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Macro

Congo-China $7B Deal Ties to Copper; $8K/Ton Threshold Set

DRC updates its $7 billion minerals-for-infrastructure deal with China, linking payments to copper prices above $8,000 per ton.

By Athena Xu

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5/7, 00:35 EDT
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Key Takeaway

  • Congo's updated $7 billion deal with China for infrastructure financing is tied to copper prices, requiring them to stay above $8,000 per ton.
  • If copper exceeds $12,000 per ton, 30% of additional profits will fund more projects; funding ceases if prices drop below $5,200.
  • The deal involves significant tax and duty exemptions through 2040 and increases total loan value to Congo for national development.

Copper's Crucial Role in Congo-China Deal

The Democratic Republic of Congo (DRC) and China have updated their minerals-for-infrastructure agreement, initially established in 2008, to further capitalize on the DRC's vast mineral resources, including copper and cobalt. The revised contract, published on May 3, stipulates that the DRC will receive $324 million annually for infrastructure projects from its Chinese partners through 2040, conditional on the copper price staying above $8,000 per ton. With copper prices currently at $9,910 a ton and averaging $8,500 over the past year, the deal's viability seems strong, despite historical fluctuations in the commodity's price.

Infrastructure Development in Focus

The financing from this deal is earmarked for significant infrastructure improvements within the DRC, particularly the construction of national roads that have suffered from decades of neglect due to dictatorship and conflict. This investment is critical for the DRC, the world's second-largest copper producer and top cobalt supplier, which remains one of the poorest countries globally. The contract also includes a clause for additional infrastructure financing if copper prices exceed $12,000 per ton, demonstrating the direct link between the country's mineral wealth and its developmental prospects.

Sicomines Joint Venture

At the heart of this agreement is Sicomines, a joint mining venture that is 68% controlled by Chinese entities—China Railway Group Ltd., Power Construction Corp. of China (PowerChina), and Zhejiang Huayou Cobalt Co.—with Congo’s state-owned Gecamines holding a 32% stake. The amendments to the contract have increased the total value of the infrastructure loans to $7 billion between 2008 and 2040, with $1.5 billion already disbursed. This partnership underscores China's significant investment in Africa's mineral sector and the DRC's reliance on these resources for development funding.

ZiG Currency Depreciation

In a related development, Zimbabwe's gold-backed currency, the ZiG, has depreciated against the US dollar, reaching its lowest level since its launch a month ago. This marks Zimbabwe's sixth attempt at stabilizing its currency since 2008, with the ZiG backed by 2.5 tons of gold and $100 million in reserves. Efforts towards making the ZiG fully convertible include engaging major trading partners like South Africa, Mozambique, and Zambia, highlighting the challenges and strategies involved in establishing a stable and convertible African currency.