2018: Year of the Acceleration of the Modernization of Generale des CarriAres et des Mines (Gecamines SA)

The 2017 financial year has just ended with the concrete materialization of an awaited commitment: the inauguration, on 22 December 2017, of the modernized registered office of Geacute;camines (http://Gecamines.cd) in Lubumbashi, in the presence of the highest State authorities and institutions, led by the President of the Republic, His Excellency Joseph KabilaKabange.

This inauguration, a symbol of the transformation that Geacute;camines has been undergoing for some years under the auspices of its Board of Directors, presented the opportunity for its Chairman, Albert YumaMulimbi, to draw up an objective and uncompromising report on the activities of the company and to announce the major projects and challenges which await Geacute;camines for 2018.

1.Benefits Below What Was Promised

Finding that the overwhelming majority of partnerships which management has been entrusted to external partners by Geacute;camines present negative results, do not generate any dividends, and thus do not contribute to national development to the extent expected, Geacute;camines initiated, between 2015 and 2017, a series of audits of its partnerships with the help of leading international firms. The initial results of these audits reveal that they were managed at the expense of Geacute;camines, often through unacceptable accounting and management practices. Geacute;camines cannot content itself with such a situation for longer.

In 2018, Geacute;camines therefore intends to initiate a frank discussion with its partners and, as needed, demand a clarification of the agreements in place.

Furthermore, Geacute;camines is attentively following the discussions currently taking place in Parliament on the reform of the Mining Code of 2002, whosestated objective is to rebalance the sharing system of the mineral wealth of the DRC, one of the most advantageous in the world for investors. As a recent report of a financial backer in effect noted, the boom of the natural resources sector from 2007 benefited more to foreign investors than to the State and local producers, the choice to have recourse to multinationals operating in the formal sector thus not having generated the economic outcomes expected. It is now clear that the generous provisions of the Mining Code of 2002 do not allow the DRC to fully benefit from its abundant natural resources.

2.Redesigned Mining Partnerships

In the future, Geacute;camines intends to break with past schemes that do not fulfill their initial objectives, contrary to the content of the studies produced at the time.

Geacute;camines has thus chosen to follow a subsidiarity principle. It will only form partnerships for the operations that require the contribution of third parties and that will allow it to maximize industrial or financial return. Two innovative partnership schemes are currently the subject of pilot projects with leading partners:

A time-limited partnership scheme (also called BOOTrdquo;), based in particular on (i) the recovery of an operational and modern production tool at the end of a period agreed in advance, (ii) a more egalitarian distribution of shares, (iii) a real and increasing implication of Congolese executives in the steering of the project and (iv) an effective distribution of subcontracting in the best interest of the Congolese economic structure.

A mining production sharing scheme, inspired by the oil industry, thus allowing Geacute;camines to benefit directly from a part of the mining production, regardless of the financial results of the partnership, so as to guarantee to the Congolese that their wealth will effectively benefit them.

3.A Necessary Modernization of Gecamines

The desired transformation will only be able to bear fruits if Geacute;camines itself plays its role in the modernization effort that has been initiated. Between 2015 and 2017, Geacute;camines commissioned from various international consultant firms an audit of its industrial apparatus as well as an organizational audit.

The initial results of these audits are unquestionable: (i) its production apparatus, due to a lack of necessary investment over various decades, has become obsolete, uncompetitive and, often, inefficient and (ii) its industrial and institutional structure is no longer adapted to the reality of a globalized industry. Here again, Geacute;camines has been resigning itself before the magnitude of the task to be completed for too long. This situation can no longer persist.

As such, Geacute;camines has taken various strong decisions, including (i) the closure of its obsolete and dangerous sites, (ii) in the short-term, the concentration of its activities on its most profitable sectors, (iii) the investment in the certification of its reserves to prepare the future, which had not taken place for 25 years and (iv) the completion of a bankable study for the creation of a new plant.

Finally, the work conditions and methods within Geacute;camines must be revisited. Geacute;camines thus decided to initiate (i) a progressive modernization of its facilities, of which the inauguration of its registered office in Lubumbashi is only the first step, (ii) an organizational transformation so as to convert Geacute;camines to the best standards of the international mining industry, (iii) a global personnel training plan on the latest technological, legal and financial developments, unprecedented in the recent history of the company.

Geacute;camines intends to reclaim its destiny. As the Chairman of Geacute;camines emphasized, in the name of the Board of Directors, only the reconstruction of a strong national mining actor will be able to transform the wealth of the Congolese soil into wealth for the Congolese people.

Source: Gecamines SA.