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September 8, 2015

Potential Impact of Glencore's Decision to Review its Katanga Mining Operation

Katanga Mining has suspended production of both copper and cobalt for up to 18 months as part of a business review of its operations and expenses amid a challenging environment for commodities
Jack Bedder Senior Analyst for Cobalt at Roskill provides comment…
“On Sunday, it was announced that Glencore’s Katanga Mining (KML) had started a review of its business, including operations and expenses, in light of the challenging environment for commodities. The review could result in up to 18 months of suspended production. Considerable media attention has been paid to the potential impact on global copper production but what will be the effect on the cobalt market?”
KML operates a major mine complex in the Democratic Republic of Congo (DRC), producing refined copper and cobalt. Its two key mine sites are the KTO underground mine (60Mt grading 4.65% Cu and 0.58% Co) and the KOV open-pit/underground mine (111Mt grading 5.37% Cu and 0.41% Co).
KML’s Kamoto concentrator consists of four milling and flotation sections with a design capacity of 7.5Mtpy. The concentrator processes ore from the KTO mine. KML’s Luilu solvent extraction/electro-winning plant processes sulphide and oxide concentrate from the Kamoto concentrator. Constructed in 1960 and expanded in 1972, this facility is capable of producing 175ktpy of copper and 8ktpy of cobalt metal. Cobalt metal production totalled 2.8kt in 2014, a 21% increase on 2013 levels, and 1.8kt in H1 2015, a 79% increase on H1 2014 levels, owing to increased grades and volume, together with improved recovery rates. Material is shipped to Europe, Asia and the USA.
The temporary closure of KML could have a considerable impact on the market as the operation is an important source of cobalt hydroxide and metal to the international market. With reduced output also expected from ENRC’s Chambishi smelter in Zambia in the future, suspension of KML’s operations could compound fears over African cobalt supply.
This development comes at a time of falling cobalt prices and may serve as the catalyst that many are waiting for to reverse this trend. Cobalt prices have fallen over the past year. Prices as reported by Metal Bulletin averaged US$15.08/lb in Q3 2014, US$14.21/lb in Q4 2014 and US$13.93/lb in Q1 2015. Prices in Q2 averaged US$13.86/lb, just below Q1 levels, and will average around US$13.00/lb in Q3.”
Roskill will be factoring the likely impact of this news on the cobalt market outlook in its forthcoming Q3 cobalt briefing. This quarterly service, launched in 2015, provides insiders, observers and investors with the latest news, data, analysis and short-term supply/demand/price forecasts, enabling faster decision making.
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