KML's response to RAID's
document Key Mining Contracts in Katanga
The economic argument for renegotiation

KML's response to RAID's document "Key Mining Contracts in Katanga: The economic argument for renegotiation" suggests the following comments:

  1. KML's response is published, but not RAID's document "Key Mining Contracts in Katanga: The economic argument for renegotiation". See this document.


  2. KML's technical report is not questioned in anyway; all data are taken as given in the reports.


  3. Long term mining projects are generally 12-15% IRR because of high investment costs, long lead times for exploration, reserve delineation and project implementation. In the case at hand, it is because the reserve base is excellent, existing assets are transferred free of cost to KML, are in good condition, and the lead time for resuming commercial production is short, that the expected IRR is high and favourable.


  4. Average copper and cobalt prices over the project lifetime are a major cause of risk or benefit; average historical prices converted in 2004 US$ values over periods 1900-2004, or 1952-2004, or 1984-2004, are higher than the Cu/Co values of 1.10/10$/lb considered by KML. Present trend since 2005 exhibits a significant shift to higher prices. See KML's own data.

    See Cu historical prices (excel sheet), chart1 and data with periods 1900-2004, 1952-2004 and 1984-2004 (in Copper tab).

    See Co historical prices (excel sheet), chart1 and data with periods 1900-2004, 1952-2004 and 1984-2004 (in Cobalt tab).


  5. The "open business" process for reaching the agreement between KML and Gecamines, involved one foreign party only. There was no competitive international bidding. As a result, there can be ground for suspicion that the agreement, ie. the 25% equity share for Gecamines, is not fair to Gecamines and the people of DRC, the more so as average metal prices over the project lifetime may be underestimated, the reserve base is excellent, existing assets have been transferred at zero cost and these assets are in good condition. These qualities are amply presented in KML's reports to the market. See KML's March 2007 presentation (pdf). And that of April 2007 (pdf). This suspicion would not exist if a competitive international bidding had been undertaken according to sound international bidding procedures.


See the full assessement of KML's project.

put on line on 21/04/2007 by Pierre Ratcliffe Contact: (pratclif@free.fr)