Column: Electric dreams turn into a nightmare for battery metals
A sector that was once racing to build new supply has been closing mines and deferring projects as low prices bite into the cost curve.
China’s CMOC Group overtook Glencore to become the world’s largest producer of cobalt last year as it ramped up its new Kisanfu mine in the Democratic Republic of Congo.
The company’s production leapt by 174% year-on-year to 55,526 metric tons, accounting for over a quarter of global demand of 213,000 tons.
Kisanfu, in which Chinese battery giant CATL owns a minority stake, has flooded the cobalt market. The Cobalt Institute estimates global production exceeded demand by 12,500 tons in 2023, making it one of the “biggest surpluses in recent years”.
CMOC is unconcerned. It plans to lift output further this year despite a slump in the cobalt price from $40 per lb in May 2022 to a current $13.
Others can’t afford to be so sanguine. The price implosion has upturned project economics and undermined Western hopes of reducing dependency on China for a metal that is critical both to clean energy technology and military hardware.
But the West is now challenging China’s tight grip on the mineral riches lying beneath the soil of the Congo and its neighbour Zambia.
This new scramble for Africa comes with a post-colonial twist since both countries have ambitions to be major actors in the critical minerals race.
The clue is in the name. The Copperbelt straddling northern Zambia and the southern part of the Congo still contains some of the richest copper and cobalt deposits in the world.
KoBold Metals, a California-based metals exploration company backed by billionaires Bill Gates and Jeff Bezoz, claims its Mingomba project in Zambia boasts copper grades of around 5%, compared with under 1% for most big mines in Chile, the world’s top producer.
Few Western mining companies have until now ventured into the renascent Copperbelt, wary of the daunting mix of political risk, poor infrastructure and, in the case of Congolese cobalt, the ethical issues around artisanal mining.
Fewer still have lasted.
US producer Freeport McMoRan brought the Tenke Fungurume copper-cobalt mine into production in 2009. It sold its holding to CMOC in 2016, giving the Chinese company its first foothold in the Congo.
Freeport went on to sell CMOC the Kisanfu deposit in 2020 saying it was “no longer strategic” to its long-term growth.
CMOC quite evidently views the deposit very differently.
And Western governments also seem to be coming to the view that if you’re strategically short of energy transition metals such as copper and cobalt, there’s only one place to head.
Back to Africa.
The US International Development Finance Corporation (DFC) is planning to near double its financial commitments to try to de-risk mining in the Copperbelt.
The flagship investment so far is the Lobito Corridor project, which will upgrade the existing rail line from the Angolan port of Lobito to the Congo and then extend it into Zambia.
The aim is to link Copperbelt mines directly with the Atlantic Ocean, reducing both the cost and the carbon foot-print of the current trucking corridor to South African ports.
US and European government backing, it is hoped, will de-risk logistics for the private sector, a policy that has already borne fruit in the form of a six-year commitment from Ivanhoe Mines to use the upgraded rail line for copper exports from its giant Kamoa-Kakula mine in the Congo.
The United States Trade and Development Agency (USTDA), meanwhile, is funding a feasibility study into a new 200-megawatt solar power plant in Solwezi.
This will not only supply Zambian industry but has the potential to provide power for two critical mineral mines in the Congo, addressing another persistent problem for Copperbelt operators.
Infrastructure is just the start of the West’s re-engagement with the Congo and Zambia.
The DFC has “a very healthy” pipeline of critical minerals projects in the region, according to deputy CEO Nisha Biswal.
Japan’s Organization for Metals and Energy Security has just signed a memorandum of understanding with Congo’s state-owned mining company Gecamines for technical cooperation at every stage of the mineral supply chain.
The deal falls under the aegis of the Minerals Security Partnership, a US-led alliance of Western countries looking to reduce critical metals dependency on China and other problem suppliers such as Russia.
Gecamines has in recent years been a largely passive minority stake-holder in the country’s mines.
That is changing as the Congolese government looks to grab a greater revenue share of its mineral resources.
President Felix Tshisekedi’s government, which won a second term in December elections, is taking a harder line with some of the Chinese investment deals struck under his predecessor Joseph Kabila.
The amorphous mega deal with China’s Sicomines joint venture has been revisited with the Chinese partners committing to $7 billion in infrastructure spending and annual payment of 1.2% royalties.
CMOC itself was locked in a protracted dispute with the government over royalties, leading to a year-long suspension of exports.
CMOC ended up paying $800 million and, perhaps more significantly, agreed to translate Gecamines’ minority holding into commensurate physical metal offtake deals.
Gecamines sees this as a template for all its minority holdings and the Zambian government seems to be taking a close interest.
Gecamines has also just offered to buy three copper-cobalt assets from Eurasian Resources Group, which is part owned by the government of Kazakhstan.
The real game-changer, however, could be the Congo’s second attempt at formalizing its artisanal mining force, which collectively produces over 10% of the world’s supply of cobalt.
Entreprise Generale du Cobalt (EGC) was created in 2021 and given exclusive rights over artisanal production but failed to secure a suitable deposit to trial the scheme.
Gecamines will now transfer five mining areas to EGC in what is hoped to be the start of a transformational process of assimilating artisanal workers.
De-risking artisanal mining would be also be transformational for the Minerals Security Partnership, which desperately needs to find cobalt that’s not committed to Chinese buyers.
(The opinions expressed here are those of the author, Andy Home, a columnist for Reuters.)
(Editing by David Evans)
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