The government of the Democratic Republic of Congo (DRC) and Freeport-McMoRan Copper & Gold announced on October 22 successful conclusion of a prolonged review of Tenke Fungurume Mining’s (TFM) contracts. TFM was owned 57.75% by Freeport, 25.75% by Lundin Mining and 17.5% by the DRC state mining company, Gécamines.
Following the review, TFM’s key fiscal terms will continue to apply, including a 30% income tax rate, 2% mining royalty rate and 1% export fee. TFM agreed to several additional commitments, including an increase in Gécamines ownership interest from 17.5% to 20%; an additional royalty of $1.2 million for each 100,000 mt of proven and probable copper reserves above 2.5 million mt; additional payments totaling $30 million to be paid in six installments upon reaching certain production milestones; conversion of $50 million in intercompany loans to equity; and a payment of $5 million for surface area fees. In addition, TFM has agreed to expand Gécamines’ participation in TFM management and reiterated its commitment to the use of local services and Congolese employment.
The Tenke Fungurume mining concessions are located in Katanga province of the DRC, about 110 miles northwest of Lubumbashi. Project development required about $2 billion in capital investment, the largest such investment in the DRC in recent years. Copper production began in 2009. Current operations are designed to produce 250 million lb/y of copper and 18 million lb/y of cobalt. An expansion to 290 million lb/y of copper is currently in progress and due to come on line in 2011.
TFM continues to engage in drilling activities, exploration analysis and metallurgical testing, and has commenced feasibility studies to evaluate the potential for significant future expansion.
Freeport reports that in the aggregate, through June 30, 2010, TFM’s tax and related payments to government institutions, transfer bonuses, and social spending within the DRC have totaled about $370 million since the project’s inception.