US embassy cable - 05KINSHASA731

C O N F I D E N T I A L SECTION 01 OF 06 KINSHASA 000731 
 
SIPDIS 
 
E.O. 12958: DECL: 04/29/2015 
TAGS: EMIN, ECON, PGOV, PREL, CG 
SUBJECT: CONGOLESE MINING PRIMER 
 
REF: KINSHASA 506 
 
Classified By: Econoff Peter Newman for reasons 1.4 b/d 
 
This cable contains proprietary business information. Please 
protect accordingly. 
 
1. (U) Summary: The natural resources wealth of the 
Democratic Republic of Congo (DRC) is enormous, including 
diamonds, copper, cobalt, nickel, zinc, uranium, gold, 
coltan, niobium, and cassiterite. As the DRC turns its eyes 
to peacetime economic development, the mining sector will 
become ever more important. Diamond and copper/cobalt exports 
already account for over 50 percent of foreign exchange 
earnings for the GDRC. This cable provides a survey of the 
major institutions, metals/minerals, and state-owned 
enterprises and private companies in the DRC mining sector. 
End summary. 
 
Regulatory Environment 
---------------------- 
 
2. (U) The 2002 Mining Code and its attendant regulations 
govern the mining sector. The Mining Code is written to 
promote private development of the mining sector and gives 
the Ministry of Mines operational authority. The Minister 
(currently Ingele Ifoto, a member of the political 
opposition) must sign all mining titles - for exploration or 
exploitation - as well as export certificates for precious 
and raw minerals and metals. The Minister also exercises 
technical oversight of mining parastatals, including 
technical agencies such as the Centre d'Evaluation 
d'Expertise et de Certification (CEEC - precious 
mineral/metal evaluating authority) and Cadastre Minier (Cami 
- mining concession authority) and state-owned enterprises 
such as Gecamines (copper, cobalt, nickel, zinc), Miba 
(diamonds), Sominki (coltan, cassiterite, gold) and Okimo 
(gold). In his oversight role, the Minister also has first 
right of analysis of joint-ventures with any of the 
state-owned mining enterprises and is charged with advocating 
for the joint-ventures at the Economic and Financial 
Committee (EcoFin) and Council of Ministers. 
 
3. (U) Mining Administration, the Technical Cell for Mining 
Coordination and Planning (CTCPM) and Service d'Assistance et 
d'Encadrement du Small Scale Mining (Saesscam) form the 
foundation of mining regulation on the ground. Mining 
Administration has regional and local offices in mining zones 
that report directly to the Ministry in Kinshasa. It is 
capable of collecting fees and taxes for the Ministry. CTCPM 
is a locus of information on the mining sector and maintains 
a list of projects that mining companies in the DRC have 
proposed and for which they are currently searching for 
financing. It also acts as an advisor to the Minister when 
policy or technical questions are raised. Saesscam 
investigates all small scale mining in the DRC. It is 
presently most active in the Kasais, where artisanal diamond 
miners and small mining firms flourish. Saesscam not only 
reports on the activities of small scale mining, but also 
organizes small firms and individual miners into collectives 
to manage financial resources. It charges a fee for these 
services and at present does not have a strong 
subscribership. 
 
4. (C) Cadastre Minier (Cami) manages the issuance of mining 
concessions and the receipt of taxes and payments for 
exploration and mining titles. The World Bank insisted on the 
inclusion of a modern mining register in the 2002 Mining Code 
and Cami was the result. Major mining firms and industry 
specialists feel that Cami has the potential to be an 
effective organization, if it can remain independent of 
political wrangling, something that has not yet been 
possible. Many concessions are still disputed due to the 
former practice of re-assigning concessions based on 
political favors. When Cami began operations in 2003, it 
tried to solve this problem by giving a grace period in which 
concession holders had to present themselves to Cami and pay 
all concession taxes and fees. It also operated on a first 
come first serve basis and re-assigned some concessions that 
are currently disputed. For example, Cami gave exploration 
titles to Southern Era, a Canadian junior diamond company, 
that were located on Miba property ostensibly because Miba 
had not yet come forward to pay its concession fees. This 
decision fell victim to politics and Cami has been forced to 
rescind the titles it granted to Southern Era. 
 
5. (U) The titles Cami issues are either for exploration or 
exploitation. Exploration titles are granted for four years 
(for precious minerals) and five years (all other minerals) 
but convey no mineral rights. Titles for precious minerals 
can be renewed twice for 2 years and for all other minerals 
twice for 5 years. Exploration titles are restricted to 
400km2, and a single company can hold up to 20,000 km2. 
Exploitation titles are valid for 30 years and are renewable 
several times over a duration of 15 years. Exploitation 
titles for major deposits are supposed to be offered for 
public tender, although in practice this may not be the case. 
Cami approves exploitation titles after mining firms submit 
proof of a mineral deposit, a feasibility study, development 
plan and source of financing. An environmental impact 
statement and environmental mining plans must also be 
completed before approval. Per the Mining Code, the Congolese 
government takes a 5 percent interest in the mining project. 
Raw ores are subject to Ministry of Mines authorization, but 
processed ores are freely exported. 
 
6. (C) The Centre d'Expertise, d'Evaluation et de 
Certification (CEEC) is the authority providing official 
valuations of precious minerals and metals. Its director is 
Victor Kasongo Shomary, who is rumored to be a distant 
relative of President Kabila. The resources currently 
regulated by the CEEC are diamonds, gold, silver and coltan. 
The CEEC was once integrated within the structure of the 
Ministry of Mines but was removed from the Ministry and made 
a parastatal in April 2003 to afford it greater independence. 
Former Minister of Mines Diomi Ndongala threatened the 
independence of the CEEC several times from 2003-2004 but was 
unsuccessful in his attempts. The CEEC currently has offices 
in Kinshasa, Mbuji Mayi, Tshikapa, Kisangani, Bukavu, and 
Lubumbashi. Only the Kinshasa, Mbuji Mayi and Tshikapa 
offices are particularly effective. The CEEC currently only 
has the expertise to evaluate rough diamonds. It is focusing 
on strengthening the Kimberley Process in the DRC as well as 
developing its capacity in gold and coltan evaluation. The 
CEEC collects taxes equivalent to 1.25 percent of the value 
of the diamond shipment evaluated, and it retains those 
revenues for its operational expenses. 
 
Major State-Owned Enterprises 
----------------------------- 
 
7. (C) Gecamines: In the early 1900s Belgium began to explore 
the Katanga region of the Congo for mineral wealth. Extensive 
deposits of copper, cobalt, zinc, nickel and uranium were 
discovered and consequently exploited by Union Miniere du 
Haut Katanga (UMHK). Union Miniere's operations were a 
tremendous boon to the colony and it became one of main 
engines of infrastructure growth. Union Miniere remained a 
private venture until Mobutu's nationalization campaign in 
the 1970s, when it was renamed La Generale des Carrieres et 
des Mines (Gecamines). Gecamines continued to be the engine 
of growth for the Congo (then Zaire) through the 1980s. 
Numerous other state-owned enterprises, including the 
electricity and railroad companies, grew as Gecamines 
thrived. Rampant corruption and mismanagement caused 
Gecamines to fall on hard times beginning in the late-1980s, 
but the event that brought Gecamines to its knees was the 
collapse and flooding of the Kamoto underground mine near 
Kolwezi in 1991. Exports of copper, which reached 400,000 
tons per year in the 1980s, dropped to below 40,000 tons per 
year in the 1990s. Key political and economic actors are 
currently dismantling Gecamines to assert control over the 
mining sector and reduce Gecamines' political influence in 
Katanga and in the DRC generally. Proposed joint-ventures - 
with Dan Gertler International, Group Forrest and 
Phelps-Dodge - would take the most valuable of Gecamines 
assets and leave the company with few options for further 
development (reftel). 
 
8. (SBU) Miba: Miniere de Bakwanga (Miba) is an industrial 
diamond mining company located in Mbuji Mayi, Kasai Oriental 
province. The GDRC owns 80 percent of Miba while Sibeka, a 
Belgian company, owns the remaining 20 percent. The Belgians 
originally founded Miba as Societe Miniere de Beceka (SMB - 
but also known as Forminiere) in 1919, but the company was 
renamed Miba in 1961. During the 1960s and 1970s, the GDRC 
slowly nationalized Miba, and in 1977 took the 80/20 
shareholder structure seen today. (Note: Sibeka represents 
the Belgian interests from SMB. End note.) Miba's diamond 
reserves (both proven and probable) are approximately 
200,000,000 carats, including both kimberlitic and alluvial 
deposits. Miba predominantly extracts industrial quality 
diamonds - i.e. low value - from kimberlite deposits. Miba's 
production consistently decreased from 1975 to 2002 but began 
to improve in 2003. In 2002 production was below six million 
carats but had increased to seven million carats in 2003 
(valued at approximately $100 million) and held steady in 
2004. Capital investment of $15 million Miba received from a 
purchase agreement with Emaxon Finance Corp  allowed Miba to 
retrofit old equipment and purchase new heavy machinery. 
(Note: Emaxon is tied to Dan Gertler International, a major 
Israeli diamond trader. End note.) 
9. (SBU) Okimo: The Office des Mines de Kilo Moto (Okimo) 
holds three large gold concessions in Ituri and Bas-Uele 
Districts of Oriental Province. Belgian colonialists 
discovered gold in those districts in 1903. Okimo was 
officially designated a parastatal during Mobutu's 
nationalization campaign in the early-1970s. Okimo 
experienced the same problems as all other parastatals in the 
1990s, including declining production and an inability to 
support itself financially. Okimo is currently trying to 
restart activity through several joint-ventures with 
international gold mining firms, including AngloGold-Ashanti 
(UK/South Africa), Gold Fields (UK/South Africa), Mvelaphanda 
Mining (South Africa), Mwana Africa (South Africa) and Moto 
Gold (Australia). Okimo's total production of gold from 
1905-2000 was 320 tons, and recent studies by Moto Gold show 
a high potential to extract over 8 million ounces of gold 
from just one of Okimo's concessions. Work conditions, 
however, are difficult due to ongoing ethnic militia conflict 
in Ituri district. Only Moto Gold is currently on the ground 
with exploration activities. 
 
Copper, Cobalt, Nickel and Zinc 
------------------------------- 
 
10. (SBU) The Katangan Copperbelt holds one of the greatest 
concentrations of high-grade copper and cobalt resources in 
the world. Consistent with other copper/cobalt zones, the 
Katangan Copperbelt also contains significant reserves of 
nickel and zinc. Until the mid-1990s, Gecamines controlled 
all mining in Katanga. A large number of small operators and 
local economic bosses (such as George Forrest) are currently 
running the mining sector in Katanga. Most small operators 
rely on purchasing raw copper/cobalt ore - locally called 
heterogenite - for their activities, which include light 
processing of the heterogenite in small furnaces or export of 
the raw ore itself. Much of the ore these companies export 
goes through South Africa to China. 
 
11. (SBU) Forrest has two large ongoing projects: Luishwishi 
and the Big Hill Project. Luiswishi is a joint-venture with 
Gecamines to retrofit an aging Gecamines factory. The Big 
Hill Project is a joint-venture between Forrest, Gecamines 
and OM Group (USA) and featured prominently in the 2002 UN 
Panel Report on the Exploitation of Natural Resources in the 
DRC. Forrest processes tailings in Lubumbashi for cobalt and 
then sends the tailings to Finland where OM Group extracts 
germanium, a high-value superconducting metal. Forrest is 
also active in construction and trucking through Entreprise 
Generale Malta Forrest (EGMF), which the Forrest family 
established in 1922. 
 
12. (C) Artisanal exploitation of heterogenite poses unique 
problems for development of the Katangan mining sector. 
Artisanal miners - some of whom are ex-Gecamines employees 
and others who are internally displaced people - have invaded 
Gecamines concessions and also work as day laborers in 
pre-Industrial Revolution conditions. They are somewhat 
organized into a union called EMAK (Entreprise des Mineurs 
Artisanals du Katanga) that is largely ineffective in 
protecting the workers' interests, but is politically 
volatile. These miners are also stripping the most easily 
accessible ore from many concessions - and thus making them 
less profitable - that Gecamines could rent or sell. 
Furthermore, when major mining companies return to Katanga, 
these artisanal miners will automatically expect immediate 
jobs, even though the miners could have occupied the 
companies' concessions for an extended period of time. 
 
13. (SBU) Two other mining companies are actively mining 
copper in Katanga - First Quantum and Anvil Mining. Both 
companies are listed on the Toronto Stock Exchange. First 
Quantum holds concessions on the border with Zambia between 
Kasumbalesa and Sakania. It extracts ore on both sides of the 
border and produces metal at its foundry in Zambia. Anvil 
Mining is located in Kilwa, on Lake Tanganyika, and exports 
copper and silver across the lake through Tanzania. 
 
Uranium 
------- 
 
14. (C) Uranium in the Congo has traditionally been 
associated with the Shinkolobwe (aka Kasolo) mine, 
approximately 25 km SW of Likasi. UMHK sealed the Shinkolobwe 
mine in 1961, and it remained inactive until roughly 2002 
when artisanal miners in search of high grade cobalt ore 
invaded the site. Although there is not an immediate 
proliferation risk and the possibility of uranium mining is 
currently low, the environmental hazards and long term risks 
of leaving Shinkolobwe unregulated and unremediated merit 
attention. 
 
15. (C) Other unexploited sources of uranium do exist in 
Katanga province. Shinkolobwe is part of a tectonic structure 
and fault line stretching from Kalongwe in the west (south of 
Kolvezi) to Shinkolobwe in the east (southwest of Likasi). 
Along this line, several potential 
copper/cobalt/nickel/uranium deposits have been identified, 
including Kalongwe, Menda, Kasompi, Kibamba, Mindigi, Swambo 
and Kipese. UMHK analysed a set of bore holes and estimated 
that the Kalongwe deposit contained reserves of 500 tons of 
uranium (at 0.2 percent concentration per ton of material), 
along with associated copper and cobalt, but no nickel. 
Diamonds 
-------- 
 
16. (U) The DRC finds itself at the intersection of the two 
Central African diamond belts. The less rich belt stretches 
from the Central African Republic southeast toward Katanga 
province. The principal diamond belt begins in Angola and 
extends northeast past Kisangani and Isiro toward Sudan. The 
DRC exports almost 30 million carats of diamonds per year, 
most coming from the provinces of Kasai Occidental and Kasai 
Oriental which are situated directly across the border from 
Angola's diamond-rich provinces. The majority of production - 
over 70 percent - is considered artisanal, meaning small 
scale miners dig in alluvial deposits and then sell the 
diamonds to comptoirs (buying houses). Miba and Sengamines 
are the only two true industrial mining firms in the DRC. 
Oryx Natural Resources (Omani-owned) owns 80 percent of 
Sengamines while the GDRC owns the other 20 percent. Its 
production is small, averaging 600,000 carats per year. 
 
17. (C) A varied community of Lebanese, Belgian and Israeli 
citizens own the highest performing comptoirs. Congolese 
citizens do own several comptoirs but their performance is 
usually low compared to the foreign-owned comptoirs. Of the 
six comptoirs that exported over one million carats in 2004 
three are Lebanese, one is Israeli/Belgian, one is Congolese, 
and the ownership of the other is unknown but thought to be 
Lebanese. By value, six comptoirs exported over $50 million 
in 2004: three Lebanese, two Israeli and one Congolese 
comptoir. Key figures in the DRC dimond trade include Gustave 
Luabeya (ADG of Miba), the Nassour and Ahmad families (owners 
of Primogem, Millenium and CongoDiam), Dan Gertler (owner of 
Emaxon Corp, Dan Gertler International and IDI-Congo), Roni 
and Gadi BenSimon (owners of Comptoir Ashley), Tuvia Marom 
(managing director of Comptoir Margaux), and Victor Kasongo 
(CEO of the CEEC). 
 
18. (U) The DRC has brought its diamond regulations in 
conformity with the Kimberley Process, a voluntary 
international regime to curb the trade of conflict diamonds, 
of which the DRC is a member. The CEEC tracks diamond sales 
and issues diamond valuations from the comptoir to export but 
does not have the capability to track individual miners or 
small companies. Provincial divisions of the Mining 
Administration are responsible for issuing ID cards to 
diggers and negotiators. A Kimberley Process export 
certificate must accompany all exports of diamonds. The CEEC 
and the Minister of Mines must sign the export certificate. 
 
19. (C) Despite the improvements of the Kimberley Process in 
increasing transparency in the diamond trade, the DRC diamond 
sector remains shadowy. The GDRC does not have the means to 
effectively track diamonds from mine to export, and it 
readily admits that it can only track a diamond once it 
reaches a comptoir. In a voluntary review visit in Oct 2004, 
the Kimberley Process determined that two million carats 
(approximately $300 million) are smuggled per year out of the 
Congo. Angolan diamonds are also smuggled into the Congo due 
to elevated prices in Kinshasa. 
 
Coltan, Niobium, and Cassiterite 
-------------------------------- 
 
20. (U) Coltan (columbo-tantalite), niobium and cassiterite 
are found in North and South Kivu provinces in the eastern 
DRC in remote areas with security issues. The 2000-2001 
coltan shortage caused prices to skyrocket, and many 
international companies sourced DRC coltan through Uganda and 
Rwanda. Niobium (also known as tantalum) and other associated 
superconducting metals (such as wolframite) are found 
predominantly in North Kivu. Coltan, niobium and wolframite 
are all superconducting metals used in the production of 
miniature computer systems, such as those in cellular phones. 
Cassiterite is a key metal in making tin. Although industry 
experts estimate the DRC holds over 60 percent of the known 
coltan reserves in the world, reliable studies of these 
metals deposits have not been made. 
 
21. (C) All production of these metals in the Kivus is 
artisanal at present. During the war period (1998-2003), 
roving militias and rebel forces exploited deposits through 
forced labor. Some forced labor may continue. No industrial 
mining is taking place at this moment. New 
coltan/cassiterite/niobium comptoirs (buying houses) are 
opening in Bukavu. One that features prominently is 
Eurotrade, owned by an American citizen. Eurotrade estimates 
that the total amount of coltan passing through Bukavu - both 
legally and smuggled - is 40 tons per month. This does not 
include air shipments from the interior of either North or 
South Kivu that go directly to Rwanda. Goma has not seen new 
comptoirs open recently. Eurotrade attempted to open an 
office in Goma but found the work environment to be 
inhospitable to new investments. Eurotrade's owner made 
particular mention of Rwanda's and Governor Eugene Serafuli's 
continued dominance of the business community in Goma. 
 
22. (C) One industrial mining investment in North Kivu is 
currently under dispute. Krall Metal (Austria) invested in a 
niobium mine at Lueshe in 1999. It signed a Mining Convention 
with the Laurent Kabila government giving Krall Metal rights 
to the Lueshe concessions that used to belong to Somikivu, a 
very small and inoperative parastatal. During the war, the 
mine was not accessible, and after the war, the concessions 
were retroceded to Somikivu, now under private investment and 
management. The GDRC divested Krall of the concessions. Krall 
is currently attempting to regain them from the Congolese 
Government. 
 
Gold 
---- 
 
23. (U) Although gold is found scattered throughout the DRC, 
the main gold deposits are located in the Kivus/Maniema and 
Oriental Provinces. The most explored area, Kilo-Moto, is 
located in the Ituri and Haut Uele Districts of Oriental 
Province, near the towns of Mongbwalu and Watcha. First the 
Belgians then the Congolese/Zairois partially exploited this 
region, but significant deposits remain. Gold is spread 
throughout the Kivus, but the best-known deposits run from 
Kamituga southwest past Shabunda in South Kivu and near Punia 
and Lubutu in Maniema. 
 
24. (SBU) The Kilo-Moto area is the most troubled at the 
moment due to ongoing militia violence. Local warlords run 
many of the gold mines through their militias and export gold 
to Dubai through Uganda and Kenya. Okimo holds the Kilo-Moto 
concessions but does not exercise control over them. Only the 
concessions near Watcha on which Moto Gold is working are 
relatively calm. 
 
25. (C) Gold exploration in the Kivus and Maniema has not 
been intense. A small parastatal, Sominki, holds title to 
several concessions in South Kivu and Maniema, although 
production has not historically been high. Banro Gold 
(Canada) has acquired exploration rights on a large swath of 
land from Kamituga past Shabunda that at one time Sominki 
held. Banro is having significant difficulties with regional 
leaders and the FDLR. They are currently trying to work with 
MONUC (U.N. Mission to the Congo) to improve security. The 
quantity of proven and potential reserves in the Kivus and 
Maniema is not known. 
 
26. (SBU) There are a large number of small traders in the 
Kivus that buy and sell gold, as well as coltan and 
cassiterite. It is unknown to whom they then resell their 
stocks, but most of the gold reportedly arrives in Dubai. 
Post is currenly aware of only one large comptoir trading in 
gold, Comptoir Panju. 
 
Comment 
------- 
 
27. (U) With political stability, the DRC would have the 
opportunity to control and develop its vast mineral holdings. 
Multinational mining companies are already expressing 
interest in bringing investment to the DRC, despite the 
risks. With greater control over its resources, the GDRC 
could see significant increases in revenue and could claim 
credit for improving the general economic welfare of the 
Congolese people. End comment. 
DOUGHERTY