VZCZCXRO3675
RR RUEHBZ RUEHDU RUEHGI RUEHJO RUEHMR RUEHRN
DE RUEHKI #0294 0851055
ZNR UUUUU ZZH
R 251055Z MAR 08
FM AMEMBASSY KINSHASA
TO RUEHC/SECSTATE WASHDC 7725
INFO RUEHXR/RWANDA COLLECTIVE
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK
RHMFISS/HQ USEUCOM VAIHINGEN GE

UNCLAS KINSHASA 000294 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
PASS TO OPIC (JIM WILLIAMS) 
 
E.O. 12958: N/A 
TAGS: ENRG EMIN PGOV CG
SUBJECT: GDRC PUBLISHES MINING CONTRACT REVIEW 
 
¶1. (SBU) Summary.  The GDRC Mining Contract Review Commission 
published its final report on 61 mining contracts March 20, calling 
for all contracts to be either terminated or modified.  Companies 
will have the opportunity to start negotiations or appeal decisions 
with a GDRC task force, but details of that process are not yet 
available.  The Carter Center points to the report as reason to 
support the entire mining sector review process.  However, the 
Commission carried out its work with very little transparency. 
Majority U.S.-owned Tenke Fungurume Mining (TFM) is among the 
projects slated for renegotiation, and has already begun discussions 
with the GDRC.  End Summary. 
 
¶2. (SBU) The GDRC Mining Contract Review Commission, appointed by 
President Kabila and set up by Minister of Mines Martin Kabwelulu in 
April 2007, made public its report on the 61 mining contracts, all 
signed with Congolese parastatals during and after the Transition, 
on Thursday, March 20.  The Commission, led by the Minister's Chief 
of Staff Alexis Mikandji Penge, called for 15 of the 61 contracts to 
be cancelled and 46 to be renegotiated.  The Commission said none of 
the contracts met international standards, and cited problems 
ranging from the undervaluation of DRC state assets to the inability 
of the GDRC to govern all companies equally because of "force 
majeure" clauses. 
 
¶3. (SBU) The Commission's report is the culmination of just the 
first step in the process, and does not necessarily indicate which 
contracts may ultimately be cancelled and which may be modified.  A 
high-level task force, including Kabwelulu and Vice Minister of 
Mines Victor Kasongo, will analyze the Commission's report and guide 
the ensuing discussions with each mining company. 
 
¶4. (SBU) The Carter Center, a U.S.-based human rights NGO that 
provided limited legal counsel to the GDRC during the review, called 
for the international community and the mining companies involved to 
support the review process.  (Note:  Carter Center representatives 
find fault with the international and diplomatic community for not 
thus far supporting the process, and the Center's role therein.  End 
note.)  The Commission operated mostly in secrecy during the 
preceding ten months and the Carter Center called on the GDRC to 
establish clear criteria and a transparent process for the ensuing 
contract renegotiations. 
 
¶5. (SBU) Several large mining companies are targeted for contract 
renegotiation, including De Beers, BHP Billiton, Anglogold Ashanti, 
and U.S.-based Freeport McMoRan's TFM project.  Kabwelulu sent 
letters to most of the companies during the week of February 25 
indicating the Commission's position, and TFM had already responded 
by the time the review was published.  In an assessment typical of 
many of the concessions reviewed, the Commission called for the 
share of TFM held by GDRC copper/cobalt mining parastatal GECAMINES 
to be raised to 45 percent and for GECAMINES to be given more direct 
control over day-to-day operations.  Freeport owns a 57.75 percent 
share of TFM, GECAMINES owns 17.5 percent, and Lundin Mining (a 
Canadian firm) owns the balance. 
 
¶6. (SBU) Comment:  There has been little transparency in the review 
process to date and the details of negotiations between companies 
and the GDRC are likely to be equally opaque in most cases.  The 
Commission may have correctly recommended cancellation of those 
concessions that had never been explored nor exploited, but other 
recommendations appear to target legitimate companies, some already 
in production, in an effort to turn a quick profit for the GDRC. 
Some companies may decide to resort to international courts if they 
cannot reach an agreement with the GDRC. 
 
¶7. (SBU) Comment, continued:  While the renegotiations will result 
in some eventual gains for the DRC, the lack of transparency and the 
anticipated lengthy process may have both a short and long-term net 
negative effect on investor confidence and overall foreign direct 
investment.  High commodity prices, recent Chinese investments in 
the DRC, and the temporary ban on all mining in the Walikale region 
of eastern Congo (rich in tin and cobalt) are all complicating the 
review process.  End comment. 
 
GARVELINK