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DR Congo cobalt growth prospects defy new controversial mining code

By Oscar Nkala

The Democratic Republic of Congo (DRC) will not lose its status and appeal as a global cobalt exporter despite the promulgation of a new mining code that has dampened relations between global mining houses and the government of President Joseph Kabila.

In its latest analysis of trends and the mining industry response to the adoption of a new mining code that raises taxes and classifies cobalt and other minerals as strategic assets, global geo-political intelligence and investment risk analysis firm Stratfor said battery producers will still rush to the DR Congo to secure supplies of raw materials to meet rising global demand.

Stratfor said despite the regulatory, political and security risk factors, investors will intensify the scramble for the DR Congo’s raw cobalt in order to satisfy demand from the manufacturers of batteries for “everything from smartphones to electric vehicles.”

“Right at the centre of this frenzy is the DRC, which holds roughly 50% of the world’s cobalt reserves. The price of cobalt has sky-rocketed over the past year, as numerous companies sought to negotiate long-term contracts with cobalt miners to ensure guaranteed access to the metal, which as an essential component for most lithium-ion batteries.

“With global cobalt supplies constrained, battery makers and other users are keen to ensure as stable a supply as possible, often in the form of long-term contracts. As demand for electric vehicles increases, battery makers and users of consumer electronics will compete with producers of batteries of new-generation cars to access cobalt supplies,” Stratfor said.

The firm noted the entry of US electronic giant Apple in the contest to secure future DR Congolese cobalt supplies as a sign of the intensified competition for the resource. Apart from Apple, South Korean battery maker SK Innovations and Chinese competitor CATL have also secured future cobalt supplies from the DRC.

The Chinese company, which specialises in automobile batteries, gained access to the DRC cobalt market through a partnership with Glencore, a global mining operator with vast interests in the DRC.

Stratfor concluded that despite reservations about the new Congolese mining code, high-level graft and investment risks arising from the deteriorating security situation blamed on militias and rebel groups, it will be long before the DRC loses its global appeal as the leading source of cobalt ore.

“Industry leaders will continue to tread a well-worn path to the African giant (DRC) in the short-term as the country will dominate cobalt supply for the next several years,” the firm said.

The DR Congo’s position as a leading global supplier of cobalt is also assured in default by the lack of viable, alternative suppliers.

“Alternative projects that do not carry the same amount of ethical or political risks as DR Congolese cobalt are in the works, but they are not yet (and perhaps never will be) able to replace Kinshasa’s capacity. Projects in Australia could benefit from close proximity to (markets in) China, while smaller projects in Canada are likely to begin operations in the next three to five years.

“Accordingly, the country (DRC) will remain an unavoidable quagmire for mining companies interested in exploiting global cobalt demand. Yet the promise of its riches will continue to entice investors, and because of this attention, the country’s political future will remain of particular interest to mining companies,” Stratfor said.

Further, the firm believes that while some Western-owned mining companies may opt out of the DRC to protest the new mining code in the long-term, the entry of well-resourced Chinese companies in the cobalt extraction industry can offset the possible impacts of an investor exodus.

Post mining code cobalt scenario

An analysis of investor trends and developments in the DR Congo copper-cobalt mining sub-sector shows that the scramble for future cobalt resources has only intensified following the adoption of the new mining code.

Nzuri Copper – Kalongwe copper cobalt project

Among the new investment is a newly announced A$4 million exploration budget by Nzuri Copper Limited. The budget, announced on April 3, covers 7 250m of reverse circulation drilling at the Kalongwe high-grade copper-cobalt project.

The concession also holds high promise of other rare metals that include zinc and lead.

Fe Limited – Kasombo copper-cobalt project

In an announcement on March 14, 2018, Cape Lambert Resources Limited said its subsidiary Fe Limited has intersected further high grade mineralisation at the Kasombo Copper-Cobalt project.

The company is now pursuing a share placement to raise an estimated US$2 million to fund the next stage of exploration and preliminary developments at the same project.

DR Congo losing the mining ethics war

Despite the DRC’s assured position as the global supplier of cobalt, ethical issues around the exploitation of child labour in cobalt mines have given rise to a new push for global dealers to accept only mineral products from stable and ‘law-abiding’ countries of North America.

Following the publication of damning reports which alleged that children as young as 5 years of age were being forced to work under slavery conditions in DR Congose cobalt mines, producers in North America have started positioning themselves as ‘ethical’ resource alternatives to the DRC.

In March, Canadian cobalt miner International Cobalt Corp said it was positioning itself to capitalise on the anxiety of tech companies which are increasingly concerned by the worsening political instability and ‘justice issues’ in the DR Congo.

In a statement, the company said political instability and the adoption of a new mining code  deemed unfair by most industry players were forcing consumers to seek alternative sources from small suppliers in the US and Canada.

The company noted that although there are no active cobalt producers in North America at present, the Blackbird District of East-Central Idaho in the US has the potential to replace the DR Congo as the major source of global cobalt supplies.

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