Kolwezi deal formalized

America Mineral Fields (AMZ-T) is another step closer to developing the Kolwezi cobalt-copper tailings project in the Democratic Republic of Congo.

After 10 months of negotiations, the company has agreed to a contract of association with the DRC government and state-owned Gecamines (Generale des carrieres et des mines). The contract will govern the ownership and management of jointly held Kingamyambo Musonoi Tailings (KMT), which will own the mining title at Kolwezi.

The contract cements a previous agreement that calls for AMF to relinquish a tax holiday for the project in return for a larger equity interest. AMF stands to take an 82.5% interest, with Gecamines owning 12.5% and the government retaining 5%.

The deal also calls for AMF to pay Gecamines US$5 million once titles are transferred to KMT; another US$10 million is due once project financing has been completed. Gecamines is also entitled to participate in profits generated as a result of higher cobalt prices.

Under a previous proposal, AMF would have owned 60% of the project and Gecamines would have had 40%. In all, AMF would have had to pay US$35 million by the time project commissioning was completed.

Ratification by the boards of AMF and Gecamines and by the government is expected to take several weeks. The project has already been approved by the Economic and Finance Cabinet Sub-committee.

Reserves at Kolwezi consist of 112.8 million tonnes of oxide tailings grading 0.32% cobalt and 1.49% copper (T.N.M., Feb. 10-16/03). Of that amount, 42.3 million tonnes exist in a 1.5-km-wide tailings dam; the balance is in an 11-km-long body of tailings discharged into the Musonoi River Valley.

The project is expected to produce 7,000 tonnes cobalt and 42,000 tonnes copper annually over 38 years. Capital costs are pegged at US$335 million.

AMF will begin the final stage of its feasibility study once mining rights have been transferred; the company will also start the process of securing project financing.