VZCZCXYZ0000
RR RUEHWEB

DE RUEHKI #0646/01 2191629
ZNR UUUUU ZZH
R 061629Z AUG 08
FM AMEMBASSY KINSHASA
TO RUEHC/SECSTATE WASHDC 8276
RUEHLS/AMEMBASSY LUSAKA 1463
RUEHSA/AMEMBASSY PRETORIA 4101
INFO RUCPDOC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RUEHC/DEPT OF LABOR WASHDC
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHDC
RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK
RHMFISS/HQ USEUCOM VAIHINGEN GE
RUEHBJ/AMEMBASSY BEIJING 0087
RUEHBY/AMEMBASSY CANBERRA 0036
RUEHLO/AMEMBASSY LONDON 0167
RUEHMO/AMEMBASSY MOSCOW 0060
RUEHFR/AMEMBASSY PARIS 1200
RUEHOT/AMEMBASSY OTTAWA 0123
RUCNSAD/SADC COLLECTIVE
RUEHXR/RWANDA COLLECTIVE
RUEHZO/AFRICAN UNION COLLECTIVE

UNCLAS KINSHASA 000646 
 
SIPDIS 
SENSITIVE 
 
STATE PLEASE PASS USAID 
STATE PLEASE PASS USGS 
STATE PLEASE PASS OPIC FOR JIM WILLIAMS 
DEPT FOR AF/S, EEB/ESC AND CBA 
DOE FOR SPERL AND PERSON 
E.O. 12958: N/A 
TAGS: EMIN ENRG EINV EIND ETRD ELAB CG ZA SF
SUBJECT: DRC COPPERBELT - TENKE FUNGURUME MINING MAKES NO SMALL 
PLANS 
 
REF: A) KINSHASA 515 
 B) LUSAKA 666 
     C) LUSAKA 744 
 
 
¶1.  (U) This cable represents innovative collaboration in resource 
reporting and commercial advocacy between Embassies Pretoria, 
Kinshasa, and Lusaka.  It is the fourth in a series of six cables on 
the Democratic Republic of the Congo (DRC)/Zambia Copperbelt 
(reftels). 
 
¶2.  (SBU) SUMMARY: The Tenke Fungurume Mining (TFM) copper-cobalt 
mine in the DRC's Katanga Province is a mega-project in many ways. 
U.S.-based Freeport-McMoRan's estimated USD 1.9 billion investment 
represents the largest U.S. investment underway in southern Africa 
and will be the largest mine in the region.  The project aims to 
initially produce 115,000 tons per annum of copper and 8,000 tons 
per annum of cobalt, with potential to ramp up production by a 
factor of four.  Part of the ample investment represents funds for 
power and local infrastructure in this underdeveloped region. 
Transportation, power, and government intervention represent 
significant risks to the project.  Freeport remains concerned about 
the pending license review (Ref A), but continues to mine and build 
its processing plant in anticipation of production later this year. 
Tenke Fungurume Mining (TFM) asserts it has put in place substantial 
social development investment and is committed to zero discharge of 
waste from its tailings reservoir.  End Summary. 
 
¶3.  (SBU) Embassy Pretoria Minerals/Energy Officer and Specialist 
visited mines on both sides of the DRC/Zambia copperbelt May 12-23 
to assess developments in the sector, covering six mines in the DRC 
and four in Zambia.  Ref A provided an executive summary of 
developments on both sides of the border of the copper-cobalt belt. 
Companies were helpful in supporting the well-received visits. 
Embassy Kinshasa Economic Assistant accompanied the team for a May 
12-14 visit to the Tenke Fungurume mine under development west of 
Lubumbashi in the Katanga Province of the copper-cobalt belt. 
Processing General Manager Sam Rasmussen hosted the team's visit. 
 
¶4.  (SBU) The Tenke Fungurume deposits lie on the northern edge of a 
belt of folds comprising the geologically famous Lufilian Arc that 
stretches 500 kilometers across the DRC and Zambia.  TFM's 
high-grade copper-cobalt deposits occur in a sequence of sedimentary 
rocks known as the "Mines Groups" that are between 1050 million and 
650 million years old.  TFM Chief Geologist Wolfram Schub described 
Tenke Fungurume's geology as a unique series of complex geological 
phenomenon of sedimentation and successive infiltration of salts, 
oxidants, organics, and other chemicals, in advance of tectonic 
action.  DRC copper and cobalt mining parastatal GECAMINES and 
precursors previously owned mining rights at Tenke Fungurume, but 
the state focused its mining activities more intensely elsewhere in 
the DRC, so the current project is effectively a greenfield 
endeavor.  Freeport McMoRan International (FMI) holds an effective 
57.75 percent stake, in partnership with Vancouver-based Lundin 
Mining (24.75 percent) and parastatal GECAMINES (17.5 percent). 
 
Massive Investment 
------------------ 
 
¶5.  (SBU) FMI announced on April 22 that investment in TFM would 
nearly double the previous estimate to USD 1.9 billion, as a result 
of scope changes and additional infrastructure, reflecting its 
commitment to this long-life, remote project.  TFM has already 
invested more than USD 600 million to date.  (Note: TFM officials 
have more recently suggested the total will likely be closer to USD 
1.7 billion.  End note.)  Tenke Fungurume's oxide ore is associated 
with a harder silicified limestone that forms numerous domed 
 
outcrops throughout the lease area, of which three have been 
evaluated.  These are amenable to mining using a unique USD 1.6 
million U.S. Vermeer surface miner.  The miner's rotating drum is 
studded with titanium-hardened steel picks that fragment ore and 
waste rock down to a depth of 0.6 meter.  At the completion of the 
cut, the rock is selectively removed by front-end loader and 
transported to respective waste and ore stockpiles in advance of the 
start-up of processing.   Mining has begun on the first such outcrop 
known as Kwatebala.  TFM has ordered a second machine and additional 
spare parts, now en route to the mine, both as a back-up for the 
first machine and in anticipation of future mining phases.  The 
substantial processing investment will include five sulfuric acid 
leaching tanks, neutralization tanks, solvent extraction and 
"electro-winning" plants to produce copper cathode, and a cobalt 
refinery to produce cobalt hydroxide.  Transportation and egress of 
products will be one of the biggest challenges given poor roads in 
the DRC.  Phase I alone will require 450 trucks to carry copper 
cathode to the port in Durban, South Africa. 
 
¶6.  (SBU) A primary driver of the increase in TFM's investment is 
the need to build roads and power infrastructure.  FMII will make a 
loan to the Congolese national power utility (SNEL) to fund 
investment in regional power infrastructure, including provision of 
expanded electrical power-generation capacity and improved power 
reliability.  FMI's Rasmussen told the team that TFM will refurbish 
two of four turbines at the N'seke hydroelectric facility, providing 
250 MW of capacity, of which TFM will use 80 MW for its mining and 
processing plant. 
 
Doing the Right Thing - Social Development 
------------------------------------------ 
 
¶7.  (SBU) TFM says it is committed to the Equator Principles and 
referred to its compliance with the international NGO's Pact 
(located in 60 countries and focused on capacity building) and 
International SOS (leading provider of international health care) to 
implement a robust social development program, including medical and 
education programs and facilities.  TFM's substantial concession is 
home to 61,000 people, including the separate villages of Tenke and 
Fungurume.  At present TFM employs 5,000 people for the current 
construction phase and says it will employ 1,000 employees when in 
operation, but will not come close to GECAMINES' historical maximum 
work-force of 40,000 in all of Katanga Province, which only produced 
at most 500,000 metric tons of copper per year.  The project, TFM 
spokesmen said, will give preference to local job-seekers and will 
"employ" 150 national mine police to supplement its 140 mine guards. 
 TFM noted it has experienced some labor unrest because of 
unrealistic employment expectations.  Its social development program 
emphasizes brick and fence-making, agriculture, and other small 
business activities.  TFM moved about 1,800 people in three villages 
to four new villages with improved, larger housing.  TFM says it 
will implement robust malaria and HIV/AIDS Voluntary Counseling and 
Testing programs.  From an environmental perspective, spokesmen 
said, the project is committed to a no-waste seepage policy from its 
tailings reservoir and has invested significantly in its tailing 
impoundment and monitoring processes.  TFM has created a number of 
"micro-reserves" (surface acreage unknown) to preserve unique, 
indigenous flora with affinity to copper and cobalt. 
 
License Review - GDRC reopens contracts 
--------------------------------------- 
 
¶8.  (SBU) The DRC government began a review of 61 joint venture 
mining licenses in April 2007 and announced early this year that 
most contracts are "Category B", indicating the need to renegotiate 
terms or face contract termination due to alleged unfair or illegal 
terms.  This has made investment in the DRC mining sector more 
 
uncertain, but - like in Zambia - big investors continue to develop 
their mines.  TFM feels that it has been unfairly labeled "Category 
B" and TFM representatives fear the government may demand an 
increased share in the project for GECAMINES.  The GDRC Review 
Commission recommended that GECAMINES' share be increased from 17.5% 
to 45%, a decision the GDRC Review Panel has now accepted. 
Rasmussen was cautiously critical of the involvement of the Carter 
Center in the review because, he asserted, its role had not been 
clearly defined and communicated.  Rasmussen said that TFM is 
continuing to meet with the GDRC and had also scheduled a meeting 
with Carter Center officials.  Rasmussen emphasized that the TFM 
deal was negotiated with full transparency and is compliant with the 
DRC Mining Code.  He was optimistic that TFM would continue with 
investment without impediment to reach production later this year. 
An official from Australian mining company Anvil noted to the team 
that FMI had previously negotiated a change in the license 
convention which reduced the GECAMINS share from 45% to 17.5% in 
exchange for cash and a change in tax payment schedules.  According 
to the official, the Mine Law of 2002 allowed automatic extension of 
pre-existing partnership conventions, but proscribed changes to 
these conventions and this could give the GDRC ammunition to seek to 
increase its parastatal's share-holding. 
 
¶9.  (SBU) COMMENT: The GDRC Mining Concession Review process has 
been opaque and slow, and much of the current and future contract 
renegotiations will probably occur without much transparency as 
well.  The prolonged process has prompted critics to warn of a 
worsening investment climate, but the potential profits of projects 
such as TFM may be incentive enough to solve differences with the 
GDRC.  Like Lumwana in Zambia, the Tenke Fungurume project 
represents a new class of copper-cobalt mega-project which exceeds 
old, traditional projects' dimensions in terms of investment, 
resources, production, geology, infrastructure, and social 
development.  Freeport's investment, through its acquisition of 
Phelps Dodge, is remarkable as the biggest U.S. mining investment in 
southern Africa.  An important aspect of Freeport's investment is, 
according to its representatives, is the great emphasis it places on 
advancing social development objectives in the DRC.  If these 
objectives are indeed pursued, it will be a welcome change in a 
country where there is a long and bitter history of antagonism 
between the Government, mining companies and workers over profits, 
taxes, and benefits to local populations.  Such projects might also 
help GDRC officials to understand that this new generation of "mega 
projects," while not employing as many people as used to be the case 
with GECAMINES during its heyday, is nonetheless beneficial to the 
country because of its social development projects, the creation of 
much-needed infrastructure, and the potential revenues to be paid 
into the national and provincial treasuries.    End comment. 
 
¶10.  (SBU) APPENDIX - TFM Resources 
 
Copper/Cobalt Ore Reserves and Resources: 
 
                          Tons   Copper   Cobalt 
Reserves              (millions)  (percent)(percent) 
 Proven and Probable      100       2.27      0.33 
 
Resources 
 Measured and Indicated 
  Oxide                    92       3.25      0.34 
  Mixed                   139       2.82      0.29 
  Sulfide                   4       4.22      0.37 
                         ------------------------- 
Total                     235       3.01      0.31 
 
 Inferred Resources 
  Oxide                    70       2.75      0.20 
 
  Mixed                   176       2.61      0.20 
  Sulfide                  18       1.82      0.13 
                         ------------------------- 
Total                     268       2.60      0.19 
 
 
Major Mining Fleet Items: 
-- 35 45-ton Caterpillar trucks 
-- 9 Caterpillar Front-end loaders with 6.3 cubic meter buckets 
-- 9 Caterpillar Road maintenance vehicles including five dozers 
-- 2 1000 ton per hour Vermeer continuous surface miners. 
 
Total capital cost for mining fleet is USD 40 million 
 
Final Pit Dimensions (Kwatebala): 
 2,000 X 750 meters, to an unknown depth 
 
Major Capital Items USD(USD millions) 
Mining fleet                               USD  40 
Copper-Cobalt plant                        USD 410 
Indirect costs                             USD 232 
Total                                      USD 682