Democratic Repubic of Congo Mining Report Q2 2008

The Democratic Republic of Congo (DRC) is home to vast reserves of a wide variety of natural resources - primary among them being metals such as cobalt, copper, gold and precious stones, including diamonds. However, the mining industry, like the rest of the economy in the central African nation, has suffered due to an unstable political environment coupled with widespread strife caused by the six-year civil war that ended in 2003.

All mineral deposits in the DRC are state-owned and the holder of mining rights also gains ownership of the mineral products for sale. Governed by the National Mining Code, the Ministry of Mines regulates the Mining Registry, Directorate of Mines and the Geological Directorate in the DRC. A peculiar feature of the mining industry in the DRC is that artisanal mining, i.e. non-mechanised small-scale mining, accounts for 70% of the national diamond production. Thus, in spite of being the world's third-largest diamond producer in terms of output, the country is ranked only seventh in terms of value. Further, use of archaic mining techniques has restricted possible growth in the diamond mining segment.

Civil unrest and the looting of minerals and precious stones by armed militias continue to drain the country's rich natural resources. A transitional government that came to power in 2003 failed to tackle the law and order situation in the country. Though things are looking up after the formation of a new government, following the 2006 elections, analysts do not expect the macroeconomic and political environment to stabilise anytime soon. Though multinational miners have started investing in the country's mineral and metals sector, the physical infrastructure remains extremely poor or even nonexistent at times.

Industry Forecast The DRC government was focusing on improving the state of the mining industry by reviewing its mining agreements - a decision that raised insecurity among overseas investors. However the review has now been completed and negotiations with mining companies are in progress, beginning to give them a sense of how concession terms may be adjusted. Most hold the opinion that the revival of DRC's mining industry is unlikely without forging alliances with foreign mining enterprises - a situation evidently well understood by countries like China and Australia. BMI expects an average mining industry growth rate of 9.0% for DRC for the 2008-2012 forecast period.