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(Bloomberg) — The Democratic Republic of Congo has suspended nine subcontracting companies working at mines run by Eurasian Resources Group, as the cobalt and copper producer faces fresh complications in the country. 

The government first announced the ban on March 14, alleging that the firms aren’t controlled by Congolese nationals as required by law. The regulator said Tuesday the sanctions are still in place, after meeting with Kazakhstan-backed ERG last week.

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ERG “must appoint real companies with real Congolese shareholders,” Miguel Kashal Katemb, director general of the Regulatory Authority for Subcontracting in the Private Sector, said by phone. 

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The allegations mark the latest sign of frayed relations between ERG and the Central African nation. The country supplies more than three-quarters of the world’s cobalt and is the second-largest copper producer, giving it an important role in the energy transition. The government says it’s striving to generate greater domestic benefits from its critical resources which are mined by international companies. 

State-owned miner Gecamines wants to take over some of ERG’s assets, saying the firm has been slow to develop them. The government has also halted activity at one of the company’s copper projects amid accusations of environmental damage. 

“ERG Africa’s policy is to comply with all applicable laws and regulations of the countries in which we operate, including local content legal and regulatory requirements,” a company spokesperson said. “We also require our business partners to comply with relevant applicable laws and regulatory frameworks and to adhere to the same standard.”

The company said a “substantial majority” of its expenditure in the nation goes to Congolese suppliers, adding that it is working with the regulator to ensure that its operations comply with local laws. 

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Project Shareholders

The latest measures affect firms with contracts at ERG’s two operating projects in Congo: Metalkol, which was the world’s fourth-biggest source of cobalt last year, and Frontier, which produced more than 100,000 tons of copper in 2023.

Output from the assets should be unaffected, because ERG is being provided with a transition period to bring in new companies, according to Kashal. 

Metalkol paid almost $180 million to the subcontractors in 2023, the regulator said, adding that the figure rose to about $250 million including other projects such as the Frontier copper mine.  

Legislation passed in 2017 reserves the subcontracting market for businesses majority-controlled by Congolese nationals. More than 50% of the shares in all the companies singled out by Kashal – including Etalon, Roche Solide and Surtek – are held by Congolese individuals, according to corporate filings. 

“These shareholders are just on paper, they are not in the operations, they are not managing the companies,” he said. 

ERG itself is 60% controlled by Alexander Machkevitch, Patokh Chodiev and the heirs of their late co-founder, Alijan Ibragimov. The Kazakhstan government owns the remaining 40%.

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Kashal took similar action in February at the Sicomines copper-cobalt joint venture – which is at the heart of Congo’s minerals-for-infrastructure deal with China. His agency ordered the removal of three Chinese subcontractors from the project.

Congo’s leaders made several attempts last year to regain potentially lucrative yet undeveloped permits from ERG, with Gecamines variously offering to buy some licenses, terminating the Swanmines joint venture and demanding the return of its permit for the Kalukundi copper-cobalt concession. ERG is fighting the cancellation in court. 

The government has also suspended the firm’s Boss Mining copper-cobalt mine since May, citing environmental and safety concerns.

In October, ERG announced an $800 million revamp of its dormant Comide project, which it said will produce copper and cobalt in Congo for about 20 years once a processing plant is completed next year.

—With assistance from Michael J. Kavanagh.

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