By Tim Kiladze
Everyone knows that many African countries aren’t the safest places to operate, but recent unrest in a select few should worry some Canadian miners.
Chiefly, operations in the Democratic Republic of Congo and Zambia are under the spotlight, and problems in these countries could spell trouble because they are mineral rich and home to some of Africa’s most promising mining projects.
Last year Barrick Gold Corp. (NYSE:ABX) shelled out $7.3-billion to buy Equinox Minerals and its big Lumwana project in Zambia, while Lundin Mining’s stake in the Tenke Fungurume copper mine in the DRC was the subject of a lengthy takeover saga that ultimately yielded no buyer.
In the DRC, nationalization is a pressing issue, and First Quantum Minerals Ltd. (OTCPK:FQVLF) has been a major victim. Since 2009 the government has attempted to claim ownership over two of First Quantum’s assets, the Kolwezi and Frontier projects, forcing the miner to suspend operations at both.
First Quantum tried to fight the charges in international courts, but ultimately opted to sell the assets for $1.25-billion (U.S.) in a deal announced Thursday. By unloading the assets to Kazakh miner Eurasian Natural Resources Corp. PLC, First Quantum will also settle all legal claims.
In Zambia, labour strikes are the hot topic. As the Wall Street Journal reports, Zambian union officials are urging miners to meet their demands for an 11 per cent pay hike, or find more workers walking off the job this year. The threats are backed by president Michael Sata, who was elected in September on the heels of a populist cry for improving mining conditions.
And across the continent, there are calls for greater transparency in the mining sector. At the recent African Union Conference of Ministers, Stephen Karingi, director of the regional integration, infrastructure and trade division at the United Nations Economic Commission for Africa (UNECA) said that contracts continue to be mired in secrecy and warned that African nations are losing out on revenues that stem from the mining boom.
On the bright side, at least miners in Zambia know what the president is calling for. In the DRC, president Joseph Kabila was just re-elected to his second term and opposition parties claimed there was widespread vote rigging. Many people fear a botched election could result in a new round of civil war.
To understand just how volatile Mr. Kabila is, Zimbabwean president Robert Mugabe was the only foreign head of state to show up for his inauguration -- and Mr. Mugabe doesn’t exactly have a clean record. (To understand the history, the BBC noted that Mr Mugabe sent troops to support Mr Kabila's father, Laurent, during times of conflict in the past.)
While these worrying signs linger, Lundin Mining doesn’t appear to be showing any fear. Just one month ago, the miner announced that production at Tenke, which is operated by Freeport McMoran, should jump to between 107,000 and 117,000 tonnes in 2012.
Progress is also being made. A few months back Zambian officials halted the issuance of new mining licences. That ban is now expected to be lifted by the end of January.