Chinese company consortium provide $870.1 million interest-free loan for Phase 1 and Phase 2 of Sicomines Copper and Cobalt Mining Project (Linked to Project ID#450 and #73145)

On September 17, 2007, a consortium consisting of China Eximbank, China Railways Construction Company (CREC), and Sinohydro and the Government of the Democratic Republic of Congo signed a “protocol d’accord” (or “项目换资源协议”). According to the terms of the agreement, CREC and Sinohydro would be granted a 68 percent stake in a new joint venture (JV) named the Sino–Congolais des Mines (Sicomines SARL), and a Congolese parastatal called Générale des Carrières et des Mine SARL (Gécamines SARL) would own the other 32 percent. In exchange, the CREC and Sinohydro would provide the Government of the DRC with turnkey public infrastructure projects (worth $6.56 billion) financed by China Eximbank. The terms of lending were not identified in the “protocol d’accord”. Then, on April 22, 2008, a “convention de collaboration” (Chinese name: 关于刚果民主共和国矿业开发和基础设施建设的合作协议) was signed by the Government of the DRC and Sinohydro (on behalf of Sicomines). It specified that two tranches of infrastructure financing—reportedly worth $3 billion each—would be disbursed and that subsidiary loans approved under the first tranche and second tranche would carry the following terms: a 25-year maturity and an interest rate of 6-month LIBOR plus 100 basis points (or 3.839% at the time of the agreement). The proceeds from these loans would be disbursed to the Chinese contractors responsible for individual infrastructure projects. The April 2008 agreement specified that ownership of the Sicomines joint venture was allocated such that CREC holds 43% ownership of the joint venture, Sinohydro holds 25%, Gécamines holds 20%, and a Mr. Gilbert Kalam Babanika (who was eventually appointed as deputy head of Sicomines) holds 12%. On June 28, 2008, an amendment to the agreement was signed, which change the ownership allocation to CREC: 28%, Sinohydro: 20%, China Metallurgical Group Corporation: 20%, Gécamines: 20%, Mr. Gilbert Kalam Babanika: 12%. On September 11, 2008, a second amendment was signed, which further changed the ownership allocation to CREC: 33%, Sinohydro: 30%, Zhejiang Huayou Cobalt: 5%, Gécamines: 20%, Mr. Gilbert Kalam Babanika: 12%. Project ID#450 provides a list of the infrastructure projects and subsidiary loans that have been approved to date. Additionally, as part of the April 22, 2008 “convention de collaboration,” it was reported that the Chinese company consortium were to provide 2.9 billion USD in loans to cover 1) 32 million USD loan to Gécamines to cover its initial capital injection to Sicomines (the total registered capital of Sicomines in 2008 was 100 million USD); 2) 50 million USD loan to Gécamines to procure supplies; and 3) to provide a shareholder loan for the development of the copper and cobalt mine at Kolwezi. The $2.9 billion was financed by a $870.1 million, interest-free shareholder loan (prêt d’actionnaire) from China Railway Engineering Corporation (CREC), Sinohydro Corporation and Zhejiang Huayou Cobalt, and a $2.0299 billion loan from China Eximbank at a fixed interest rate of 6.1%. Project ID#73204 captures the interest-free shareholder loan from China Railway Engineering Corporation (CREC), Sinohydro Corporation and Zhejiang Huayou Cobalt. Project ID#73145 captures the loan from China Eximbank. At the end of Fiscal Year 2013, Sino–Congolais des Mines (Sicomines SARL) disclosed that it had received loan disbursements worth $423,889,454. However, it did not disclose if these disbursements came from the China Eximbank loan, the interest-free shareholder loan (prêt d’actionnaire) from China Railway Engineering Corporation (CREC) and Sinohydro Corporation, or both loans. CREC likely provided 422 million USD in interest-free loans, Sinohydro provided 383.7 million USD in interest-free loans, and Zhejiang Youhua provided 64.4 million USD in interest-free loans. The Congolese government agreed to provide a sovereign guarantee for both the infrastructure loan and the mining loan from China Eximbank. Another unique feature of the April 22, 2008 agreement was the inclusion of a $350 million signing bonus from the consortium of Chinese firms. However, following pressure from the IMF and civil society, an amendment (Avenant No. 3 à la Convention de Collaboration Relative au Developpement d’un Projet Minier et d’un Projet d’Infrastructures en République Démocratique du Congo du 22 Avril 2008) was made to the “convention de collaboration” in October 2009. It reduced size of the infrastructure loan from $6 billion to $3 billion and removed the sovereign guarantee for the copper and cobalt mining loan from China Eximbank. The sovereign guarantee for the infrastructure loan was left in place. China Eximbank was not a party to this amended agreement, which specified that if the floating (market) interest rate on the infrastructure loan (LIBOR plus 100 basis points) rose higher than the rate (4.4%) referenced in the April 22, 2008 “convention de collaboration”, an expanded consortium of Chinese firms (CREC, Sinohydro, and Zhejiang Huayou Cobalt Company Ltd) would assume responsibility for the additional interest payments. The profits from the investment by SICOMINES SARL in the copper and cobalt mine at Kolwezi would be used to repay the loans that finance the costs of developing the copper and cobalt mine and the unrelated infrastructure projects. However, nearly four years after the October 2009 amendment was signed, the Congolese parliament had still not ratified it and China Eximbank became concerned about the risk of non-repayment. In order to limit its risk exposure, China Eximbank suggested that it take over Gécamines’ 32 percent ownership stake and that the Chinese consortium’s 68 percent ownership stake be mortgaged until the infrastructure and mining loans were repaid. The Congolese government rejected these proposed changes, and China Eximbank responded by rescinding its funding in early 2012. Then, the Chinese firms began negotiating with two alternative financiers: China Development Bank and the Bank of China. In July 2013, China Eximbank reversed its decision to halt funding for development of a copper and cobalt mine in Kolwezi. Construction of the mine began in April 2013, and on November 6, 2015 the first phase of the mining project was completed. The second phase commenced on May 21, 2020. As of July 2021, the second phase of the project had successfully produced its first batch of cathode copper. The main copper system has been completed.

Additional details

1. This project is also known as the Sicomines Copper Project. The Chinese project title is 华刚矿业项 or 华刚矿业项目. The French project title is Projet Minier en République Démocratique du Congo (Sicomines). 2. The transaction (final commitment) amount only captures financing from the official financiers, which include Sinohydro and CHEC, two Chinese state-owned companies.

Number of official sources

20

Number of total sources

39