May 6, 2024
Congo’s $7 Billion Deal With China Linked to Copper Price Under New Contract
, Bloomberg News
(Bloomberg) -- A revamped minerals-for-infrastructure deal between the Democratic Republic of Congo and China that will send billions of dollars in financing to the Central African nation is contingent on the price of copper, according to a newly published contract.
Congo signed an updated agreement in March to its 2008 deal to trade copper and cobalt from a joint mining venture known as Sicomines for development funding. Under the new contract published on May 3, Congo will get $324 million annually for infrastructure projects from its Chinese partners through 2040 as long as the copper price remains above $8,000 per ton.
Read: DRC Strikes New $7 Billion Mine Road-Financing Deal With China
Copper traded at $9,910 a ton Friday, according to data compiled by Bloomberg. The price has averaged $8,500 over the past 12 months and $7,937 over the past five years. The lowest price during that period was $4,630 in March 2020 at the beginning of the Covid-19 pandemic.
Most of the financing will go toward building national roads, most of which were destroyed over decades of dictatorship and war. Congo, Africa’s second-largest nation by landmass, is one of the world’s poorest countries despite being the second-biggest source of copper and the largest producer of cobalt, a key ingredient in many EV batteries.
According to the contract, if the copper price rises above $12,000, 30% of the additional profit will go to financing additional infrastructure projects. If it falls below $8,000, the funding will diminish until it stops altogether at $5,200 per ton.
The project has “total exemption from all indirect or direct taxes, duties, fees, customs, royalties through the year 2040,” according to the contract.
Sicomines is 68% controlled by China Railway Group Ltd., Power Construction Corp. of China, known as PowerChina, and Zhejiang Huayou Cobalt Co. Congo’s state-owned Gecamines has a 32% stake.
The amendments bring the total value of the infrastructure loans to $7 billion between 2008 and 2040, with $1.5 billion already disbursed, according to the contract.
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