China investing big in Africa (May 19, 2008)

China continues in its race to secure mineral resources in Africa, with a plan to invest more than US$9 billion in the Democratic Republic of the Congo (DRC).

In a statement to parliament in Kinshasa, the DRC’s Infrastructure Minister Pierre Lumbi described the deal as “a vast Marshall Plan for the reconstruction of our country’s basic infrastructure.”

He added: “It is going to generate tens of thousands of jobs directly or indirectly, with some 10,000 persons being employed directly in the first phase.”

Lumbi estimates that the deal will have an internal rate of return of at least 19%. Its total initial value is US$9.25 billion, of which US$3.25 billion will go toward mining investment and the remaining US$6 billion is earmarked for infrastructure development.

“This contract is undoubtedly the best which the country has ever signed with foreign investors,” Lumbi declared.

The agreement creates a mining joint-venture company, Sicomines, in which the Chinese hold 68% and Gcamines, the DRC’s state-owned mining entity, the remaining 32%. Lumbi said that 150 Chinese engineers and technical experts were already in the DRC to start work on various aspects of the project.

The infrastructure portion of the deal includes railways, roads, a major hospital plus 31 smaller hospitals and 145 clinics, two universities, two vocational training centres, two hydroelectric dams, two electricity distribution networks and two airports.

In return for the investment, China will receive mining rights through Sicomines for mineral deposits hosting 10.6 million tonnes copper and 620,000 tonnes cobalt. Production is projected to start in four years.

The Chinese companies involved in the deal are SinoHydro Corp., China’s leading hydroelectric construction contractor, and China Railway Group. Financing will come in the form of loans from the Import and Export Bank of China, and they will be repaid by way of dividends from the new mines.

In a speech in parliament, Jean- Lucien Mbusa, a leading member of the DRC’s largest opposition party, the Movement for the Liberation of Congo, criticized the deal as”incoherent and unbalanced” and called for its review, renegotiation and an international tender, reported Reuters news agency. He said that the deal forces the DRC “to sell off its national heritage to the detriment of several generations.” Mbusa calculated the value of the Congolese contribution at US$87 billion.

In a separate deal, SinoHydro and another state-owned Chinese company have agreed to spend US$140 million to build a uranium mine complex in Niger.

SinoHydro and Chinese Nuclear Overseas Uranium Resources Development Co. (SinoUranium), a subsidiary of China National Nuclear Corp., will build the mine for the project owner, Niger Azelik Mining Industry. Niger Azelik is owned by the Niger government, China National Nuclear Corp. and Beijing Zxjoy Technology & Trade.

Aside from the mine itself, the facility will also include two coalfired power plants, each with a 6-megawatt output, and a hydrometallurgy plant. Annual production capacity will be 600,000 tonnes and the project will be completed in 2.5 years.

SinoHydro released news of the agreement last month. The Englishlanguage website People’s Daily Online ran a story about the agreement based on a news report by China’s Xinhua news agency.