The Democratic Republic of Congo's richest man wants to take control of cobalt

8
4 minutes

The Democratic Republic of Congo, the main source of Cobalt battery ingredients in the world, is also one of the poorest nations. And while it's dominated by large industrial mines, around a fifth of its silvery-blue metal is still hand decommissioned in often unregulated and dangerous conditions.

Jean-Dominique Takis Kumbo, the head of the new state cobalt buyer, is determined to change that.

His Entreprise Generale du Cobalt will have a monopoly on all hand-digged cobalt in the Central African country and give it power to improve the working conditions and potential control of almost 15% of the world's production. Takis says he hopes to gain a market share big enough to help affect cobalt prices the way Saudi Arabian Oil Co. or Aramco does with oil and ultimately boost profits for the state.

On the oil sector, you ca n't speak of Aramco, Takis, 61, said in an interview. EGC believes that Congo will introduce the image and identity of cobalt into the markets for those involved in Congo.

Congo accounts for nearly 70% of the world supply of cobalt used in the lithium-ion batteries that power most electric vehicles. The part that is hand-dug or common, has long been criticized for its dangerous working conditions, with deaths and child labor common. Concerns about the industry have prompted miners and carmakers to reassure customers about ethically mined supplies of metal- Tesla Inc. announced in 2019 that it wo n't buy metal from artisanal sources, and like BMW AG is among manufacturers backing initiatives to improve conditions at the sites.

EGC plans to use its monopoly to limit artisanal mining to monitored sites that will be approved to ensure they comply with safety and other standards. Once it's up and running, all other buyers of artisanal cobalt will have six months to shut down, said Takis.

The state company will produce about 8,000 tons of cobalt contained in hydroxide form in 2021, with the production expanding exponentially in the years to come, he said.

EGC is partnering with trading house Trafigura Group in a five-year deal to finance the creation and control of artisanal mining zones, ore-purchasing stations and costs related to buying, processing and transporting cobalt hydroxide to end buyers.

There's a long way to go to make that plan a reality, but there is still a long way to go to get there. Trafigura is still evaluating the investment required to prepare the first accredited mining site.

We expect a significant body of work to bring the site up to a level that meets the newly established EGC standard, said a Trafigura spokesperson on Thursday.

While the contribution of artisan miners to Congo ’ s cobalt production has at times reached 20%, it has dropped dramatically last year amid high prices, the impact of Covid 19 and increased industrial production, said Andries Gerbens, director of Darton Commodities, by phone on Friday.

While Gerbens expects artisanal output to increase as the cobalt price rises, an 8,000 ton target for 2021 is unrealistic and the possibility of EGC capturing Congo's entire artisanal market is at least in the short term unrealistic.

Cobalt prices have risen almost 70% in the past year and now trade at more than$ 50,000 a ton on the London Metal Exchange.

The operation of production would be limited first to a single site known as Kinshasa in Kolwezi, a town located 820 miles southeast of the capital, Kasulo.

Kasulo was once a residential neighborhood, but became famous when a resident discovered cobalt in his yard while digging a latrine. Thousands of artisan miners descended on the site, partnering with home-owners to dig up their plots in the hope of making it rich. The ensuing chaos kicked off a movement to formalize the artisanal mining in the country.

The initial investment to prepare the site will cost$ 15 million after which EGC hopes to have$ 7 million to$ 8 million available per week to purchase and process cobalt into hydroxide form, said Takis.

While Takis will prepare all of EGC's cobalt for market, the state company can sell 50% of the output for itself and keep it separately, Trafigura said. It is currently in talks with processing plants in Congo that treat artisanal cobalt to switch to EGC's products.

These production plants will, one way or another, conclude with EGC in order to continue to operate, he said.

For more articles like this, please visit bloomberg.com at bloomberg.com.

Subscribe now to stay ahead with the most trusted business news source.

  • Comments
Loading comments...