Critical Minerals To Play A Crucial Role In 2023
The ongoing conflict in Eastern Europe has highlighted Europe’s dependence on Russian gas, causing prices to rise for both individuals and businesses.
This has led to increased demand for a rapid shift towards a green economy, which in turn is driving the need for ‘critical’ minerals from the Democratic Republic of Congo, which holds some of the world’s largest reserves of these minerals.
In early 2022, President Tshisekedi of the Democratic Republic of Congo, along with the Presidents of Zambia and Rwanda, signed a joint declaration to promote value addition in Africa.
The goal is to create African-made batteries in DR Congo. As demand for battery metals in the US and EU continues to increase, this presents an opportunity for the Congolese government to push for partnerships that support national priorities and improve the lives of mining communities in the country.
Artisanal cobalt mining could play a key role in the Democratic Republic of Congo’s goal of creating African-made batteries. Artisanal mining is estimated to have provided 10-20% of the country’s cobalt supply in 2021, which could be used as a source of raw material for local processing.
However, to be able to sell cathodes on international markets, the production and supply chain must meet international sourcing standards.
This is important as most of the industrial mining operations in the country have long-term commercial agreements.
Adjusting to an evolving regulatory environment
As of January 1st 2023, companies in Europe’s largest economic powerhouse, Germany, must adhere to the new supply chain due diligence act, obligating corporates to conduct due diligence on their supply chains.
A similar EU-wide supply chain due diligence regulation is expected to soon follow suit, with a first draft having been shared in February of last year.
The new legislation broadens due diligence and compliance expectations to include minerals such as cobalt – imposing an expectation on downstream actors to ensure the respect of human rights across their supply chain, encouraging them to co-contribute to the creation of acceptable working conditions upstream of their supply chains – or else face significant fines.
Zooming into the artisanal mining sector, the US-based Responsible Minerals Initiative (RMI) is about to pilot the ASM Cobalt Criteria in partnership with the Congolese Ministry of Mines.
The criteria are designed to respond to the realities of ASM cobalt mining on the ground, structured as staged requirements co-developed in consultation with national and international civil society and industry actors.
Originally designed to help guide investment into artisanal mining, the framework aligns with the CTC standard governing the artisanal mining sector.
The Fair Cobalt Alliance (FCA) has been a party to this effort and is looking forward to seeing clearly articulated goals for artisanal mine sites to professionalize – conditional on their access to meaningful financing from international actors to enable and catalyze the adoption of best practices.
Investment is critical to harness the full potential of the ASM sector
The financing needed for such improvements is something that the Congolese Minister of Mines, Madame Antoinette N’Samba Kalambayi, drew attention to in November 2022. In a public announcement, she declared her Ministry’s ambition to mobilise $300 million in blended finance – both commercial investments and international grants – to drive investment into the artisanal cobalt mining sector.
Meanwhile, in early November, Madame Fifi Masuka Saini, the Governor of Lualaba province, signed a decree highlighting the provincial government’s ambition of operationalising and launching the Musompo Trade Centre. This regional trading hub for minerals originating from artisanal mine sites is set to open mid 2023.
As the race for valuable supplies of cobalt quickens, investment decisions will need to take into account shifting policies and strategies of countries that host these increasingly valuable resources. The recent developments in the DR Congo are aligned with the growing spotlight on social and governance issues related to the sourcing of critical minerals.
Without targeted investment into the sector, the challenges that exist in the artisanal cobalt sector will remain the same. Blended finance can be leveraged to facilitate improvements into the operational health and safety of artisanal operations, increase productivity and enable more dignified working conditions.
2023: a year of uncertainty with a promise of change.
The year ahead brings a level of uncertainty coupled with the promise for change. The global recession and record inflation are putting a strain on the international market, likely to slow down EV uptake – for many, still perceived as a luxury product. In this context, I would like to share three critical reflections for the year ahead:
One: As many industrial mine sites have ramped up production capacity over the last year in response to seemingly insatiable market demand, the market analysts foresee a slight oversupply of cobalt compared to global market demand.
While this temporary imbalance is forecasted to not last much beyond 2023, a cobalt price reduction will likely negatively impact the ASM sector. So far, we have seen the number of workers engaging in the sector fall drastically every time the market price goes down.
Two: A reduction in the workforce might have a silver lining, as it makes it easier to restructure mine sites and train the workforce. The efforts taken by the government to recruit finance and formalise trade may counter the effects of the market and keep the sector attractive enough for the estimated quarter of a million people relying on the sector.
Three: While there is still some uncertainty about what 2023 might bring, the world has clearly moved into a mineral age, and the importance of the DR Congo is undeniable. It is up to the international community to harness its full potential by seeking cross-sector partnerships and ensuring reforms in the mining sector to guarantee that mineral wealth translates to community prosperity for generations to come.
Source: faircobaltalliance.org
