The development of the mining sector in the Democratic Republic of Congo (DRC), which was anticipated through the adoption of the 2002 Mining Code to bring back substantial revenues to the State for its economic and social growth, has not produced the expected results.
The revision of the former mining Code is therefore motivated by the following reasons:
- To increase the level of control over the management of the State's mining sector and mining titles;
- To balance the tax, customs and exchange rate regime;
- To focus on the social and environmental responsibility of mining companies; and
- To bring the mining legislation in line with the evolution of the politico-administrative context, including the introduction of new ministerial departments in the mining sector.
The following is a summary of some important amendments introduced by the new mining Code:
1. Restrictions and tightening of regulatory requirements relating to the granting, processing and termination of mining rights :
Only the following legal entities are eligible to apply for mining rights:
- Any legal entity under Congolese law which has its registered and administrative headquarters in the National Territory and whose corporate purpose relates exclusively to mining activities; and
- Any foreign legal entity whose object is exclusively concerned with mining activities and which complies with the laws of DRC.
The Minister of mines makes an open or restricted call for tenders for the mining rights relating to deposits that have been studied, documented or possibly worked by the State. In these cases, the Minister reserves by order the mining rights to put out to tender after consulting the Provincial Mines Minister and the local community concerned. The reservation of mining rights is confirmed by the Prime Minister within thirty days of the entry into force of the order of the Minister of Mines.
The call for tenders is concluded within 9 months from the entry into force of the order. An amount is levied as a filing fee, on the filing of each request for an institution, renewal, extension, transfer or leasing of a mining right. If the conditions for admissibility are satisfied by the applicant, the Mining Registry proceeds to register it within 20 working days from the filing of the application.
The applicant for the operating license is now required to provide evidence of its capacity to process and transform mineral substances in the Democratic Republic of Congo. It must file an act of commitment to process and transform these substances on Congolese territory.
Upon payment of an approval and registration fee, the lease agreement of an operating license will be registered by the Mining Registry.
2. State participation in the social capital of the Companies
There is now a mandatory state aacquisition of at least 10% shares of Congolese natural persons in the share capital of mining companies.
3. Local content provisions
With this in mind, the innovations under the new code are the following:
- Exclusivity of subcontracting activity in the mining sector only for companies where the majority of capital is held by Congolese people ;
- Participation of national private sector in the capital of the legal buying house for purchase and sale of precious materials.
4. Payment of proportional royalties
The new rates for royalties are as follows:
• Commonly used building materials: 0%.
• Industrial minerals, solid hydrocarbons and other substances not mentioned: 1%.
• Iron and ferrous metals: 1%.
• Non-ferrous and / or base metals: 6%.
• Strategic metals: 5%.
• Precious metals: 3.5%.
• Precious and colored stones: 6%.
The mining royalty is calculated and due at the time the product is released from the shipping processing facilities.
Fees and charges in respect of services rendered for the export of merchantable goods or goods for temporary export for professional development may not exceed 1% of their gross commercial value.
The distribution of royalties paid by the holder of an operating license is as follows:
• 50% for the Central Government.
• 25% for the Provincial Government where the mining project is located.
• 15% for the decentralized territorial entity where the mining activities are performed.
• 10% for the Mining Fund to help the coming generations.
5. New provisions on import and export activities of mining
If a mining operator has opened any accounts with the national banking system during the depreciation period, it must repatriate at least 40% of its export earnings in the Democratic Republic of Congo. The holder of a mining right that has paid off the investment has the obligation to repatriate 100% of income from exports to the Democratic Republic of Congo.
The holder of a mining right who exports the merchant products from the mines is entitled to keep and manage 40% of his export sales revenues in his main account and foreign debt service accounts.
6. Entry fees and tax amendments
Prior to the commencement of the effective operation of the mine, and from the effective date of commencement of operation, all intermediate goods and other consumables are taxed at 10%. Fuels and lubricants for mining activities are taxed at a rate of 5%.
There is a transfer capital gains and loss tax on mining permits. If the transfer is between affiliated entities, the price and terms of the transfer must be at least equal to those that would have applied to a transfer in full competition.
If the transferor has acquired the mining title of a person other than the person who incurred the research and development expenses, the capital gain or loss is equal to the difference between the total transfer price and the acquisition cost.
The holder of the mining right is authorized to make provision for reconstitution of deposits where the maximum amount is equal to 0.5% of the turnover of the year in which it is made, free from taxes on the profits.
7. Incentive measures for the development of provinces
The Prime Minister may provide a number of incentives to boost economic growth from mineral resources in provinces that have infrastructure deficits.
8. Corporate social and environmental responsibility
Henceforth the Congolese Agency for the Environment, the national fund for promotion and social services, in collaboration with the Direction of the Protection of the Mining Environment are in charge of environmental instruction of the application for the mining exploitation right, the mining rights transfer application file and the project's contribution plan to the development of the local communities concerned.
The Direction of the Protection of the Mining Environment also informs the mitigation and restoration plan submitted by the holder of the mining rights. It submits its environmental and social certificate to the Mining Registry at the conclusion of the process. The environmental notice under the old law is replaced by an environmental certificate.
In social matters, we can note:
- The introduction of specific requirements for mining companies in relation to their social responsibility towards local populations.
- The introduction of seeking a social opinion from local populations during the process for obtaining an operating license.
9. Validity of mining conventions already in force and future mining conventions in relation to the New Mining Code
Mining conventions duly signed before the date of the entry into force of the new law remain applicable.
At the conclusion of these conventions, the State will not renegotiate the renewal of the said conventions for any reason.
In the event of a change of control after the entry into force of the new law, all related mining rights are governed by this new law. Mining conventions whose validity period is not determined or which exceed 10 years, are governed by the provisions of the new law for 10 years after its promulgation.
However, their duration cannot exceed a period of 10 years from the entry into force of this new law.
With the experience of the 10 year period of entry into force of the new law, the holders of mining rights arising from the mining agreements will be governed in full by the provisions of the new law.