Essential Power…Infinite Possibilities

September 27, 2017

Everyone wants cobalt, few want to get tangled up in the world's largest producing nation

Publisher: Quartz Africa

Author: Lynsey Chutel

For too long, the Democratic Republic of Congo has known no competition in the cobalt market, to its detriment. The metal, which used to be just a byproduct of nickel and copper mining, is fast becoming one of the core ingredients of our technology-driven lifestyles. The instability in the DR Congo, however, is driving some investors to look to much smaller but more reliable cobalt sources.

Earlier this year, Canada began to notice the makings of a cobalt rush, starting in the town of Cobalt, Ontario—named for the mineral that was discovered there. More than a century ago, the region was the site of an old-fashioned silver rush, but its resources were soon eclipsed by Africa’s offering. Prospectors are again returning to the town of Cobalt: By May this year, more than a dozen mining companies had staked their claim in the Canadian town, the Northern Prospectors Association told Canada’s CBC .

One of those is First Cobalt, a Toronto mining company. In mid-September, the company said it would be pulling out of DR Congo just months after it signed a deal over copper and cobalt prospecting in the country.

“The DRC remains very appealing geologically but the investment climate has deteriorated since the strategic alliance was announced and we have significantly expanded our footprint in Canada,” the company said in a statement on Sept. 18.

“With the signals we’re getting, why would we invest our scarce dollars in a country that may not respect our investment rights?” First Cobalt CEO Trent Mell told Quartz, saying those questions are better answered in the early stages of the deal.

Without divulging details of why the deal fell apart, Mell said African governments could be rather myopic when it came to policies and mining rights for international prospectors. The world has only recently started paying attention to cobalt, and is only now actively looking for cobalt in new locations like Scandinavia, Russia and of course Canada.

“I don’t think in 10 years the Congo is going to be as significant,” said Mell.

Not everyone is writing off the DRC just yet. First Cobalt’s prospective partners, Johannesburg-based Madini Minerals is sticking it out.

“We maintain that if you want to become a player in the cobalt market, you need to be in the DRC,” said Mandini Minerals’ Ilja Graulich. After the setback with First Cobalt, they’re looking for new partners, Graulich said in an email to Quartz.

“The risk is all political, but political risk is a very subjective view that people take,” said Graulich. “The DRC has had a more stable investment legislation than many other countries.”

The DRC’s mining industry may be chaotic, but it is consistent. Nearby Tanzania, Zambia and South Africa are all “tinkering“ with their mining codes, says Graulich. Tanzania in particular has hit diamond and gold miners with hefty fines.

The DRC produces more than half of the world’s cobalt, eight times more than it’s closest competitor. Yet, it remains one of the world’s poorest countries because only 6% of the revenue garnered from mining exports make it to the national coffers. Decades of looting have left the state-owned mining company, Gécamines, barely operational.

Much of the demand for cobalt, roughly 49%, is driven by batteries, in cellphones and increasingly self-driving cars, according to US Geological Survey (pdf). Last week’s Volkswagen put out a tender for a direct cobalt supplier for ten years from 2019. That makes the one of the largest procurement projects in the automotive industry, VW said, signaling a $24 billion shift to electric vehicles.

Despite the policy uncertainty, the DRC is still the world’s main source for cobalt, more than the combined output of rest of the world’s producers. Most investors won’t give up on the country, just yet.

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September 14th, 2017, Cobalt Shifts from Metal to Chemical Market
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