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Randgold Resources to meet with Democratic Republic of Congo government on new mining code

The Democratic Republic of Congo government said President Joseph Kabila will soon sign into law a new mining code
Mining executives met with the government on Wednesday

Randgold Resources Ltd (LON:RRS) said it will meet with the Democratic Republic of Congo’s government next week to discuss the country’s controversial new mining laws.

Congo's government said President Joseph Kabila will soon sign into law a new mining code. The code will raise taxes and remove a stability clause in the current law that has been protecting miners from changes to the fiscal and customs regime for 10 years.

Representatives of the mining industry met with the government on Wednesday to clarify certain aspects of the new mining code.

"The president of the republic assured the miners...that their concerns will be taken into account through a constructive dialogue with the government after the promulgation of the new mining law," a joint statement said.

Discussions set to continue

The government agreed to continue discussions with the mining operators on issues once the new mining code has been signed into law.

Following the meeting, mines minister Martin Kabwelulu told reporters mining operators’ concerns would be treated on a case-by-case basis, according to Reuters.

"After the promulgation of the code, we are going to wait for the mining send us their concerns," Kabwelulu said. "We are going to re-examine those concerns, first with (government) experts ... and with the mining companies’ experts."

Randgold chief executive Mark Bristow said the company would start its engagement with government representatives next week.

Shares edged down 0.6% to 5,944p in afternoon trade. 

In its full year results last month, the miner said it believes the new mining code “will severely limit the growth of the mining industry in the DRC as well as the country's own economic prospects.” 

READ: Randgold Resources doubles dividend as annual profits rise by 14% on increased gold production

The code was passed by both houses of parliament last week but still has to be signed by the president before it becomes law.

Glencore and China Molybdenum also operate mines in Congo, Africa’s top copper and cobalt producer.

Investors need to assess where miners operate, says analyst

“Investors have clearly been spooked by the resurgence of resource nationalism in the DR Congo, where President Kabila is looking to increase the royalty payments owed by miners to the government under legislation that dates back over a decade," said Russ Mould, AJ Bell investment director.

“In sterling terms, Randgold’s London-listed shares are down by nearly 17% over the past 12 months while the (dollar-denominated) price of gold is up by nearly 5% and the precious metal is down by only 5% when priced in pounds."

Looking at the wider sector, Mould said picking the right mining stock to invest in is not as easy as it looks. He said investors need to "assess where the miners operate and the risks posed by resource nationalism or weather, their financial strength, costs of production (as inflation here is becoming an issue), their operational currencies, financial strength and management acumen".

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