The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™

Ratings update: China Molybdenum, Democratic Republic of Congo

Amid the positive global outlook for cobalt, the Democratic Republic of Congo – the metal’s biggest producer – presents a highly challenging operating context for China Molybdenum and other companies as political, security, corruption and local stakeholder risks remain rife.

Key developments

  • China Molybdenum has announced it is increasing control of the Tenke Fungurume mine by buying out a 24% stake held by private equity firm BHR Partners. Tenke, located in the Katanga province of the Democratic Republic of Congo, has been operated by China Moly since its acquisition of a majority stake from Freeport-McMoRan in 2017. The mine hosts one of the world’s largest known copper-cobalt resources – it was the source of 21% of Congo’s total cobalt output in 2017 while the country as a whole produced around 67% of global output of the metal. The prospects for cobalt have improved significantly in light of growing demand for its use in batteries, for example in electric vehicles, and China Moly’s acquisition of Tenke reflects a broader move by China, which already produces over 80% of the world’s refined cobalt, to dominate global supply of the metal.
  • However, mining in Congo remains fraught with challenges, including artisanal mining; continued violence from armed groups; human rights concerns; and repeated outbreaks of Ebola. The new mining code, fiercely opposed by companies, highlights the difficulty of navigating relations with government and the allegedly corrupt state-owned mining company Gécamines. The current political crisis, following repeated delays to the presidential election and its surprise result, poses additional risks to mining investors in the country.


  • Following the long-delayed elections, Congo’s political outlook is highly uncertain. Provisional election results show Félix Tshisekedi, the son of a veteran opposition leader, narrowly ahead of Martin Fayulu, a former businessman backed by influential opposition figures. Emmanuel Shadary, President Kabila’s interior minister and preferred successor, finished a distant third. Doubts about the count have been expressed by international observers as well as the influential Congolese Catholic Church, which produced a parallel vote tabulation showing Fayulu clearly ahead. There is speculation that Tshisekedi may have colluded with Kabila’s camp to share power and Fayulu challenged the result in court, though this was struck down. Alleging fraud, Fayulu has called on his supporters to organise protests – there will likely be continued uncertainty about Congo’s political situation in the months ahead, with a prolonged dispute and outbreaks of further violence possible. While the election was seen by many as an opportunity for Congo to finally stabilise and develop economically following Kabila’s misrule – and may turn out to have been a step in that direction – investors will need to take a wait-and-see approach, monitoring developments carefully.
  • The new mining code, vigorously opposed by major miners in Congo, may be here to stay. Signed into law in June 2018, the code raises royalties, including a significant increase from 3.5% to 10% for cobalt. It also removes a stability clause that previously protected mining-license holders from changes to the fiscal regime for ten years. If he does become president, Félix Tshisekedi – who previously described the changes as too drastic – may be constrained in his ability to amend the code while his government settles in, especially if he indeed has an agreement with Kabila. Meanwhile, Fayulu has made few statements about the mining sector or about the new code specifically, though as a former Exxon executive he may be inclined to take a pragmatic stance towards the sector if he were to take power. On the other hand, it is also unclear how strictly the new mining code will be enforced given that informal arrangements frequently supplant legal provisions in Congo, potentially leaving room for companies to negotiate the new terms.
  • Corruption remains widespread within the government, including Gécamines. The state-owned mining company, which owns a 20% stake in Tenke, recently denied having improperly diverted $750m from its accounts – one of many allegations of corrupt practices levelled against it over the years. Its chairman, a Kabila ally, has instead claimed that international miners have for years artificially inflated costs to avoid paying taxes and dividends, including accusing China Moly of ‘playing games’. There have been similar recent disputes in which Gécamines made accusations or legal threats against companies, which have been resolved by negotiated concession from those companies. Gécamines is also currently renegotiating contracts with international mining companies and has reached deals with Glencore and Eurasian Resources Group, though it is unclear whether this process will continue post-Kabila. Corruption and arbitrary decisions are likely to pose continuing challenges to China Moly and other operators in Congo, requiring them to have strong anti-bribery and corruption policies in place.
  • China Moly faces a number of local-level challenges that other miners in the country also encounter frequently. There appears to be discontent locally about a lack of economic benefits from the operation and the hiring of Chinese nationals. Large numbers of artisanal miners regularly enter the mining concession – including reportedly up to 10,000 on one occasion in late 2016. In November last year, this led to clashes with the state mining police that resulted in two casualties. China Moly highlights its implementation of the Voluntary Principles on Security and Human Rights and a range of local development initiatives in its public reporting. However, in light of high cobalt prices and the lack of local alternative livelihoods, illegal mining is likely to continue to pose challenges both for China Moly and other miners in the country.


This article uses Critical Resource’s LicenseSecure™ model to assess the likely level of political and stakeholder risk. Our updates provide a rapid overview of new or updated ratings in our database, with a focus on projects in the news. Please note that these ratings updates are provisional, based in part on open source analysis and are not from client projects. Full LicenseSecure analyses are in-depth, involve extensive intelligence gathering and are confidential.

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