DRC rail line may get $1B from U.S. finance agency

The United States may offer as much as $1 billion to revamp a rail line in central Africa that could help facilitate critical minerals shipments from the Democratic Republic of Congo (DRC).

The Washington-based U.S. International Development Finance Corp. said Friday it signed a letter of intent (LOI) with Portuguese engineering firm Mota Engil Engenharia e Construção África aimed at rehabilitating and operating the Dilolo-Sakania railway line in the DRC. The line would connect to Angola’s Lobito Atlantic Railway to form a strategic regional link – known as the Lobito Corridor – capable of handling increased mineral exports from the DRC.

The rail project may seek up to $1 billion in DFC financing following full review, the U.S. federal agency said in a statement.

Equity stake

A second LOI disclosed Friday envisions the DFC buying an equity stake in a new copper and cobalt venture between state-owned DRC miner Gecamines and Swiss commodities firm Mercuria Energy Trading.

The partnership would “enhance the commercialization of copper, cobalt, and other critical minerals to help secure U.S. critical mineral supply chains,” the DFC said.

“These projects will help to secure vital supply chains, expand private-sector opportunity, and strengthen America’s global competitiveness while supporting peace, prosperity, and dignity in Central Africa,” Ben Black, CEO of the DFC, said in the statement. “By working with partners that share our values of transparency, accountability, and fair competition, we are helping to build a peaceful, prosperous future for the United States and our allies across Africa.”

Strategic agreement

News of the financing comes a day after the U.S. and DRC signed a strategic pact that seeks to strengthen cooperation on security and defence matters while improving U.S. access to critical minerals produced by the African country.

The deal includes a commitment by the DRC to increase the volume of critical minerals being exported from the country via the U.S.-backed Lobito-Sakania Corridor. Within five years, half of the copper, 90% of the zinc concentrate and 30% of the cobalt controlled by DRC state-owned enterprises must be exported via the rail line, the document says.

The agreement also includes a framework for investment in DRC assets by U.S. entities through the creation of a joint steering committee and a strategic list of critical mineral assets. It aims to reorganize supply chains for critical minerals and help to formalize artisanal mining in a region where minerals such as gold, tantalum or tungsten have been fuelling informal economies and armed groups for decades.

The DRC is one of the world’s richest sources of copper, lithium and other critical metals. It’s the world’s top producer of cobalt, a metal essential for electric-vehicle batteries and aerospace applications.

Offtake deal

Other key components of the deal include a commitment by the DRC that its state-owned enterprises give U.S. persons a right of first offer on critical minerals destined for export on commercially comparable terms that guarantee such minerals are consumed in the U.S. Where appropriate, this offtake should be exported using the Lobito-Sakania Corridor, the agreement says. 

The corridor connects the namesake Angola port to the DRC copper belt. Inside Angola, it runs about 1,300 km eastward from the Atlantic Ocean to the border town of Luau, extending another 450 km into the DRC to reach the city of Kolwezi via the Société Nationale des Chemins de fer du Congo rail network. It passes within 5 km of Ivanhoe Mines’ (TSX: IVN; US-OTC: IVPAF) Kamoa-Kakula copper complex and through the company’s Western Foreland exploration project.

“The United States reaffirms its intention to make the Sakania-Lobito Corridor project a success that benefits the Democratic Republic of the Congo and the Congolese people and enables long-term, private sector-led economic growth for the Democratic Republic of the Congo while opening new market opportunities for U.S. persons,” the accord says.

Hydropower financing

Thursday’s agreement also calls for the creation of a joint coordination and governance committee to advance the Grand Inga hydropower complex – a massive group of dams on the Congo River that could potentially generate enough power for much of Africa. Raising financing for the project from lenders such as export credit institutions, international financial institutions and multilateral development banks will be a key task for the committee.

A preferential fiscal, tax and regulatory incentive regime for U.S. persons will be set up by the DRC within the next 12 months, according to the agreement. In return, the U.S. will provide technical assistance to the African country in areas such as regulatory reform, increasing the DRC’s processing capacity and evaluating mineral resource data to assess critical mineral exploration priorities.

The countries also commit to exploring “appropriate avenues” to support the successful formalization or standardization of artisanal and small-scale mining activities. The DRC will explore partnerships with U.S. persons to ensure that the sourcing of critical minerals from the country adheres to international and regional standards.