Congo’s Gecamines Needs $160 Million to Cut 6,000 Mine Jobs

Jun 24, 2014 10:25 am ET

(Updates with copper price in 10th paragraph.)

June 24 (Bloomberg) -- Democratic Republic of Congo’s state-owned mining company said it needs $160 million to implement a plan to fire about 6,000 people, more than half its workforce.

Gecamines doesn’t have “the necessary funds to pay retrenchment packages” and this “means we continue with them on our payroll; it is quite a difficult situation,” Chief Executive Officer Ahmed Kalej Nkand said in a phone interview yesterday from Lubumbashi, capital of Congo’s mineral-rich Katanga province. “We don’t have a date yet when we will start this process. We are having some good discussions with people whom we think can finance this.”

Gecamines was once one of the world’s biggest copper miners, shipping as many as 476,000 metric tons in 1986, until years of mismanagement and war in Congo almost destroyed the company. This year it’s set to produce 60,000 tons of copper, an increase from 41,000 tons a year earlier, Nkand said in April.

The “collapse of production the company faced in the past wasn’t matched with a reduction in the number of employees,” Nkand said yesterday. “It has become very hard for the company and to maintain an equilibrium we have to reduce the workforce.”

Workers who went on strike last week at the company’s Kolwezi operations in the southeast of the country after they hadn’t been paid have been remunerated and are reporting for duty, Nkand said.

Wage Delay

“There was a delay in payment of wages but the workers have been paid now,” he said. “We experienced cash-flow problems this past month.”

Gecamines undertook a $43.5 million voluntary departure program for its staff in 2003 and 2004, according to the World Bank, which oversaw the cuts. The program trimmed 10,655 employees, or almost half the company’s workforce. Some workers complained that the action broke Congo’s labor law, that they were forced out against their will and weren’t paid the full amount due to them, according to the World Bank, which changed its policies on supporting voluntary departures in response to the complaints.

At the time of the reduction, Gecamines was more than $1.3 billion in debt and owed an average of 21 months’ salary to its employees, according to the World Bank.

Production Statistics

Congo was the sixth-largest producer of copper last year, according to CRU Group, and the largest producer of cobalt, a mineral used in rechargeable batteries that’s often mined alongside copper. Most production came from projects run by Phoenix-based Freeport-McMoRan Copper & Gold Inc., Baar, Switzerland-based Glencore Plc, and London-based Eurasian Natural Resources Corp. Gecamines has minority stakes in ventures with all three miners.

Copper for delivery in three months fell for the first time in eight days, slipping 0.1 percent to $6,878.25 a ton by 3:15 p.m. in London.

The company has yet to secure funding for its Deziwa and Ecaille C projects, which contain 4.85 million certified tons of copper and 401,900 tons of cobalt reserves.

“By the end of the year, we might start work on the processing plant,” Nkand said, declining to disclose the names of the potential funders.

--With assistance from Michael J. Kavanagh in Paris.