Chemaf Resources in DRC Seeks Buyer Amid Cobalt Price Slump
A mining company in the Democratic Republic of Congo, supported by commodity trader Trafigura Group, has put itself up for sale due to the declining cobalt prices that have left the company struggling to complete its key projects.
Chemaf Resources Ltd.’s expansion plans faced financial troubles, prompting the need for fresh investment. The company was aiming to construct one of the largest copper and cobalt mines in Congo and two new processing plants.
Last year, it secured a $600 million loan from Trafigura. However, Bloomberg reported in August that Trafigura sought additional funding for the project due to budget overspending.
Chemaf initiated a sale process in September, inviting interested buyers to bid for the entire company. Initially, they asked for non-binding offers by October 17, with a requirement that bidders also commit $250 million to $300 million for the project’s completion. The deadline was later extended.
While the priority is securing a capital injection, Chemaf remains open to other deals beyond a full sale. The company seeks a valuation of approximately $1 billion.
Chemaf’s main subsidiary in Congo operates under a “preventative settlement arrangement” approved by a local court in August, which allows the firm to restructure its debts while preventing creditors from making claims. Chemaf intends to conclude this process as part of any acquisition.
This development underscores the difficulties faced by Chemaf and the extent to which Trafigura’s investment has encountered challenges.
Chemaf Resources and its subsidiaries hold around $690 million of debt, including about $510 million from the loan arranged by Trafigura.
The document indicated that one challenge for the projects is the “existing debt not being available for full draw,” suggesting restricted access to the remainder of the facility.
Jeremy Meynert, an adviser for the deal, has been hired to help “realize value” for the company’s equity holders, debt holders, and off-taker.
Trafigura did not comment on the sale process, and neither TDB nor Congo’s Mines Ministry responded to requests for comment.
Chemaf has been planning to build a large plant in Mutoshi, Congo’s Lualaba province, capable of producing over 20,000 tons of cobalt a year since at least 2018.
The project experienced multiple delays due to a soft cobalt pricing environment, supply growth, and a slowdown in Chinese demand.
The company has invested over $570 million in the Mutoshi mine and an upgrade at its existing Etoile operation, which are 80% to 85% complete.
The funding gap is attributed to inflationary pressures in the global mining sector and the unavailability of the full loan.
Chemaf has asked potential buyers to disclose if they intend to restructure the company’s debt or modify Trafigura’s existing off-take contracts.
