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Cablegate: Drc Copper Belt: Dreams, Opportunities, and Challenges

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ZNR UUUUU ZZH
R 231216Z SEP 08
FM AMEMBASSY KINSHASA
TO RUEHC/SECSTATE WASHDC 8474
RUEHLS/AMEMBASSY LUSAKA 1469
RUEHSA/AMEMBASSY PRETORIA 4113
INFO RUCPDOC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RUEHC/DEPT OF LABOR WASHDC
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RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK
RHMFISS/HQ USEUCOM VAIHINGEN GE
RUEHBJ/AMEMBASSY BEIJING 0093
RUEHBY/AMEMBASSY CANBERRA 0042
RUEHLO/AMEMBASSY LONDON 0173
RUEHMO/AMEMBASSY MOSCOW 0066
RUEHFR/AMEMBASSY PARIS 1207
RUEHOT/AMEMBASSY OTTAWA 0129
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHZO/AFRICAN UNION COLLECTIVE

UNCLAS SECTION 01 OF 08 KINSHASA 000791

SIPDIS
SENSITIVE

STATE PLEASE PASS USAID
STATE PLEASE PASS USGS
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 COPPER BELT: DREAMS, OPPORTUNITIES, AND CHALLENGES

REF: A) KINSHASA 515
B) LUSAKA 666
C) LUSAKA 744
D) KINSHASA 646
E) KINSHASA 663

1. (U) This cable represents the sixth and final in an innovative
collaboration in resource reporting and commercial advocacy between
Embassies Pretoria, Kinshasa, and Lusaka (reftels). Embassy
Pretoria Minerals/Energy Officer and Specialist visited six of the
largest mines in the DRC (and four in Zambia) May 12-23, accompanied
by Embassy Kinshasa or Lusaka Specialists.

2. (SBU) SUMMARY: Global copper-cobalt supply shortage and
commodity price escalation have provided the incentive for
international mining companies to invest in new exploration and
mega-projects in the DRC and the Central African Copperbelt. The
Copperbelt straddles the DRC/Zambia border and represents the
world's greatest source of cobalt and the second greatest resource
of copper, after Chile. Combined copper production from both sides
of the border is likely to reach one million tons within the next
five years, a figure last achieved in the 1960s and 1970s before the
wars in the DRC and nationalization in Zambia. Investment has
flowed into the region, despite significant lack of skills and
infrastructure, in combination with an uncertain power supply.
Recent actions by the DRC government and the Governor of Katanga
Province have caused some uncertainty in the investment environment,
which could have negative implications for incremental investment.
The mining licence review and measures to fight mineral export fraud
are intended to boost the DRC's income from copper and cobalt
mining, but red tape, corruption, and higher taxes are driving up
costs and uncertainty for companies. Nevertheless, companies will
persevere with short-term commitments because of the huge
opportunities and costs already incurred. End Summary.

Compelling and Unique Geology
------------------------------

3. (SBU) All mines visited in both the DRC and Zambia occur within
the world-renowned Lufilian Arc. The Arc is a geological feature
estimated to be 1,050 million to 650 million years old, which
stretches some 500 kilometers from Angola in the west, across the
southern DRC and into Zambia. Earlier interpretations of the
geology of the "traditional" Copperbelt envisaged a simple
sedimentary-hosted, strata-bound type of mineral deposit. More
recent research has shown that the geology and mineral associations
are much more complex, particularly in newer remote mines, and that
mineralization differs in age and characteristics from mine to mine.
This has opened up a whole new vista of exploration targets. South
American copper deposits are bigger in tonnage, but DRC and Zambian
deposits have much higher grades and many contain cobalt. The DRC
deposits also have higher grades of both minerals than their Zambian
neighbors and leads to a conclusion that the northern "limb" of the
Arc may have a different mineral footprint than the southern "limb"
in Zambia.

Increasing Government Take
--------------------------

4. (SBU) The Democratic Republic of Congo (DRC) is one of the most
attractive mining areas in Africa, particularly since the post civil
war elections of 2006. Corruption and the smuggling of ores and
concentrates across borders have deprived the government of tax
revenues needed to fund the budget. As a response, the Governor of
Katanga Province last year banned exports of ores and concentrates
containing less than 15 percent copper, and cracked down on customs
agents involved in fraud. These measures, combined with an overall
rise in production, have increased government revenues, according to
Katanga Mines Minister Bartelemy Mumba Gama in press reports, but

KINSHASA 00000791 002 OF 008


red tape and higher local taxes are driving up costs for companies.


Review of Mining Leases
-----------------------

5. (SBU) The GDRC claims that many of the mining leases signed
prior to 2002, a time of civil war in the DRC, were one-sided in
favor of the mining companies. The current high prices of copper
and cobalt have exacerbated these perceived inequities and the
government asserts it is not receiving an appropriate share of the
"windfall" revenues. The GDRC announced early this year that it
would review 61 mining licenses and that most contracts would need
to be renegotiated, with respect to royalty payments and government
ownership through mining parastatal GECAMINES. Completion of the
review remains scheduled for September 30. Companies like
Freeport-McMoRan (Tenke Fungurume), Metorex (Ruashi), First Quantum
(Kolwezi Tailings), and Anvil (Kinsevere) are particularly
vulnerable because they had negotiated a change in the license
convention which reduced GECAMINES' share-holding, a practice
reportedly not permitted in the current mining code. A principal
concern for the companies, NGOs such as the Carter Center who have
provided technical assistance, and the USG has been the lack of
transparency in the process. While the GDRC did publish general
terms of reference for the contract renegotiation process, the next
step for these vulnerable "category B" licenses is not clear and
transparent as companies apparently negotiate one on one with the
GDRC. These companies fear that the license review could serve as a
pretext to take concessions to award to Chinese interests as part of
China's significant and opaque infrastructure loan (Ref A).

Power and Infrastructure
------------------------

6. (SBU) Power (mainly hydro-electric) is generated in the DRC by
Socit Nationale d'Electricit (SNEL), the government-owned
electricity company. Shortages of power are endemic in the DRC due
to a lack of capacity for maintenance of turbines and transmission
lines. The mining companies have managed to secure a reasonably
adequate and reliable supply through a number of initiatives ranging
from financing to rehabilitating and building power lines,
sub-stations, generation turbines, and DC-AC converter facilities.
Comparable shortfalls apply to the country's road system, which is
in a state of advanced decay. For most mines, these roads are the
only means of moving equipment, supplies, and product to site and
market. Rail lines are operational, but because of their limited
range and coverage, as well as lack of rolling stock, skills and
parts, and poor management, the rail service is expensive,
inadequate, and inefficient, and generally avoided by mining
operators where roads are an option.

Social Commitments - A License to Mine
--------------------------------------

7. (SBU) All mines on the DRC Copperbelt, and especially in the
remote areas, express commitment to programs of social development
and upliftment on the mines and in the surrounding communities. The
mines would lose their "social license to mine" and encounter labor
and community unrest without such programs. All mines visited have
robust social programs in place, generally tailored to the
particular needs of the local communities. Provisions include mine
housing, medical, educational, power, water, social infrastructure,
nutrition schemes, recreational facilities, subsidizing salaries for
teachers and medical staff, and support for small business projects
by providing the facilities, materials and markets for products,
such as brick-making, vegetables-growing, Jatropha-growing for
bio-fuels, and briquette-making using Jatropha residues. A major
feature of the social programs is the great effort being allocated
for training locals, who in most instances have limited exposure to

KINSHASA 00000791 003 OF 008


the techno-industrial world. Companies have committed to training
and hiring locals to fill most of their mining positions. It is
widely perceived that Chinese and domestic mining companies do not
adhere to the same commitment to social development, skills
transfer/training, and safety.

Mine Visits
-----------

8. (SBU) The collective Embassies' mining team visited the
following mines and facilities in the DRC:
-- Tenke Fungurume Mining copper/cobalt open pit mine owned by
Freeport-McMoRan of the United States (57.75 percent), Lundin Mining
of Canada (24.75 percent) and DRC parastatal GECAMINES (17.5
percent); capex $1.7 billion; hosted by the Processing General
Manager Sam Rasmussen;
-- Kolwezi copper/cobalt tailings project owned by First Quantum of
Canada (65 percent), State-owned Gecamines mining company (12.5
percent), South African government-owned Industrial Development
Corporation (10 percent), International Finance Corporation (7.5
percent), and the GDRC (5 percent); capex $553 million;
-- Lonshi small open pit high-grade oxide copper mine owned by First
Quantum of Canada (100 percent); capex $25 million;
-- Frontier open pit sulfide copper mine owned by First Quantum of
Canada (95 percent and Gecamines (5 percent); capex $226;
(DRC Country Manager Jeffery Ovian accompanied the team on all
visits to First Quantum mines)
-- Ruashi open pit oxide copper/cobalt mine owned by Metorex of
South Africa (80 percent) and Gecamines (20%); capex $220 million;
hosted by Mine Manager Grant Dempsey; and
-- Kinsevere open pit oxide copper mine owned by Anvil of Australia
(95 percent) and Mining Company of Katanga (MCK) (5 percent); capex
$420 million; hosted by Vice President DRC Operations Toby Bradbury.


Tenke Fungurume an Awakening Giant
----------------------------------

9. (SBU) Tenke Fungurume Mining's (TFM) copper/cobalt oxide
deposits comprise one of the world's largest and richest known
copper-cobalt resources, which still remains extensively
under-explored. TFM is being developed west of Lubumbashi in
Katanga Province for a 40-year production life. It is considered a
mega-project and will be the largest mine in the region. The
operator is Freeport-McMoRan, which holds an effective 57.75 percent
stake. Latest estimates show TFM investment will reach $1.7
billion, nearly double the previous estimate, as a result of scope
changes and cost of additional infrastructure. Part of the
investment will go to funding power and transport infrastructure
needed by the mine and the region. Major Capital Items ($-millions)
include:
-- Mining fleet $ 40
-- Copper/Cobalt plant $410
-- Indirect costs $232
-- Total $682

10. (SBU) TFM's high-grade oxide copper-cobalt deposits lie on the
northern edge of the Lufilian Arc. The geology is complex and
mineralization has taken place in a number of events over geological
time. Subsequent tectonic action has given rise to multiple
mineralized dome structures of which some twenty-one occur in the
TFM lease area. Currently three are being developed for mining.
The dome structures are amenable to mining using a unique $1.6
million U.S.-built Vermeer surface miner. The surface miner uses a
rotating drum studded with titanium-hardened steel to rip and
fragment surface ore and waste rock down to a depth of about 60
centimeters. The rock is selectively removed by front-end loaders
and transported to respective waste and graded ore stockpiles to
await completion of the processing plant. Mining has begun on the

KINSHASA 00000791 004 OF 008


first such outcrop known as Kwatebala. Copper/Cobalt Ore Reserves
and Resources estimates are:

Million Copper% Cobalt%
Tons
Reserves 100 2.27 0.33
Resources 503 2.80 0.24
Total Reserves/Resources 603 2.71 0.26

11. (SBU) An oxide ore processing plant is under construction and
commissioning is planned for early 2009. The initial annual mining
rate will be 115,000 tons of copper and 8,000 tons of cobalt, with
plans to expand production to 400,000 tons copper and 28,000 tons
cobalt in the next five years. Processing will comprise a standard
crushing, milling, and sulfuric acid leach circuit, followed by
solvent extraction and electro-winning (SX/EW) of the copper to
produce cathode copper. A separate cobalt refinery will produce
cobalt hydroxide. Egress is a vexing challenge. It will require
some 450 truckloads per year on bad roads to carry copper cathode to
Durban port for export. The plant will also produce sulfuric acid
for its own use and for sale. Tenke management claims the mine is
committed to zero discharge from its tailings reservoir.

12. (SBU) Freeport has agreed to supply a loan to the state power
utility SNEL to fund investment in regional power infrastructure,
including expanded electrical power-generation capacity and improved
power reliability. Rasmussen told the team that TFM will refurbish
two of four turbines at the Nseke hydroelectric facility, providing
250 megawatts of power of which TFM will use only 80. TFM has put
in place substantial social development investment, asserts it is
committed to the Equator Principles, and works closely with a number
of international NGOs such as Pact and ISOS to implement a robust
social development program. TFM currently employs 5,000 people,
mainly from local communities, while under construction and will
employ 1,000 employees when in full operation.

Kolwezi Oxide Tailings Project - Cleaning up the Mess
--------------------------------------------- --------

13. (SBU) The Kolwezi Tailings project will ambitiously exploit one
of the world's largest resources of primary cobalt, and also recover
substantial amounts of copper. These metals are contained in two
immense dumps of floatation tailings from the treatment of
high-grade ore from the KOV and other nearby mines from 1952
onwards. The then prevailing processing technologies techniques
failed to recover large amounts of copper and cobalt, which were
discharged into the two tailings dams. The project is located
outside the town of Kolwezi and west of TFM in Katanga Province.
The area was the center of extensive mining activity in the 1930s to
1960s and little care was taken in disposing of mine tailings, which
were often pumped into streams and dams. The project operator is
First Quantum, which holds a 65 percent stake in the project.
Management is bitter that the GDRC labeled this project as one of
the few "Category C" projects, a designation for the recommended
cancellation of a contract.

14. (SBU) The resources consist of two tailings dams holding 40 and
72 million tons of "ore", respectively. The 72-million ton resource
is about 11 kilometers long and partially lies under a dam that will
be mined by dredge. The above-water portion will be mined using
hydro-mining techniques using high-pressure water to break down the
tailings into a sludge that will be pumped to a conventional solvent
extraction/electro-winning (SE/EW) treatment plant. The smaller
resource will also be mined hydraulically. The planned SE/EW plant
will be the biggest in Africa at four times the capacity of First
Quantum's Bwana Mkuba plant and twice that of First Quantum's own
Kansanshi plant, both in Zambia. The combined resource has been
estimated as 113 million tons grading 0.32 percent cobalt and 1.49
percent copper.

KINSHASA 00000791 005 OF 008

15. (SBU) Project construction is under way. Capital expenditure
for the base case is estimated at around $553 million. The plant
will initially treat 2.5 million tons of tailings per year to
produce 35,000 tons of copper cathode and 7,000 tons of cobalt
hydroxide (about 4,200 tons cobalt metal equivalent). It is being
designed and constructed so that capacity can be doubled for an
incremental capital cost of $40 million. Thereafter, plant
expansions will treat 4.3 million tons per year and produce 105,000
tons of copper and 17,400 tons of cobalt hydroxide (12,600 tons
contained cobalt) per year over 20 to 27-year life, depending on
markets and practical experience. Commissioning of the project is
scheduled for the fourth quarter of 2009, and commercial production
for the first quarter of 2010. Electricity will be supplied be from
Nseki and Nzilo hydro plants via a DC-AC converter station, and
ultimately from Inga once the stations are fully operational. To
date there has been little action on the proposed construction of a
3,000 MW Inga-3 hydro-electric facility on the Congo River.

Lonshi Oxide Copper Mine - End of the Road
------------------------------------------

16. (SBU) First Quantum operates two mines in the DRC's "pedicle",
with access from and egress to Zambia. The Lonshi mine works a very
high-grade (8-10 percent) copper oxide deposit located in the DRC on
the border with Zambia. It was the first greenfields copper mine
built on either side of the Copperbelt in 33 years and produced
520,000 tons of ore grading 10.3 percent copper in 2006. First
Quantum originally conducted exploration in the area to secure
additional feed for its Bwana Mkubwa (BM) processing plant in Zambia
and discovered the Lonshi oxide ore deposit in 2000. The deposit
was originally discovered by Belgian geologists in the 1930s, but
was never worked.

17. (SBU) Lonshi ore is produced by conventional open pit truck and
excavator/shovel mining methods. The ore was for years trucked for
processing at BM, which is a conventional copper oxide acid/leach,
SE/EX plant located in Zambia some 35 kilometers to the west of the
mine. This arrangement is a bone of contention as the Governor of
Katanga Moise Katumbi closed the border to ore exports from Lonshi
in November 2007, despite Central Government approval to export,
according to the company. At the time of the team's visit the mine
was sitting on some 700,000 tons of stockpiled high and low grade
ore waiting for permission to move to BM. At the same time BM had
only one working SX/EW circuit, was importing feed from other
sources, and was operating at less than 50 percent of capacity. BM
has produced cathode copper and sulfuric acid from Lonshi ore since
1998.

18. (SBU) Lonshi is scheduled to cease production from its open pit
at the end of this year and is currently sinking a decline to
evaluate the viability of underground mining of sulfide ore. It
will take an estimated two years to convert to underground mining if
proved viable. (Comment. It is not clear why the feasibility study
was delayed until closure of the pit. If Lonshi does proceed with
mining sulfide ore it will need to build a concentrator or have to
transport ore to Frontier mine for processing. End Comment.) First
Quantum owns 100% of Lonshi and acquired full rights to the mine
under the new Congolese Mining Code in August 2003.

Frontier - a Lower Grade Mine
-----------------------------

19. (SBU) First Quantum's $226.4-million Frontier copper mine, also
located in the DRC pedicle, achieved commercial production in
November 2007 at a plant throughput of 15,000 tons (design capacity
of 22,000 tons) of ore per day. The mine is 95 percent-owned by
First Quantum and is a greenfield development relatively close to
existing mine developments in the Zambian Copperbelt, which

KINSHASA 00000791 006 OF 008


facilitates issues of access and housing. However, all mine site
infrastructure was developed by the mine. The mine is located in
south-eastern DRC, 45 kilometers north of Ndola on the Zambian
Copperbelt. The main railway from the Copperbelt in Zambia to
Lubumbashi in the DRC passes within 5 kilometers of the Frontier
site.

20. (SBU) Mineralization at Frontier is sediment-hosted and occurs
higher in the stratigraphic sequence than deposits in the
traditional Copperbelt. The deposit occurs within veined and
altered sediments of the Katanga Group and is located in the
south-eastern extension of the Lufilian arc. The copper occurs
mainly as sulfides within shales and conglomerates that have been
highly faulted and folded. Measured and indicated sulfide resource
at a 0.35 percent copper cut-off totals 182 million tons of ore
grading 1.16 percent copper, equivalent to 2.1 million tons of
copper. In addition, the deposit hosts an oxide/mixed resource of
26 million tons grading 1.19 percent copper, equivalent to 310,000
tons of copper. The oxide/mixed ore is stockpiled separately for
possible processing in the future or for treatment at Bwana Mkubwa
plant, should the GDRC's ban on ore exports be lifted.

21. (SBU) Frontier is a conventional sulfide ore open pit mining
and processing operation. It has been designed to produce
1,000-1,200 tons of concentrate per day containing 27 percent
copper. It produced 8,000 tons of copper in concentrate in 2007 and
84,000 tons in 2008. During the estimated 19-year mine life,
Frontier is expected to produce 1.43 million tons of copper at an
average 75,000 tons per year. The total concentrate will be shipped
for smelting and refining in Zambian facilities, at least until such
are built in the DRC. During the teams visit, the mine had a
concentrate stockpile valued at $100 million caused by the embargo
on exports, which has subsequently been lifted. The mine employs
1,100 of whom 900 were local, and requires 26-28 megawatts of power
from DRC utility SNEL, which is wheeled in through Zambia.

Ruashi - Another Mining Superlative
-----------------------------------

22. (SBU) Ruashi Mining Sprl is an exceptionally high-grade oxide
orebody grading greater than 3.5 percent copper and just less than 1
percent cobalt. It also had some 3 million tons of stockpiled
tailings from defunct mines, which enabled it to generate an early
cash flow for mine development. The bulk of that resource has been
processed through the Phase 1 Concentrator. The Ruashi mine is
located only 10 kilometers from the Katanga provincial capital of
Lubumbashi in southern DRC. The mine is 80 percent owned by
Metorex, a South African middle-tier mining company, and 20 percent
by the state-owned mining company Gecamines. Last measured reserves
and resources are tabled below:

Million Tons %Copper %Cobalt
Mineral Reserves 24,120,000 3.78 0.79
Mineral resources
-- Mining Pit 35,530,000 3.74 0.46%
-- Stockpiles 2,720,000 1.86 0.35%
Total Resources 38,250,000 3.61 0.45%

23. (SBU) Production at Ruashi was planned in two phases. Phase I
was commissioned in July 2006 to process some 56 oxide ore
stockpiles and tailings dumps that surround the Ruashi and Etoile
open pits (the Etoile pit was first mined in 1911) from a number of
old defunct operations. Phase II comprises plans underway to build
a new solvent extraction/electro-winning (SE/EW) plant to process
the high-grade Ruashi orebodies. A future Phase III would involve
underground mining of primary sulfide ore that underlies the oxide
cap currently being mined in the pits. The build-up of Phase II
overlaps with Phase I and has resulted in higher tonnages treated
and copper and cobalt output.

KINSHASA 00000791 007 OF 008

24. (SBU) Production for 2008 is expected to increase as more ore
from the Ruashi pit becomes available. The Phase I mine and the
Zambian Sable processing facility annually produce 10,000 tons of
copper cathode and 500 tons of cobalt in carbonate. Phase II will
increase output by 45,000 and 3,500 tons, respectively, plus 500
tons per day of sulfuric acid. Phase II involves the expansion of
the phase I concentrator and the construction of a new acid-leaching
section, and an SX/EW plant for the production on site of copper
metal (99.99 percent copper) and cobalt carbonate powder (25 to 27
percent cobalt). Capital expenditure for the metallurgical complex
is forecast to be $180 million to treat 120,000 tons of ore per
month from two open pits at a headgrade of 3.5 percent copper. Full
production is planned for 2009, and mine life is estimated to be at
least 30 years.

25. (SBU) Currently, the oxide material is treated in the Ruashi
concentrator where it is sulfurized and floated as an oxide
concentrate. The concentrate is trucked to Metorex's Sable refinery
complex north of Lusaka where copper metal and cobalt carbonate are
produced. Production from the Ruashi open pits began in late 2007,
the new copper refinery was commissioned at the beginning of 2008,
the cobalt refinery should be commissioned by the end of the year,
and the solvent extraction plant is still under construction. Once
in full production in 2009, Ruashi will produce 40,000 to 45,000
tons per year of 99.99 percent copper metal and 3,500 tons of cobalt
in carbonate. An additional 10,000 tons of copper and 500 tons of
cobalt in carbonate will continue to be produced at the Sable
facility.

Kinsevere - Anvil's Biggest Investment in the DRC
--------------------------------------------- ----

26. (SBU) Kinsevere is Australia-based Anvil's biggest investment
in the DRC and is likely to become a large tonnage, high-grade,
oxide-copper operation. Phase I of the project includes a major
open pit mining operation, a heavy media separation (HMS) plant, and
two electric-arc furnaces (EAF). Phase II will be a conventional
acid/leach solvent extraction/electro-winning (SE/EW) circuit under
development. A potential Phase III could be the development of an
underground mine to exploit the primary sulfide ore lying below the
oxide cap, and the possible construction of a sulfide circuit to
process the ore. Phase I was commissioned in June 2007 at a cost of
$35-million to produce 25,000 tons of copper per year. Construction
of Phase II began in the second half of 2007 and full production is
expected by 2010. The capital cost of this phase has escalated to
$380 million. The mine is located 27 kilometers north of
Lubumbashi.

27. (SBU) The Kinsevere orebody is abnormally thick because the
20-meter thick barren unit that usually separates the upper and
lower orebodies of the Copperbelt is absent, and the overlying unit
is also economic to mine. The latest reserve/resource estimates
shows 50-million tons of ore grading 3.6 percent copper, but low in
cobalt, and containing 1.8 million tons of copper. The deposits are
hosted in the Lower Roan Supergroup/Mines Group in a mixed sequence
of silica and carbonate rocks. The ore forms an oxide cap more than
100 meters thick, which overlies the primary sulfide mineralization.


28. (SBU) The Kinsevere mine has three ore bodies conducive to
open-pit extraction, two of which are being developed for production
and the third will be opened in about 9 years. The ore is 95
percent free digging and the stripping ratio is low at 2.7 tons of
waste to 1 ton of ore. Mining on both deposits has operated at full
capacity since January 2007. During the last seven months of 2007,
the mine produced 13,006 tons of copper from concentrates grading
27% copper. When the two electric-arc furnaces are commissioned,
which is scheduled for later in 2008, the mine will also produce

KINSHASA 00000791 008 OF 008


90-95 percent "black copper" ingots. Kinsevere is forecast to
produce 28,500 tons of copper in 2008, of which some 10,000 tons
will be "black copper". The mine receives 39.5 megawatts of
hydro-electric power from SNEL. Currently the fine tailings
(average grade of 2.9 percent copper) and HMS light fraction
(average grade 4.3 percent copper) are stockpiled for future
processing in the Phase II SX/EW plant. Phase II will produce
60,000 tons of A-grade cathode copper (99.99 percent copper) per
year by 2010.

Comment
-------

29. (SBU) A calculation of the copper and cobalt production from
only the DRC mines visited shows that if all goes as planned, the
six mines should produce about 260,000 tons of copper and 17,000
tons of cobalt annually in the next two to three years. Based on
the mines' expansion plans, this could increase to over 700,000 tons
copper and 65,000 tons cobalt per year within the next five years.
These calculations do not take into account new and expanded
production from other mines in the DRC or production from Zambia.
The cobalt consumption estimate for 2012 ranges from 97,000 to
105,000 tons. There is a possibility that cobalt may be in over
supply at that time.

30. These DRC mines with western investors are bringing significant
skills transfer, social development, and tax revenues to the DRC.
They are working with NGOs and the GDRC to integrate or ameliorate
the lot of numerous artisanal miners. The companies are grappling
with uncertainty related to the DRC mining review, corruption, and
dilapidated infrastructure. The GDRC legitimately seeks to gain
adequate benefits to the country through the license review, but
still needs to assure transparent oversight and transfer of these
benefits to its people.
GARVELINK

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