Congo's War-Torn East Earmarket for $123 Million Tin Mine

Congo's War-Torn East Earmarket for $123 Million Tin Mine

01/03/2016

Alphamin Resources Corp., a mining company backed by Denham Capital Management LP, plans to raise $123 million to dig the first industrial mine in Congo’s North Kivu province, where the army has fought rebels on the nation’s eastern border for two decades.

The company, based in Grand Baie, Mauritius, will seek half the money for the tin mine from its investors and the rest in debt, Chief Executive Officer Boris Kamstra said Feb. 25 in an interview in Congo’s capital, Kinshasa. Output is expected to begin at the end of 2018, according to a feasibility study released Feb. 23.

“This is a potential catalyst for economic growth in the whole of North Kivu,” Kamstra said.

Congo is Africa’s biggest tin producer, with output of 6,400 metric tons last year ranking the country as the world’s eighth-largest source of the metal, according to theU.S. Geological Survey. Demand for the raw material, used as a solder in circuit boards, has increased with the expansion of the electronics industry. Tin for delivery in three months has climbed 8.9 percent this year to $15,580 a metric ton on the London Metal Exchange.

Impact Investment

South Africa’s Industrial Development Corp., which owns 10.5 percent of Alphamin’s Congolese unit after a $7 million investment in January, said it backed the project in part because of the social and economic impact it could have on the eastern Congo region.

“The potential social impact in a region that has been plagued by crisis after crisis reflects the true spirit of being developmental,” Mazwi Tunyiswa, head of basic metals and mining at the IDC, said in an interview in Kinshasa. “It really fits into what we want to achieve in Africa.”

The Bisie project will have operating costs of $8,450 a ton at the first mine site, Mpama North, according to the feasibility study. At prices of $14,800 a ton, the project offers a rate of return of 36 percent after tax, Alphamin says. After Mpoma North, the company is considering adding a second mine at Mpoma South and then a hydropower and tin-smelting operation at Bisie or elsewhere in Walikale territory where the project is based, Kamstra said.

The project must overcome challenges including the construction of a $19.1 million, 35-kilometer (22-mile) access road to replace the jungle path along which human porters previously hauled artisanally mined ore. Since the deposit was found in 2004, it has been predominantly mined by informal diggers and controlled by armed groups.

Mai Mai Invasion

In July 2014, Alphamin’s exploration site was attacked by Mai Mai Sheka rebels and the camp overrun by artisanal miners.

The number of people mining without permits in the area has fallen to as few as 80 from 2000. They are now restricted to the Mpama South site, according to Alphamin. The company says that it can manage the security risks.

When IDC completes its $10 million investment, it will increase the company’s holding in the local subsidiary to 14.25 percent. Denham Capital holds 43.39 percent of Alphamin through Mauritius-registered Tremont Master Holdings.

Alphamin is the South African development finance institution’s first investment in Congo’s mining industry since 2010, when a dispute arose with the government over First Quantum Minerals Ltd.’s Kolwezi copper project, in which the IDC held a 10 percent stake.

Shares in Alphamin climbed 3.2 percent to C$0.16 in Toronto on Monday, paring their decline this year to 14 percent.

By Thomas Wilson
Bloomberg