Archive for the ‘Metals’ Category


THIS IS FURTHER GOOD NEWS FOR THE GOLD MARKET
China pushes for gold; India follows suit
Hot on China’s heels, India’s Central bank is mulling over a proposal to allow banks to trade in gold. If cleared, the move will only strengthen the validity of the bull case in gold.

Author: Shivom Seth
Posted:  Monday , 09 Aug 2010
MUMBAI  –  Mineweb

Hot on the heels of moves in China to expand the gold market in the country, several Indian bans have submitted a proposal to the Reserve Bank of India (RBI), India’s central bank, to permit them to trade in gold in the domestic market and also hedge their requirements.

These banks hope to take advantage of the current bout of bargain-hunting taking place in the country as investors take advantage of lower prices.

At present, banks are only allowed to buy gold. India’s central bank has permitted certain banks to import bullion on consignment basis for domestic jewellers and exporters but they do not stock gold. And, while a couple of the nominated banks authorised to import gold, sell gold coins at a premium of 10% to 15% over the market rate but, they are not permitted to buy back the gold they sell. Among their proposals, Indian banks have asked for permission to invest in gold exchange traded funds a move which is hoped will boost the trading of gold in demat and securitised forms.

Incidentally, banks and agencies such as the MMTC (Mines and Metals Trading Corporation) account for nearly 80% of the country’s gold imports.

Asian tiger

China’s central bank has said that it will allow its banks to import and export more gold as part of a programme to push forward the development of the country’s market in the precious metal. China is already one of the largest gold producers in the world and a leading consumer.
According to reports, China’s central bank is also ruminating over allowing second-tier institutions such as the Minsheng Banking Corp and China Merchants Bank to team up with four major state banks, including Bank of China, to hedge bullion positions in the overseas markets.
In a bid to increase the competitiveness of its domestic financial markets and broaden investment channels for ordinary customers, China’s central bank is also looking at allowing foreign suppliers to provide gold bullion directly to the Shanghai Gold Exchange.
Analysts have reportedly pointed out that China is keen that more of its banks trade with overseas counterparts, in a move that will reduce their reliance on the Shanghai Gold Exchange for hedging.
At the exchange, trading volumes have risen by more than half during the first six months of this year. HSBC and Standard Chartered are among five banks that are members of the Shanghai Gold Exchange.
For the full year 2009, India managed to import just over 35 tonnes, far below the 400 tonnes the country imported in 2008. China’s purchases in 2009, on the other hand, equalled 11% of global gold demand.
During the last quarter of 2009, however, demand for the precious metal increased 84% in India. The country already accounts for over 20% of the world’s gold demand.
Similarly, in the first quarter of 2010, India was termed the strongest performing market by the World Gold Council, as total consumer demand surged 698% to 193.5 tonnes. Indian jewellery demand rose 291% to 147.5 tonnes during the same period, the Council said.
World Gold Council’s investment managing director, Marcus Grubb, told reporters recently that the full-year gold demand in India was expected to be stronger than in 2009.

Reasons galore

Some bankers have noted that one of the major reasons why gold imports to India have been plunging in recent months is because Indian banks hold a lot of carry-over gold stocks. “Many consumers have stopped buying gold jewellery and are instead concentrating on imitation jewellery. Gold’s high price in the last four months is another factor that has kept some of them away, leading to a further slump in imports,” said an official with Mumbai-based Indian Bank, which is one of the 20 banks allowed to import gold. The bank’s proposal in 2008, to launch gold bullion trading, was stymied due to the disapproval of the Central bank.
A Bombay Bullion Association report noted that gold imports have fallen this year, from 34 tonnes in January to 13.8 tonnes in June, with the trend broken only in April, when the country imported 34.2 tonnes. The spurt in April was to meet additional demand during the Akshya Trithiya festival, considered an auspicious occasion to buy gold.
An executive of the Punjab & Sind Bank said:  “Gold is a popular investment vehicle in India, as well as being a traditional option for gifts. There is a lot of demand. In the present scenario, gold provides an excellent hedge against inflation, a source of liquidity and a form of savings as well,” the executive, who declined to be named, pointed out. The bank is also awaiting clearance from the RBI, and is eager to trade in gold.
It may be recalled that gold had stormed to record highs following news that India’s central bank had bought 200 tonnes of the metal from the IMF in October last. The Indian purchase had ensured that the RBI became the world’s 10th largest central-bank gold holder. It was the biggest single central-bank purchase in at least 30 years over such a short period, according to Timothy Green, author of The Ages of Gold.
“India did not buy that gold to sell it. It wanted to own it and keep it,” said the head of global markets at IndusInd Bank, another bank permitted by the Reserve Bank of India to import gold. “If banks are allowed to trade in gold, the move will only strengthen the validity of the bull case in gold,” the official added.
Citing the example of China, the official said, in its bid to overtake India as the world’s top consumer, Beijing has allowed more domestic banks to export and import bullion. China has reportedly increased its official gold holdings by more than 400 tonnes in the past few years to 1,054 tonnes.
“Beijing is keen to focus on bringing more gold into the country to satisfy domestic demand, but will not stir up global prices through official purchases,” the banker added. Other than banks, a few nominated government agencies and premier trading houses have also been allowed to import gold. With more banks in India now eager to step up to the plate, trading in the yellow metal could soon be a possibility.




Rusoro foresees Venezuela gold export rule change

Thu Aug 5, 2010 10:36pm GMT

* Russian-Canadian company says gov’t has agreed to change
* Firms would be able to export 50 percent of gold output
CARACAS Aug 5 (Reuters) – Russian-Canadian miner Rusoro (RML.V) said on Thursday it expects the Venezuelan government to ease a restriction on gold exports to allow private firms to sell up to 50 percent of output abroad.
Current rules allow only 30 percent exports, with the rest to be sold in-country, mainly to the Central Bank.
“A fair agreement has been reached between the government and the mining industry to allow 50 percent of output to be sold to the Central Bank and the other 50 percent exported,” said Rusoro’s local operations director Andrea Padovani.
Central Bank officials could not confirm.
Rusoro’s Padovani said, however, the new norm should be published in coming days in the government’s Official Gazette.
“After a meeting with the Central Bank president, Nelson Merentes, we were told that the norm had been approved by the directors and all that was needed was President Hugo Chavez’s signature,” Padovani told Reuters.
Rusoro had warned earlier this year that it may cut a $200 million investment plan in Venezuela unless the export regulations were changed.
Rusoro’s main interest is the Choco 10 gold mine in the southern state of Bolivar.
Rusoro’s production from Choco in the first quarter was 25,142 ounces, 34 percent less than the same period last year. The company blames Venezuela’s currency distortions for that, saying it has been hard to import machinery and materials.
It expects to produce nearly 100,000 ounces this year, down from 125,741 last year. But Rusoro foresees higher production of 184,725 ounces in 2011.
(Reporting by Diego Ore, Writing by Andrew Cawthorne; Editing by Sofina Mirza-Reid)
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Tantalum: Congo Conflict Mineral
February 12, 2010 @ 10:43 am In Feature ArticlesTantalum Articles
congo

[1]




By Melissa Pistilli—Exclusive to Tantalum Investing News [2]

Most people today are familiar with the term “blood diamond [3]” and the gruesome reality the name invokes. Global pushback against the trade in conflict diamonds from regions steeped in brutal slavery and guerrilla warfare led to the adoption of the Kimberley Process [4]by those in the industry and in the global community actively trying to block sales of diamonds used to finance war.
Blood diamonds are just one story in a long history of violence linked with the exploitation of people and resources that has plagued humankind for millenniums.
Another example of this shameful side of human nature is taking place today in the Democratic Republic of the Congo (DR Congo). The minerals involved include gold, tin, tungsten and tantalum, which are used to fund murderous militias caught up in a war between two peoples that has spilled over the borders from Congo’s neighbours.
Congo Conflict Background
The 1994 Rwandan genocide [5] was the catalyst that pushed Zaire, later to be renamed DR Congo, into the deadliest conflict since WWII. After the overthrow of the Hutu regime in neigbouring Rwanda, over two million Hutus, including many of the militiamen who committed numerous atrocities, flooded over the borders of eastern Zaire to escape possible retribution from the Tutsi.
The fleeing Hutu militia members found allies with Mobutu’s government and soon began violently persecuting the Zaire’s Tutsi population. Of course, Rwanda’s new Tutsi government provided support for Tutsi militias in Zaire fighting the Hutu and Mobutu’s troops. The Tutsi also formed alliance with other Ugandan-backed groups and managed to overthrow Mobutu. It was then that Zaire became DR Congo.
However, the newly installed president Laurent Kabila was soon ousted by Rwanda after he failed to throw out the Hutu militia. Kabila sought the aid of Angola, Namibia and Zimbabwe and the region fell into a bloody five-year war known as the Second Congo War [6] in which over five million Africans perished.
The war supposedly ended in 2003, however the region of eastern DR Congo is still under its shadow. General Laurent Nkunda, a Tutsi warlord believed to have the backing of Rwanda had been set on eradicating the area of any Hutu members of the Democratic Forces for the Liberation of Rwanda (FDLR), who he claimed the DR Congo government was supporting.
In late 2008, Rwanda and DR Congo forces came together to fight the FDLR in North and South Kivu provinces and General Nkunda was exiled to Rwanda [7] where he lives under house arrest. Unfortunately, the move did not pay off and gruesome large-scale murders and rapes are still occurring at the hands of both rebels and government troops even with the area supposedly under UN peacekeeping operations.
Conflict Minerals in the Global Marketplace
Natural resources like tin, tungsten and tantalum have been branded with the moniker “conflict minerals [8]” because the militias enslave locals to mine the metals and then use the funds garnered from their sale to help finance their bloody operations.
Sadly, it’s become apparent that even the Congolese army is taking part in the exploitation. Several thousand of the army soldiers are actually former rebels once under the command of General Nkunda and are seeking to establish their control over the region’s mineral resources.
“They didn’t integrate into the army, they took it over and now control huge parts of [the region],” says an anonymous former diplomat [9].
Once extracted, the conflict minerals are then taken to trading houses where they are prepared for sale in the global market and purchased by companies willing to ignore the illegal and inhumane way the ore was procured. Eventually, the processed ore makes its way into everyday items we Westerners often take for granted like cell phones, handheld gaming devices, and laptop computers.
Rising Backlash and Organizations Taking Action
According to Global Witness [9], “the illicit exploitation of natural resources in [Congo], and the accompanying serious human rights abuses, would not have taken place on such a large scale if there had not been customers willing to trade in these resources.”
Concerned organizations like the Enough Project [10], created by the Center for American Progress [11], and Global Witness [12], who helped bring the blood diamond controversy to global attention, along with the United Nations and other governmental agencies are bringing increasing pressure on those in the tantalum industry to ensure consumer products become conflict mineral free.
In later commentaries we’ll discuss the specific efforts these organizations are making towards creating a global marketplace free of conflict minerals, what these efforts mean for the future of the tantalum industry and what ethical investing opportunities exist in this sector of the mineral resource market.

Article printed from Tantalum Investing News: http://tantaluminvestingnews.com
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[2] Tantalum Investing News: http://tantaluminvestingnews.com/
[10] Enough Project: http://www.enoughproject.org/
[12] Global Witness: http://www.globalwitness.org/Copyright © 2010 Tantalum Investing News. All rights reserved.
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Colombia to attract $4.5 billion for gold mining over 10 years

Colombia in Latin America is a new gold exploration hotspot with gold companies due to invest $400 million in 2010

Author: Diana Delgado
Posted: Monday , 19 Apr 2010

BOGOTA (REUTERS)
Gold mining companies will invest as much as $4.5 billion over the next ten years in Colombia, attracted by rich unexplored areas and soaring prices, the head of the country’s Asomineros miners group told Reuters.
Gold companies are expected to invest as much as $400 million in exploration and production this year, up from $300 million in 2009, Arturo Quiros, executive director of Asomineros said on the sidelines of a mining seminar in capital city Bogota.
Areas of exploration have opened up in Colombia under President Alvaro Uribe, who is popular for increasing security with his U.S.-backed crackdown drug-running guerrillas.
“The gold boom has continued due to high prices of the metal,” Quiros said.
“Improved security conditions and relatively unexplored areas compared to other countries in Latin America explain why there is such a high interest to explore in Colombia,” he said.
In all, Colombia will double its gold production over the next five years. The Andean country could produce around 3 million troy ounces of gold in 2015, twice as much as the 1.57 million troy ounces produced last year and much higher than the 501,500 troy ounces produced in 2006, Quiros said.
Colombia attracted a record $3.24 billion in foreign direct investment (FDI) in mining last year, compared with $2.11 billion in 2008. Of that amount, the coal sector saw the biggest inflows, Silvana Giaimo, vice minister of mines and energy, said.
Mining weighted 40 percent of the country’s total foreign direct investment last year, much higher than the 19 percent in 2008.
“Foreign direct investment in mining will continue. The potential is huge,” Giaimo said, noting that Canadian companies are especially interested in exploring precious metals in Colombia.
Canadian Greystar Resources (GSL.TO) plans to invest about $39.3 million this year in its Angostura gold and silver project, more than double the $19.6 million invested last year, Geoff Chater, vice president of corporate development told Reuters.
Of the total, Greystar has allocated approximately $24.5 million for infrastructure related to the Angostura project. The remaining $14.7 million will be used to complete the feasibility study and exploration drilling, Chater added.
Greystar plans to begin the construction of the mine in 2011, Chater noted.
The company plans to invest $600 million at its Angostura gold and silver mine with output beginning in the second half of 2012, Frederick Felder, Greystar’s executive vice president had said.
Angostura is expected to produce an average of 2.3 million ounces of silver per year over the expected 15-year life of the mine.
Canadian Medoro Resources (MRS.V) plans to invest about $100 million in exploration, production and related activities this year at its recently acquired gold companies Frontino, Mineros Nacionales, Colombia Gold PLC and Colombia Gold.
AngloGold Ashanti’s (ANGJ.J) is also expected to invest $100 million in exploration at its La Colosa mine in Tolima province, where the company announced it had found unproven reserves of 12.3 million ounces. (Reporting by Diana Delgado; Editing by Marguerita Choy)

Mineweb – Colombia to attract $4.5 billion for gold mining over 10 years – POLITICAL ECONOMY


Gold Shines In Any Way, Shape Or Form

Charles Rotblut 03.17.10, 11:20 AM ET
Forbes.com

Investors who are interested in allocating a portion of their portfolio to gold have several choices. Direct investments can be made by purchasing physical gold or gold certificates. Exchange-traded funds and futures provide semi-direct exposure. Mining companies provide indirect exposure.

The most direct way to invest in gold is to buy the physical metal itself. Registered dealers sell bullion coins and gold bars. Deciding between the two is dependent on the amount of money being invested. The most common weights for bullion coins are 1/20, 1/10, 1/4, 1/2 and 1 troy ounce. “Good delivery” bars in the U.S. weigh either 100 ounces or 1,000 grams. (However, bars do come in many other weights.) Gold jewelry can also be purchased but its value may differ from the price of gold depending on the design. As a result, bullion coins and bars are better options for investing directly in physical gold.
The inherent problem with physical gold–or any other commodity–is storage. Space must be allocated to house the metal. In addition, and more importantly, the space must be in a secure location to deter theft. Small amounts of gold can be stored in safe deposit boxes. A safe can be used, but it should be immobilized.

Gold shot from $100 to $850 between 1976 and 1980. This gold bull began at $250, hinting gold may peak around $2,125 an ounce before this one’s over. Click here to build your portfolio and to take full advantage of this bull market with Gold Stock Strategist.

An alternative is to use a custodial service. These are services that hold the metal in their vaults for a fee. Depending on the service, gold coins and bars from several different investors may be stored together (“commingled”). Therefore, it is important to ask about a service’s storage policy. If a service does commingle gold, keep a record of any serial numbers.
Another downside to custodial services is the risk of the custodian running out of physical space. This happened last November to small investors who housed their gold at an HSBC vault in New York. According to the Wall Street Journal, increased demand for gold storage from large, institutional clients caused the vault to run out of capacity. As a result, the bank asked smaller clients to move their gold elsewhere.
Gold certificates provide ownership of gold, but do not require physical delivery. Rather, an investor receives a certificate listing the amount of the gold purchased, while a bank or other organization obtains and holds onto the metal on behalf of the certificate owner. Banks in certain countries, such as Germany and Switzerland, sell gold certificates. In the U.S. the Australian-based Perth Mint sells certificates through various third-party dealers.
A minimum investment may be required to purchase a gold certificate, and a commission may be levied on top of the cost of the certificate. The Perth Mint requires a minimum of $10,000 to open an account and a minimum of $5,000 for all subsequent purchases.
Counter-party risk should be considered. This is the possibility that the issuer of the certificate defaults on the contractual terms (i.e. fails to buy the gold, fails to pay the full amount due at the time the certificate is sold, etc.). This risk is particularly heightened when the third party is located in a foreign country. However, it should be noted that the Perth Mint does operate under a guarantee by the government of Western Australia.
SPDR Gold Shares (GLD) and iShares COMEX Gold Trust (IAU) both are trusts that invest directly in gold bullion. Each share of these exchange-traded funds (ETFs) is the equivalent of having an interest in slightly less than 1/10th of an ounce of gold. (The reason why each share does not exactly match 10% of the current price of gold is because of the cash transactions necessary for fund operations. As a result, the trusts hold both gold and cash.)

Exchange-traded funds offer low transaction costs, are easy to trade and do not require the investor to take physical delivery. The downside is that the investor does not own actual gold, but a minority stake in a trust that has gold as its predominant asset. As a result, investors have little control as to if or when the fund chooses to liquidate its holdings. This is potentially problematic because any liquidation would cause tax issues for the shareholders.

Gold futures contracts enable investors to obtain exposure to gold without directly buying the metal or investing in a trust that holds gold. Rather, a futures contract is an agreement to buy or sell the metal at a specified price on a predetermined date. Futures contracts are volatile and can result in a substantial loss of capital.
Gold futures require physical settlement. Physical settlement means that the commodity must be delivered to the purchaser once the contract expires. As a result, an investor who maintains a long position until expiration must be prepared to accept delivery of the precious metal. (Alternatively, an investor holding a short position must be prepared to deliver gold bars.) However, this can be avoided if the position in the futures contract is closed at any point prior to expiration.
Futures contracts in general can use either physical settlement or cash settlement. Physical settlement requires delivery of the underlying asset, most often a commodity such as gold or oil. Cash settlement allows the payment of cash in lieu of the underlying asset. Cash settlement is most often used for financial products such as S&P 500 futures.
Gold mining companies are an option for investors who want exposure to gold, but wish to avoid the storage and potential tax consequences associated with the precious metal. Both profits and stock prices of gold mining companies are influenced by changes in the commodity’s price. However, it is important to understand that investing in a gold mining company is not the same as investing in gold.
Many gold companies have exposure to other metals such as copper or nickel. Production costs, labor unrest, political instability and other issues can negatively impact profit margins. The competency of management and the financial strength of the company are also factors. Finally, gold stocks can be influenced by the direction of the stock market. As a result, share prices of gold stocks may not always reflect price changes of the precious metal itself.
As is the case with many other industries, investors can purchase gold mining stocks directly through a broker.

Various mutual funds and exchange-traded funds invest in gold mining companies. The returns realized by these funds will be dependent on the performance of the securities they invest in, rather than being directly tied to the price of gold. It is very important to read the prospectus before investing in a gold mining mutual fund or ETF. Some may invest only in mining companies, whereas others, such as Tocqueville Gold (TGLDX), may also maintain an allocation to gold. (If gold is held, consider the potential tax implications.)

Though the price of gold rose significantly last year, there are no guarantees that the precious metal will continue to appreciate in the future. Like any commodity, gold trades in reaction to actual and forecast demand. Perceived changes in central bank policies, both monetary and those involving the buying or selling of the precious metal, can influence prices. The strength or weakness of the dollar relative to other currencies influences how gold trades. The economy is another factor. If long-term interest rates or inflation differ from expectations, gold prices could potentially be helped or hurt. Geopolitics, though unpredictable, play a role as well.

The most important factors to consider, however, are wealth, time horizon, portfolio diversification, the type of account the metal will be held in and the willingness to deal with potential storage and tax issues. Gold can play a role in a diversified portfolio, but, like any asset, it may not be suitable for every investor.

Gold Shines In Any Way, Shape Or Form – Forbes.com Magazine Article

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Gold: China’s largest bank launching gold savings accounts to its 230 million customers

CONCLUSION: One should not underestimate the positive impact of seeing the world largest bank ( ICBC of China) starting to offer precious metals gold-silver savings acounts to its 230 million customers. THE MOST INTERESTING IMPACT is what this means in terms of China wanting to limit the volatility of the gold price if millions of its private citizens invest their savings in gold and silver. China as well as India will have a vested interest in controlling the gold price going forward. With their rising currencies they will have plenty of good reasons to intervene and put a floor on the gold price. Mineweb article below.


 

China still pushing gold to the people as ICBC and WGC announce co-operation agreement

The latest news out of China of gold marketing co-operation between the country’s largest bank and the World Gold Council will likely help underpin gold prices at the very least.

Author: Lawrence Williams
Posted:  Thursday , 01 Apr 2010

LONDON – 

The news today that the state-owned Industrial and Commercial Bank of China (ICBC), the China’s largest bank by assets, is to co-operate with the World Gold Council to help promote gold in China, is but the next sign that the Chinese hierarchy is continuing to push gold as an investment to its general population.

Mineweb readers will recall that we broke a story about the state-owned Chinese banks promoting the purchase of gold and silver just over a year ago – China pushes silver and gold investment to the masses – and that this effectively meant that the Chinese state would do its utmost to maintain the gold (and silver) price at a decent level so its citizens, who it had persuaded to buy the precious metals in the first place, did not lose out to the vagaries of the market.  Given that state entities will have been understood to be leading the ever-wealthier Chinese middle classes in this direction the state is hardly likely to want to ‘lose face’ through a declining gold price making an influential, and growing, group of its citizens poorer as a result.  And China is certainly, as we have pointed out before, in a strong position to control the gold price should it wish to do so to protect itself.

Indeed given the strong current resistance to a downtrend in gold around the $1,100 level, and the big purchase in the SPDR Gold Trust ETF by the Chinese sovereign wealth fund, CIC, this support for the gold price may already be under way.

According to statements out of Beijing today, there now exists a Memorandum of Understanding between the ICBC and the World Gold Council whereby they will share gold market resources, promote domestic demand, boost gold investment in China, and develop and market new gold investment products within the country. This thus represents yet another major attempt to further increase gold ownership in China – already the world’s second largest consumer, and rising.

The World Gold Council in its analysis of China’s gold consumption in the report ‘Gold in the year of the Tiger’ – see China’s insatiable appetite for gold as demand exceeds supply – is already predicting a doubling of Greater China (includes Taiwan and Hong Kong)  gold consumption from the current  estimated 461.9 tonnes over the next decade.  With mined gold production expected to remain pretty flat at around 2,500 tonnes – unless there is a huge boost in gold price to stimulate a big rise in marginal production – Greater China could be consuming well over 30% of global mined gold on its own – and India, which is still the world’s largest gold consumer, despite a big fall in 2009, could be consuming even more as it too is using state institutions – banks and the Post Office – to sell investment gold to its people.

What this will do to the gold price is anybody’s guess – but does appear extremely positive!  It would at least underpin the gold price level with the World’s two biggest consumers keen to retain current prices at the very least, as a collapse would undermine domestic wealth, which means gold price downside is probably very limited.  On the upside it could thus be assumed that the sky’s the limit here, although again it may not be in China and India’s best interests – politically and economically – to see massive price rises as this could be very inflationary as more and more of their huge populations are drawn into the gold purchasing community. 

In terms of potential gold price manipulation, if it exists, we possibly thus ‘ain’t seen nothing yet’, but this time it would be from a totally different neck of the woods, which may indeed have been calling the tune anyway for the past year.


DRC: Looking to Capitalize on Katanga’s Wealth


April 13, 2010 | 1901 GMT

ERIC FEFERBERG/AFP/Getty Images

Workers at a gold mine in Iga Barriere, Democratic Republic of the Congo

Summary

The Democratic Republic of the Congo’s (DRC’s) minister of mines on April 11 announced a ban on the export of concentrated mineral products from the country’s southeastern Katanga province. The next day, the DRC’s finance minister said the country must crack down harder on the smuggling of Katangan minerals into Zambia. The announcement of the ban and the finance minister’s comments indicate the DRC’s central government is working to overcome difficulties posed by geography to capitalize on the mineral wealth found in Katanga.

Analysis

The minister of mines for the Democratic Republic of the Congo (DRC), Martin Kabwelulu, on April 11 announced a ban on the export of raw minerals from the country’s southeastern Katanga province, one day before Congolese Finance Minister Matata Mponyo said the DRC must do a better job of cracking down on the smuggling of Katangan minerals into Zambia.

Katanga is a resource-rich province located far from the Congolese capital, Kinshasa. The DRC’s vast and largely unconnected geography leaves peripheral regions such as Katanga economically oriented toward neighboring countries; for Katanga, this means Zambia and, more distantly, South Africa. In attempting to maintain control over Katanga’s mineral wealth, Kinshasa must perform a delicate balancing act.

Katanga forms the Congolese portion of what is known as the Copper Belt, which traverses the DRC-Zambian border (the Zambian province abutting Katanga is actually called Copperbelt). Copper is not the only mineral mined in great volume in southern Katanga; a related ore, cobalt, also is found there, along with other valuable minerals. Although the province is part of the DRC, there is no dependable road or rail infrastructure on an industrial scale linking Katanga with Kinshasa, leaving the province’s economy much more oriented toward the south. This is where Zambia comes into play. Virtually all of Katanga’s mineral exports leave the country through border crossings at the Congolese transit town of Kasumbalesa. Mponyo specifically characterized Kasumbalesa as an epicenter of corruption in the minerals trade.

(click here to enlarge image)

From Zambia, Katangan minerals are mostly trucked overland through Zimbabwe or Botswana into South Africa, where they are offloaded onto ships at the port of Durban. Some shipments are exported through the Tanzanian port of Dar es Salaam and the Mozambican port of Beira, though these are marginal export centers in comparison to Durban, despite their geographic proximity to the Copper Belt. South Africa’s wealth has enabled it to finance better roads and better port facilities, so it has more opportunities to capitalize on the mineral wealth stretching through southern Africa and into the DRC.

(click map to enlarge)

Ideally for Kinshasa, the DRC would be integrated with a rail, road and port network that would allow copper and cobalt mined and refined in Congolese territory to be shipped overland and out to market through its Atlantic port. However, the large rainforest in the heart of the country makes this impossible in the near future (the DRC is the country that inspired Joseph Conrad’s novel “Heart of Darkness,” and the geography has not changed much since then). The next best option for the government, then, is to cash in on the Katangan mining industry while not retaining absolute control over it.

This means reducing the amount of minerals smuggled across the border, but it also means attempting to build up the value-added side of the industry within the DRC’s borders. Katangan copper and cobalt usually are not mined in their purest forms but rather as ores that must then be refined before being used. At present, virtually none of the ores mined in the DRC are refined in Congolese territory. To Kinshasa, this is inefficient and does not maximize profits, which is why Kabwelulu issued the April 11 decree aiming to ban the export of unrefined copper and cobalt.

However, large mining firms prefer to export ores from the DRC for refining, mainly in Zambia. Zambia’s ruling Movement for Multi-Party Democracy has prioritized the creation of a pro-business environment there, and the relatively transparent economic regime provides a stark contrast to the DRC’s reputation for corruption. Furthermore, foreign firms in the DRC must deal not only with Kinshasa but also with the provincial administration of Katangan Gov. Moise Katumbi Chapwe based in Lubumbashi — each of which has its own interests, interferences and expectations. In Zambia, foreign firms only have to deal with one government.

It is noteworthy that Kinshasa, rather than the Katangan provincial government, is making the push to rein in smuggling activities at Kasumbalesa and develop the value-added side of Katanga’s mining industry. The provincial governor does have close ties with the regime of Congolese President Joseph Kabila (whose family hails from Katanga), but Kabila has other political allies besides Katumbi who must be taken care of through patronage, especially with presidential elections around the corner in 2011. Kabila is under pressure in Kinshasa to demonstrate that he can bring the government’s influence to bear in areas where it matters, whether in distant economic regions such as Katanga or in the disputed offshore territory abutting the Angolan province of Cabinda, where Kinshasa is fighting for a greater stake in crude oil concessions it believes Luanda is occupying illegally.

Katanga has a history of separatist leanings dating back to the rule of former Zairian President Mobutu Sese Seko, when the province was known as Shaba. The Kabila family’s links to the region help to ensure that Katanga remains part of the DRC, but this is hardly sufficient to keep regional power players complacent. And while a few statements from government ministers is hardly a guarantee that Kinshasa will increase control over the provincial economy, the trick for any ruler in Kinshasa is to force Katanga to pay its share of royalties to the central government while allowing the provincial authorities some opportunities to siphon off revenues that Kinshasa could try to claim for itself.

DRC: Looking to Capitalize on Katanga’s Wealth





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