Trader Trafigura in talks with Congo over financing cobalt buyer

Trading house Trafigura Group is in talks with the Democratic Republic of Congo about financing a new state-controlled company that will buy all the African nation’s hand-mined cobalt.

Entreprise Generale du Cobalt will need about $80-million to $100-million to begin buying cobalt from artisanal miners, this was according to a source whose details were withheld as the negotiations in this matter were still private.

Mines Minister Willy Kitobo Samsoni said that the hand-dug metal accounts for a fifth of cobalt output in Congo, the world’s biggest producer of the essential ingredient in lithium-ion batteries for electric vehicles.

However Trafigura declined to comment. Kitobo didn’t respond to messages seeking comment, nor did Albert Yuma, chairman of state-owned miner Gecamines.

Gecamines set up EGC last year in a bid to influence cobalt prices and better regulate small-scale artisanal mining, long criticized for unsafe working conditions and its use of child labor. Warnings about long-term shortages caused cobalt prices to spike in 2017 and 2018, before slumping from too much supply. Lower prices cut production by artisanal miners last year, according to trading house Darton Commodities.

Congo supplies more than 60% of world cobalt production, mainly through industrial miners like Glencore and China Molybdenum. The new company will have a monopoly on the purchase of all artisanally mined cobalt ore, which it will sell to processing plants in Congo.

Trafigura already purchases artisanally mined cobalt in the country, and is funding a pilot project to formalize such digging at Chemaf Sarl’s Mutoshi mine.

“The project is by no means perfect,” James Nicholson, Trafigura’s head of corporate responsibility, Katanga wrote in a report on the project last year. But “it has delivered a notable social and economic impact at a local level,” he said.

More than 200 000 people make their living digging cobalt and copper in Congo’s southeast region, according to the report.

Drop in the volume of cobalt from artisanal mines in the DRC

The volume of cobalt from artisanal and small-scale mines in the Democratic Republic of the Congo dropped by around 60 percent last year after prices for the metal in the batteries leaped, according to trading house Darton Commodities.

Sector volumes have fallen below 8,000 tonnes, according to an annual report from Darton, which is about 8% of Congo’s mining production.

Falling demand for artisanal ore and falling prices led to an 80% drop in the income of artisanal miners between March 2018 and August 2019, according to an OECD report, according to Darton. According to the same source, volumes could increase in a better price environment in 2020.

Other key figures: * World production of refined cobalt increased 9% to 126,810 tonnes * Demand increased 5.8% to 122,600 tonnes * Production increased 7% this year, while the demand increased by 7.8%.