairs, Vodacom Congo is so critical to a modern mining operation.”

Can you briefly introduce Vodacom’s presence in DRC? GDP, and therefore plays a significant role in driving the Vodacom is majority owned by Vodafone (64.5%), one of economy of this country. It is important not only to con- the world’s largest communications companies by rev- sider how our sector interlinks with mining, but also how enue, and Vodacom Congo is a subsidiary of Vodacom both mining and telecom both promote sustainable socio- Group, a leading African communications company pro- economic growth in the DRC. viding a wide range of services, including mobile and fixed voice, messaging, data, financial, Enterprise IT and con- Beyond its support of the mines, how can Vodacom verged services to over 103 million customers. Vodacom assist the rest of the mining value chain? started operating in the DRC in 2002 as a joint venture that Vodacom provides connectivity, management and control is majority owned (51%) by Vodacom Congo and Congo- solutions that span the entire operational spectrum of this lese Wireless Networks (CWN) holding a 49% stake. Today, value chain and is ready to collaborate and partner. For Vodacom Congo is an established operator with a 15-year example, our car tracking solution allows for optimal fleet track-record of providing quality communication services management and several possibilities of control including in the country. We are the leading mobile operator in the the location of the vehicle, the geolocation of the vehicle DRC in terms of market share and subscribers. on the mobile phone, control and speed limitation, monitoring of consumption, reception of detailed reports, im- Can you elaborate on why telecommunications is an mobilization of the vehicle in case of loss, etc. important part of the mining value chain in the DRC? Vodacom collaborates with the mining sector to provide Can you highlight a specific service that supports the communication services and identify solutions in response exploration sector? to some of the challenges faced by our clients in the min- To support exploration phases, Vodacom accompanies ing industry. The link between the country’s infrastructure teams’ deployment by linking their quarries to the network and its ability to benefit from the exploitation of natural by building quick to assemble Rural Coverage Sites to en- resources is quite clear. However, the link between mining able voice communication and critical data transmission. and the telecommunications sector has not yet been wide- As the flow of information increases, Vodacom invests on ly discussed despite the fact that connectivity is so critical upgraded 2G sites, depending on the capacity. To date, to a modern mining operation. Additionally, telecommu- these connectivity capabilities have allowed the deploy- nication is the second largest contributor to the country’s ment of thousands of tailored sites across the country.

Global Business Reports | MACIG 2019 PRE-RELEASE 29 Global Business Reports www.gbreports.com Power The Congo’s great irony

Power typically comprises anywhere from Africa, is the second most powerful river 10-25% of operating costs for a mining op- in the world in terms of volume, with an eration, and bears particular relevance in average flow of 40,000 m/minute. It is the DRC, which suffers from a severe pow- also the world’s deepest river, reaching er deficit. As production ramps up, the en- depths of 220 m, and yet its prospects as ergy challenges for many miners will only a source for electricity have been widely become more acute. For example, the underutilized. The mining province of Kinsevere mine’s oxide ore is reaching its Lualaba alone boasts hydroelectric po- end-of-life, and while the option to exploit tential of around 800 MW, but the dismal a sulfide option exists, the current plant is state of the country’s power infrastruc- incompatible. To construct a new one will ture, coupled with too few generation be a capital and energy intensive project, projects, has resulted in an energy deficit requiring a roaster capable of heating over that will only become more pronounced 1,000 degrees to drive out the sulfide. The as mines in the region seek to consume MMG-owned mine, which expects to pro- more power. “As more mines open in duce 80,000 mt of copper cathode in 2018, DRC in the coming years, electricity will already imports some of its power supply become even more difficult to source. from Zambia and will undoubtedly need Additionally, mining is going under- more in the near future. ground in DRC, and large power plants Ironically, the DRC’s power potential is are required to supply air, water and gas,” so great that it is often said the country Axel Chasme, sales manage for BIA Africa, could power the entire continent through pointed out. hydroelectric generation. The Congo riv- The 2014 liberalization of the power sec- er, which is the second longest river in tor in DRC is a first step towards provid-

Photo courtesy of Randgold. Global Business Reports www.gbreports.com COUNTRY FOCUS: DRC

ture, either through internal departments “We are not strong advocates of solar, being an erratic source like Ivanhoe’s Kamoa Energy, or with the of power unable to meet customer’s demand on an utility scale support of companies like Congo Energy, basis, even if capacity factors have a member of the Forrest Group. “Some improved with the use of batteries parties like Tenke Fungurume (TFM) will for storage. We allow ourselves to need huge amounts of power to take ad- consider solar only when it can be vantage of the rising copper price — the efficiently combined with hydropower company will need 400 MW to produce and supply electricity during dry their desired 300,000 to 400,000 mt/y of seasons, and are still assessing the copper. They have the resources but not merits of such a solution in DRC.” the power, so they were looking at the Luapula valley at the Zambian border John Kanyoni, COO, Tembo Power to the east where there is potential for DRC hydro-stations on the DRC side of the valley,” said Tobias Posel, director at Geo- Quest. ing an alternative to SNEL, the country’s is closely related to the mining sector Zambia based Copperbelt Energy Cor- state power company, and the rules of and the reason for lack of investment is poration (CEC) operates the interconnec- play will be better understood once the the volatility of the commodity prices. tor between the DRC and Zambia, and the Autorité de Régulation de l’Electricité During the downturn, caused by a fall in has been selling power to companies (ARE) is firmly established. However, the demand from China, people were more including MMG and TFM. Katanga Ener- Grand Inga Dam, a multi-phase project pessimistic about the soundness of our gy, which is also working to rehabilitate that could eventually deliver as much initiative, but today opinions are much substations in support of the mines, is as 40,000 MW, has served as a deterrent more favorable.” importing power from Pointe-Noire in for those that might consider investing Out of necessity, many mining compa- Congo-Brazzaville. The Italian oil com- into the DRC’s power potential because nies have been active in investing into pany ENI gas power plant has a capac- once Phase III becomes operational in the rehabilitation of existing infrastruc- ity of 300 MW with an excess of 120 MW, 5-6 years, it will be impossible to beat the economies of scale achieved by this mega project. “The electricity generated by small hydroelectric dams will be slightly more expensive than that generated by Inga…. [which] will sell at four US cents/kWh to five US cents/kWh, while all the small generation plants will be between 12 US cents/kWh and 15 US cents/ kWh,” said Vincent Noel Vika di Panzu, director general of Katanga Energy, adding, “However, to ensure system stability, we also need a power plant in Katanga because, if Inga’s power supply fails, we will need the support. Therefore, projects like Busanga, Sombue, Lubudi and Lwapula are very welcome to stabilize the system. We cannot rely only on Inga, especially as it is 2,000km from Katanga.” John Kanyoni, COO of Tembo Power in the DRC, elaborated further on the reasons that investment into power-related projects has been sluggish: “The addition of power generation capacity in DRC is challenging because of the Govern- ments’ budgetary constraints, the lack of transmission infrastructures, the accessibility of viable sites, and the difficulty to finance projects, whether on a corporate or project finance basis. Power demand

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which Katanga Energy is re-selling to mining companies. Additionally, several “Solar is an expensive option, but we new generation projects have begun to believe the most important thing move forward in the small-to-medium is education. We are trying to size range. Tembo Power, which has an communicate to clients that within 80 MW project in Kenya, is also conduct- 5-10 years, the investment made into ing feasibility studies for a project on the a solar project will be earned back Kalule River with an installed capacity of allowing the benefit of producing around 70 MW. Kipay Energy, whose CEO free energy.” Eric Monga is also the provincial president of FEC, is working on the Sombwe Jean Baptiste Kasokota Kibambo, and Kawa hydroelectric projects which Technical and Commercial have combined potential to generate Director, PANACO around 160 MW. There is also a growing interest for the benefits afforded by investing in solar- to support mines in other ways such as Dev Solaire, another local provider of so- powered solutions. While no solar proj- their CSR projects: “The distribution of lar solutions, is looking to extend its offer- ects in the country currently achieve the electricity by the state power company ings in renewables by exploring opportu- scale to power a large scale mining op- SNEL is insufficient, and in places like nities in biofuel. “In DRC and particularly eration, the technology is being used to hospitals, schools, workers’ camp, and Lubumbashi, solar and biomass are the power offices such as the new Luano City villages we see significant opportunity two most viable ways to produce elec- complex in Lubumbashi, which serves for mines to step in through investments tricity when compared to wind or other as the headquarters for several promi- in solar energy. We have developed a sources. These options are more cost nent companies such as CNCM and solar energy package for the mines with effective, and the region’s abundance of TFM. Jean Baptiste Kasokota Kibambo, this in mind, with the objective of help- sunshine makes it an excellent candidate technical and commercial director of ing mines achieve their social responsi- for solar solutions. Biofuel essentially PANACO, elaborated on the opportunity bility obligations,” he said. uses waste to produce electricity, and we are working with Haier, a world leader in this space, to explore the potential,” said Divesh Hassamal, managing director of the company. Using solar and other sources of energy can help reduce consumption from the grid, but there are efficiencies to be gained in daily operations that can also help considerably. Minequip, a distributor in the region for several brands including Atlas Copco, also installs automatic lubrication systems for equipment. “Our systems allow companies to reduce that deficit by saving power, but we must emphasize to the end users how every kilo- watt saved is important. For instance, our lubrication systems for open gears and crushers reduce the friction between the components, which is turn reduces power consumption because when there is less friction, there is less waste,” said Adry Nzonzimbu, director of the company. Ultimately, optimization of operations will not be sufficient to account for the coming drought in power if success in new generation and rehabilitation of aging infrastructure do not occur. One way or another, capital invested by the mines themselves will likely prove necessary to move the country forward.

32 Global Business Reports | MACIG 2019 PRE-RELEASE Global Business Reports www.gbreports.com COUNTRY FOCUS: DRC Conclusion Developing Human Capital

In addition to addressing the controver- versities to accomplish that,” said Costas the reform of the new mining code aims sial topic of taxation, the new mining Coursaris, founder of Katanga Business to advance Congolese companies, but code also attempts to promote greater Meeting (KBM), a relatively new event the wording of the law is unclear. There participation of the Congolese in the na- that endeavors to bring together players was a subcontracting law which came tion’s mining industry. Doing so would across multiple industries to promote the into effect in March 2018, which has al- help to create a more sustainable min- DRC’s economic potential ready encouraged subcontracting re- ing ecosystem and allow the country to A large part of the problem stems from served exclusively for Congolese people, derive more wealth from its resources, poor educational infrastructure and the but the wording contradicts itself on but the key problem remains the lack of consequences of “brain-drain”, but the many aspects, and so the mining indus- a qualified labor force to service the in- generational gap that impacts the min- try does not have a clear idea of what it dustry. Nonetheless, there are certainly ing community worldwide has also likely really means to have a Congolese major- longer term benefits if the DRC’s human impacted the lack of available talent in- ity workforce,” explained Lysa Munkeni, capital is indeed enhanced. “We hope the country. Similarly to anywhere else in the managing partner at ACF Conseil, a Con- new rules will mean DRC providers step- world, jobs in IT can seem much more golese tax advisory firm. up and ensure they have the correct skills. attractive to a young student despite the A topical discussion for many mining The new rule imposes competence trans- opportunity being promoted by the new companies around the world is the notion fers so service providers from abroad subcontracting regulations. “Today it is of CSR and the responsibility a private en- will need to make partnerships with difficult to find qualified technical peo- tity has towards the communities where it Congolese companies,” said Djo Mou- ple. Many of the schools here in DRC pro- operates. Increasingly, and particularly in pondo, CEO of Sodeico Development, a vide education that is not as focused on the developing world, the mining commu- Congolese HR management company the technical side, but rather IT. We need nity is realizing that beyond just being an established in 1987 that provides a di- more people more competent in a more obligation, CSR serves as a tool to secure verse range of services from recruitment traditional technical skillset. Today it has the social license to operate while also to medical care management. “This is become more challenging to find quali- contributing to the sustainable growth of a significant benefit of the rule but it is fied laborers,” said Pythagore Manoliadis, the countries where it operates. Expat la- also potentially problematic as service managing partner at Benco Construction. bor is expensive, and if CSR programs that providers may go into partnerships very While enhancing the educational op- emphasize education and business prac- quickly without doing due diligence. Due portunities in the DRC can only help the tices that facilitate knowledge transfer are to our experience and connections, we country’s mining sector to become more better implemented in the DRC, mining know most of the supply chain and we stable, the new legal requirements about companies will ultimately improve their can point companies and investors (indi- the involvement of Congolese remain bottom lines and help the DRC finally be- viduals and companies) in the right direc- unclear for the time being. “It is true that gin its ascent to greatness. tion to find the best partnerships.” Sodeico is leading an initiative to develop an academy devoted to four different industrial sectors, including a mining and energy division based in Lubumbashi. The company aims to work with private companies through endorsements of specific courses, with the objective of pairing top students with mentorships, internships, and eventually jobs. While initiatives like this are undoubtedly a good start, improving the country’s state educational platforms will also be key if the new subcontracting law is to be fully enacted. “Without better education, it will be difficult to move forward and we need better schools and higher level uni- Photo courtesy of AEL.

Global Business Reports | MACIG 2019 PRE-RELEASE 33 Global Business Reports PRE-RELEASE | MACIG 2019 www.gbreports.com

"The annual Katanga Business Costas Meeting brings the mining community and related sectors Coursaris of DRC together." Founder, Katanga Business Meeting (KBM)

Can you briefly introduce KBM and highlight the ob- What challenges do you see for investments into the jective of the event? power sector here in DRC? KBM is one of the largest events in the Copperbelt region These projects are challenging and they require significant and the DRC, with a record high of 170 exhibitors and 4,000 time and large budgets to be successful. DRC is also home visitors in 2015. While this year attendance dropped to 130 to the Inga Dam project which, step by step, is moving exhibitors and around 2,300 visitors, we are now focusing forward, although after the involvement of many external on bringing people from different sectors together to cre- investors it is clear that the project faces an unclear and ate greater impact. Mining has remained the heart of the difficult development path. Nonetheless, in the next five economy for many years, however it is critical that the DRC years, I believe we will see improvements in the energy develop other sectors such as agriculture, tourism and sector. The problem remains that consumption of energy transport. We represent nine major sectors and provide will only continue to rise with increased production capac- these players with a platform to raise awareness about ity. To meet all the industrial needs for this country’s devel- their activities. We anticipate that in the future, more coun- opment, the government will need to invest more heavily tries will participate in the exhibition to help grow the un- in power-related projects and find more partners. derdeveloped sectors in DRC. How do you expect editions of KBM will evolve in the What are the advantages for a mining company that future? participates in the KBM event? In the beginning, exhibitions were our strength and host- Mining companies in DRC will not find buyers in an exhi- ing the conference was our weakness, and this year our bition, but through the new law requiring the mines to focus was to bring better speakers on board and gener- rely more on Congolese subcontractors and reduce im- ally enhance the conference element. Next year, we aim to ports, there is a need for a space for all of these entities to streamline both and potentially bring the event to Kolwezi. engage and learn about one another. The strategy of KBM Although Kolwezi makes sense as a venue site because is to put together not just mining suppliers, but also other that is where the mines are, the availability of hotels and sectors that in-directly impact the mining houses such as accommodation in Kolwezi presents some limitations. His agriculture and tourism. Secondly, conferences play a excellency the Governor of Lualaba is making incredible key role in facilitating conversation about the changes efforts to develop the infrastructure and, if we have a wel- occurring in the industry and promote transparent dia- coming environment for all these actors, we certainly will logue on topics such as how the new mining code will take advantage of the opportunity. be applied. What final message would you send about the oppor- In your opinion, what is the missing ingredient that tunities to invest in DRC to our readers? will help to strengthen the business ecosystem here DRC faces significant challenges in comparison to many in DRC? other countries on the continent, but I believe for Africa to Without better education, it will be difficult to move for- realize its full potential, solving the social, economic, and ward and we need better schools and higher level univer- political problems in DRC should be a priority. Our country sities to accomplish that. Additionally, we need to devel- is the heart of Africa and once we get on track, the result op better local facilities for Congolese living abroad due will benefit the entire continent. Currently, the DRC is fo- to economic and security reasons. Promoting peace and cused on its relationship with the southern region and not justice will also be key, and overcoming the corruption putting enough emphasis on engaging with countries to issue that the country faces is also important for improv- the north, west and east. Countries like Morocco, Nigeria, ing the business environment here. Regarding the local Ivory Coast, and Kenya could help to bring solutions to subcontractors, if better education and justice systems develop our sectors. To all investors, I would recommend are achieved in combination with a crackdown on cor- not to wait for the election, but come beforehand to gain a ruption, the entire supply chain will benefit. clear view of the opportunities in our country.

34 Global Business Reports | MACIG 2019 PRE-RELEASE

Country Focus: Zambia 2018-2019

MACIG 2019 PRE-RELEASEEDITION

Table of Contents Introduction Introduction & Exploration Production Interview John Gladston, with FQM Manager, Affairs Government Conclusion 3. 5. 7. 9. Country Focus: Zambia MACIG Pre-release 2019 Lindsay Davis, Lina by been conducted has This research and Emma Johannes. Jafari Smith Mungo by Edited Ergüney Özgür design by Graphic of Gemfields. courtesy photo Cover Publication Business Reports A Global our on-the-ground industry news from updated For at visit our website please the world, around teams signing by our newsletter subscribe to gbreports.com, us on or follow our website, through VIP list our up to @GBReports Twitter: ------

Project Coordinator Project Project Director and Journalist Director Project Project Coordinator Project Dear Readers, Dear Davis, Lindsay Jafari, Lina Emma Johannes, To all our readers, we always welcome your feedback or interest in being interviewed; or interest your feedback welcome always we all our readers, To [email protected]. me at contact to free feel please Enjoy the read! present our preliminary analysis of both countries on the basis of their experiences. As of their experiences. on the basis our preliminarypresent countries both analysis of can and readers the continent across our research we will continue 2019 approaches, this year. later region Africa on the West focused pre-release our second to look forward In the pages that follow, we share with you some of the developments occurring in both in both with you some of the developments occurring we share follow, that In the pages in February be released 2019 at report, 2019 to of our final MACIG ahead jurisdictions all of to our deep gratitude We extend South Africa. in Cape Town, the Mining Indaba we with us, and insights their valuable share the time to took the industry that leaders for these reports is not copper; the Kagem emerald mine in Zambia and the Kibali gold gold the Kibali and Zambia mine in copper;emerald not is Kagem the these reports for may be defined mining industries countries’ while these that mine in DRC demonstrate attention. greater warrant resources in other prospects excellent by copper, bia continues to attract the attention of investors eager to tap into its well-established well-established its into tap to eager of investors the attention attract to bia continues the continued for will be critical minerals other into but diversification mining tradition, image the cover that The sharp eye mining industry. will notice of the country’s success ecosystem. In the DRC, a new mining code has been met with loud rebuttals from many from with loud rebuttals has been met In the DRC, a new mining code ecosystem. the new to regulatory adjusting are and companies investors, international prominent Zam sense of unease. a heightened to contributes as an impending election framework while the mineral potential in the DRC is unmatched perhaps even globally, ongoing ongoing perhaps even globally, in the DRC is unmatched potential while the mineral the risk for simply unpalatable are environment political and an uncertain conflict the ser downturn has depressed of the copper impact The lingering averse investor. the mining new into life upswing is breathing but the recent regions, in both sector vices boring countries diverge entirely from one side of the border to the next. the next. to border one side of the from entirely diverge boring countries does not in Africa, nations and peaceful stable one of the most considered long Zambia, found in the DRC. Conversely, cobalt for potential nor the same the high grades offer try Investment Guide (MACIG), GBR dives into the key factors that will either inhibit or will either that the key factors try GBR dives into Guide (MACIG), Investment they claim Although both these two Kings of Copper. flows into investment encourage in these neigh of the Copperbelt, of investing a share the opportunities and challenges back into a boom phase, the price of copper has recovered substantially and cobalt and cobalt substantially has recovered of copper a boom phase, the price into back heights. historic to soared have prices Coun Mining in Africa the productions, of our cornerstone one for pre-release In the first falls almost entirely between two African nations — the Democratic Republic of the Republic Democratic — the nations two African between entirely almost falls larg and second the first represent — which unsurprisingly (DRC) and Zambia Congo Ascycle wheels the commodity continent,respectively. on the of copper producers est the world. Boasting grades as high as 4%, the sediment-hosted style deposits are esti are deposits style sediment-hosted the as 4%, as high grades Boasting the world. planet’s 40% of the and around ore, of copper tonnes 5 billion around contain to mated land of mineral-rich km stretch This 450 reserves in the region. also be found can cobalt The Central African Copperbelt hosts some of the most important copper reserves copper in important most the of some hosts Copperbelt African Central The Global Business Reports PRE-RELEASE | MACIG 2019 www.gbreports.com Mining in Zambia Diversification will drive success

Photo courtesy of Gemsfield.

Zambia has long been considered on of matter. Zambia’s worrying level of debt per. The entire industry previously suf- the most attractive destinations for min- which could rise to as high as US$13 bil- fered from severe power shortages that ing investment in Africa given its associa- lion by 2019 could also signal to some crippled the mines’ ability to produce tion with peace, relative political stability investors a potential change in the tax re- in 2015 and 2016, but Zambia is now on and a long tradition in mining. However, gime given residual mistrust brought on track to become a net exporter of pow- Zambia’s mining industry is aging and in- by unpredictable changes in recent years er — though the debate around energy sufficient exploration suggests that new in the typically predictable nation. tariffs will undoubtedly persist. Finally, opportunities are limited. The downturn Yet, there are many reasons to remain despite evidence of tension between the in the copper price hit contractors hard deeply interested in Zambia’s mining in- public and private sector, the country and, despite the recent upswing, all boats dustry. The country produced 800,0000 remains a relative safe haven for invest- are not rising and cash flow remains mt/y of copper in 2017, and the gov- ment dollars. “Over the past year, we tight. Notably, and in a scenario remi- ernment’s ambitious target to produce have definitely witnessed positive trends niscent of Tanzania’s dispute with Acacia 1,000,000 mt/y in 2018 is on track to and the order intake picked up signifi- Mining, First Quantum Minerals (FQM), succeed. The North-West province is cantly last year. We have been hearing which produces over half of the country’s being hailed as the “new Copperbelt” from our customers that the projects that total copper, was slapped with a US$7.9 and, although still sluggish, exploration were on standby and in care and mainte- billion tax bill when the Zambian govern- initiatives in and around the region are nance are coming back into production,” ment claimed the company was incor- buzzing. Zambia is also proving that its said Patrick Chanda, country manager rectly reporting exports. The Vancouver- strengths are not just in copper, but an of Epiroc Zambia. “Everyone is ramping based company has staunchly refuted array of other minerals and notably its up and there is a very optimistic feeling, the charges and, although negotiations emeralds are contributing to the devel- even taking into consideration challeng- are ongoing, it has been rumored FQM opment of a more resilient industry that ing external factors. We expect this to will pay around US$1 billion to settle the does not live and die by the price of cop- continue in the coming years.”

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PRODUCTION/EXPLORATION John Production of copper is largely driven by four standout players: FQM, Mopani Copper Mines, Konkola Copper Mines (KCM), and Gladston Barrick’s Lumwana. FQM, despite its troubles with the government and a “pivot” towards Latin America, where the compa- Government Affairs ny’s Cobra project in Panama will come online in 2019, insists it remains committed to Zambia as well. “We firmly believe that Manager, FQM Zambia has every prospect of reclaiming its place as the number one copper producer in Africa,” said John Gladston, government affairs manager for the company. “The principles that will The government is looking to diversify across sev- underpin this are stability and competitiveness, but not just in eral different industries. How does FQM support terms of the mining tax regime. Things like electricity tariffs, the this initiative? ability to issue employment permits to limited numbers of criti- Our multi-facility economic zones (MFEZ) Kalumbila cal expat workers, and access to a competitive market for con- and, hopefully in due course, Kabitaka will speak to all sumables such as low-sulfur gas-oil — of which we consume those aspects of the government’s desire to diversify in- around 500,000 liters a day — are of great influence to Zambia’s dustry in the country. More than that, these initiatives attractiveness,” continued Gladston. will generate jobs and tax payments that will become MCM will seek to produce 175,000 mt in 2018, following an ag- government revenue, increasing the general wealth of gressive expansion project that involved sinking several new the nation. I am optimistic that the government will shafts - an investment to the tune of US$1.5 billion. KCM experi- show courage and endorse those commercial zones. enced a recent shuffling in leadership and the Vedanta-owned Where we have sited them, we have also constructed a company’s new CEO, Deshnee Naidoo, has recently announced town next to each MFEZ that will help to support their an initiative to push production up to 400 mt/d, with production in June sitting at 350 mt/d. The Lubambe mine, which success by providing a stable supply of workers. All previously formed part of the historical Konkola copper mining these initiatives are geared towards creating sustain- complex, was purchased by EMR in December 2017. “In the past able communities around our mines so that when the six months that we have been here, we have identified that the orebody expires, the community there will persist; at mine is not particularly productive firstly because it has insuf- the end-of-life of each mine we do not want to see any ficient infrastructure to handle the volumes of water in the area community collapse in on itself. and secondly because the mining method used has not been the best one for the type of ore body,” said Nick Bowen, CEO How has the power conversation evolved in Zam- of Lubambe. bia since the crippling deficit that severely impact- Globally, there is a deficiency in exploration capital and Zambia ed the mining industry a few years ago? is no exception. Particularly in the recent downturn, large min- Power is such a critical component to a successful busi- ing houses have been hesitant to take part in endeavors that do ness, which again plays into the tariff debate and sub- not deliver a return to anxious shareholders, but, as resources sequent competitiveness of Zambia as an investment deplete, there is a risk that the global pipeline for projects will destination. Looking forward, we believe that competi- reach a crisis. That being said, there is significant opportunity tiveness should be embodied in a cost-reflective elec- for those that can demonstrate a successful venture. Midnight tricity tariff. The only way to determine a cost-effective Sun, which is focused on discovering copper and cobalt in tariff is to carry out an independent cost of service study; Zambia, has a land package of over 500 square kilometers near this independent study is yet to be delivered. Clearly FQM’s Kansanshi mining complex that it has been exploring any cost reflective tariff will be heavily influenced down- since 2015. “There are so few new discoveries these days that to wards by the reform of the Zambian electricity utility have a potential deposit that can illustrate the size and scale of ZESCO. In the meantime, we will continue our dialogue a large scale operation is quite exceptional,” said the company’s with government, but we must also make allowance for CEO, Brett Richards. existing power agreements. So far Midnight Sun has drilled in excess of 40,000 meters and made a discovery on the Mitu target of 4.23% Cu eq, including cobalt credits, at over 11.6 m, at 120 m depth, and on its north- Can you provide an update on the strategy in place ern target known as 22 Zone, where the company hit intercepts for the Enterprise nickel project? of 5.71% Cu. over 11.2 m, within 120 m of surface, trending over The nickel price is recovering, but we have not yet seen the a distance of 1,000 m. “The exploration program for 2018 was stability nor the price-point which warrants the commis- to isolate the key target of Mitu and try to drill (air core and dia- sioning this project. This is also the case for our nickel asset mond) the near surface mineralization (250m depth) to better in Australia, which remains under care and maintenance. understand the geological complexities of a target that extends In the meantime, we are still exploiting the synergies avail- over 17 km in strike. We also conducted a Versatile Time Do- able at Enterprise with respect to the Sentinel project. main Electromagnetic (“VTEM”) geophysical survey over the

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property on 200 m centers, but 100 m centers over the targets, and expect the “Often in Africa, because the actual cost of labour is so low, there results of this work will illustrate the size is little investment in staff training and management and they and scale of a multi-faceted deposition are not treated as the valuable resources they can be. We have that will potentially host a large mining already increased staff productivity operation,” said Richards. by 25% by bringing in productivity Notwithstanding its potential to fur- bonuses and other performance ther understand its copper and cobalt related financial incentives. We will potential, to push Zambia’s mining in- continue to increase this productivity dustry forward diversification into other without increasing staff numbers by minerals will be key. While prices have investing in training and logistics, not been attractive enough to warrant intense exploration, GoviEx’s Mutanga and using our staff better.” project, which consists of five main de- Nick Bowen, CEO, Lubambe Mine posits, suggests the country’s potential in uranium, and increased activity in small-scale mining of manganese has “Zambia’s strategic advantage is the fact that the gemstones are also been garnering attention. “Manga- located here. In India, where much of the cutting and polishing nese is a key commodity at the moment,” confirmed Seamus McKenna, operations takes place, the strategic advantage is the low cost of labor. We manager at Paul McKenna & Sons, a di- have seen many companies try and versified mining company that provides fail to implement these processes in mineral and materials processing as Zambia, and if it were a profitable well as transport services. “We have in- business we would certainly be vested approximately US$1 million into taking advantage. However, the our manganese project and we expect reality is that Zambia must play to we will need to put in more capital to its strengths in extraction of these achieve our desired production rate of resources.” 3,500 mt/d,” he added. Interestingly, whispers of lithium poten- Sean Gilbertson, CEO, Gemfields tial have also recently begun to spread. “We are seeing particular interest in lithium, driven by Europe’s demand to try is, the easier it is to find gold because The company’s CEO, Sean Gilbertson, move away from a reliance on traditional it ends up in stream networks where it highlights the role that consistent supply fuel and power solutions and more into concentrates and it can be sifted out,” plays in establishing the value of a gem- batteries. The potential is particularly explained Mark Shaw, consultant geolo- stone. “We have built Gemfields around high in the southern part of Mozambique gist at GeoQuest. “Because Zambia has the idea that the colored gemstone busi- and Zambia, and we are expecting a sig- a very flat landscape and a lack of small ness had been overlooked and was very nificant increase in the development of streams and rivers, gold exploration is fragmented. We saw an opportunity to lithium mines within the next one to two much more difficult. The alternative so- professionalize the industry similar to years,” said Patrick Kampenegele, man- lution, which would be soil sampling, is what De Beers did with diamonds. Em- aging director of Knight Piésold Zambia. not always very effective because there is eralds, rubies and sapphires never made “This translates into a lot of opportuni- a very thick overburden cover which has it into the mainstream in the same way ties for us, because developing these accumulated for the last six million years as diamonds because of a lack of consis- mines is essentially the equivalent of when the last major change in climate tent or reliable supply,” he said, adding, building the infrastructure of a new town, occurred in southern Africa.” “Because these types of deposits are very with requirements like roads and ensur- Precious and semiprecious gemstones pocketed, there is an uncertainty to what ing water accessibility,” are also an area where Zambia has excel- extent they can provide resources, mak- Zambia’s copper credentials suggest that lent prospects that have strengthened in ing it difficult for the industry to run prop- the country would also offer opportuni- recent years. In particular, the country’s erly. Our strategy centers around finding ties in gold given that the two metals of- emeralds have gained traction on inter- solutions that enable us to deliver a con- ten occur in the same mineral deposits. national markets, sought after for their sistent supply of these gemstones.” However, the challenge of gold mining in characteristic blue undertones. London- Gemfelds also holds a 50% interest in the the country is a technical one related to based Gemifelds operates the Kagem Kariba amethyst mine in the southern its topography: “The problem with find- mine, which represents the world’s single part of Zambia that the company is looking gold in Zambia is the lack of relief. largest producer of emeralds, accounting to sell in order to focus exclusively on The more mountainous or hilly a coun- ing for about 25% of global production. emeralds, rubies and sapphires. While

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Gemfields has operations worldwide, Gil- ing projects and unearth new ones, the to the south. While the Southern Africa bertson expects the African continent will boundless opportunities in this overall region overall boasts a much stronger be a key area of emphasis for the com- stable environment will inevitably drive transport network relative to other re- pany going forward. the country back to its rightful place as a gions around the continent, railway is Near the Kagem mine, the Gemcanton leader among Africa’s top mining destina- the essential next step to alleviate its emerald mine is also ramping up its pro- tions. However, Zambia is notable not just overworked road system. Reiner Barford, duction capacity. “Our future strategy for its mineral opportunities, but its stra- group managing director for Manica, involves acquiring more machines and tegic position connecting the southern emphasized: “While cargo has tradition- excavators to help unlock the potential in Africa region. The transport sector often ally been moved out of the Copperbelt certain mining areas that reach depths of quips the country is not land-locked, but by road, many logistics companies are around 120 meters. We are also engaged rather land-linked, highlighting the fact looking to invest in rail as it is far more in further drilling and exploration activi- that Zambia’s borders with eight differ- efficient. We have agreements with train ties throughout the country in both em- ent African countries allows it to facilitate companies so that we can run containers eralds and copper. We are also looking to vital trade. Furthermore, the country’s straight from Zambia into Durban, which invest in scanning technology that pro- participation in both the Southern African is the most secure mode of transporta- vides information about what the ground Development Community (SADC) and the tion. It is also more cost-effective and contains 100 meters below the surface Common Market for East and Southern more environmentally sustainable, as to better understand the potential in our Africa (COMESA) means that goods can be well as quicker and less damaging to the ground,” said Abdoulaye Ndiaye, CEO of imported and exported between member infrastructure.” Gemcanton. countries without paying duties. If a railway option can be implemented Critically, the country must improve its and better synergies can be achieved CONCLUSION transportation infrastructure if it is to between the region’s free trade ar- Around the globe the mining industry recognize the full extent of this oppor- eas such as COMESA, Zambia is well- is experiencing a lift, and Zambia is no tunity, especially as its neighbor to the positioned to service not just its own different. If the country can attract a north also ramps up copper production strengthening mining industry, but fresh round of investment to boost exist- and looks to utilize the existing corridors those around it as well.

Photo courtesy of FQM.

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