Republic of Congo revokes iron-ore project deal with Australian miner in favor of Chinese-backed firm

The Republic of Congo’s government has terminated its contract with Australian miner Sundance Resources to develop the huge Mbalam-Nabeba iron-ore deposit, subsequently awarding three new permits to a relatively unknown Chinese-backed company.

In a November 30 decree jointly signed by President Denis Sassou Nguesso and four cabinet ministers, the government cited several reasons such as insufficient development and non-payment of rights to withdraw the contract for the iron-ore deposit that straddles both the Republic of Congo and Cameroon.

Instead, permits for three areas known as Avima, Nabeba and Bandodo have been awarded to Sangha Mining Development, a company based in the city of Pointe-Noire, according to the decree.

Congo’s iron-ore projects are estimated to hold at least 500 million tons of ore.

Sundance began operations in northern Congo in 2020 and has invested almost $300 million. The Australian miner has notified the government that it will dispute the withdrawal after hearing of the decision “through informal channels” earlier this month, CEO Giulio Casello said.

He further blamed the government’s failure to award an environmental impact certificate as the reason behind the company’s struggles to raise funds for the project.

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Under the current agreement, differences with the government are to be resolved amicably within 60 days, after which the company can bring the matter to a court of arbitration in London, Casello said. He declined to say which steps the company is planning to take.

Congo’s decision to revoke the agreement with an Australian miner in favor of a Chinese one can also be viewed through the lens of the brewing trade war between both global giants.

China has recently slapped tariffs on Australian barley exports as a punishment for Canberra advocating for a thorough investigation into the origins of the coronavirus pandemic. China also blames Australia for interfering in its sovereignty due to Prime Minister Scott Morrison’s government support for protestors in Hong Kong.

During the cold war, the Republic of Congo was in the Soviet bloc, and it enjoyed relative stability and economic progress unlike its neighbor and namesake Democratic Republic of Congo (then known as Zaire).

Between 1969 and 1991, the country was formerly known as the People’s Republic of the Congo, ruled as a Marxist-Leninist one-party socialist state.

Over the years, China has surpassed former colonial power France to emerge as the Republic of Congo’s largest trading partner.

In 2013, the Chinese company Sichuan Hanlong Group attempted $1.2 billion takeover of Sundance that would have given it control of the iron-ore project.

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