Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
The man was digging a toilet in his backyard when his shovel struck a shimmering blue vein of cobalt.
At least that’s the legend in Kolwezi. Once a few locals discovered the metal underfoot five years ago, everyone grabbed hand shovels and pickaxes; they tunneled beneath homes, schools and churches. And that’s how a working-class neighborhood, located on the edges of a densely populated city of half a million, became a hive of pits and tunnels.
“My neighbors started to dig in 2013 and I followed their lead,” said Edmond Kalenga, who went as deep as 20 meters (65 feet) under his home. “The minerals are like a snake moving through the village. You just followed the snake.”
All told, he made $12,000 selling the metal to local middlemen—a fortune in Congo where most people live on less than $1.90 a day. He built a five-room house in a new part of town. Others weren’t so lucky. Dozens were dying in the mines each week until officials banned the digging last April, according to local government estimates.
Once a few locals discovered cobalt underfoot five years ago, everyone grabbed hand shovels and pickaxes.
The Democratic Republic of Congo is by far the world’s biggest supplier of cobalt, the key ingredient in the rechargeable batteries needed to power everything from Apple Inc. gadgets to Tesla Inc. cars. For many in Lualaba province, where the richest deposits are found, digging for cobalt by hand isn’t a choice: it’s the surest way to earn a living.
Their entrepreneurial efforts, also called artisanal mining, accounted about 15 percent of Congo’s cobalt output in 2017, according to Darton Commodities Ltd. That’s roughly $1 billion at spot prices and it’s sure to grow as global demand surges. Even now, mining officials in Congo say the true figure is much higher.
The artisanal production puts corporate behemoths in a public relations bind. The pits can be dangerous and in 2016, Amnesty International found children involved in sorting, washing, crushing and carrying cobalt. Since then, major buyers have sought to avoid the informal mines, opting for international companies that run industrial operations, such as Glencore Plc. Some, like Apple, have begun work on verifying standards at artisanal mines and improving conditions. But progress has been slow.
In Kolwezi, the capital of Lualaba province, the government is trying something new: regulating the informal activity to show that it can be done safely. If successful, the initiative will protect thousands of livelihoods. It could also keep more of the revenue from cobalt production—currently dominated by foreign firms who repatriate profits—inside the country.
“The problem has been the same for 20 years—accidents were very frequent because the exploitation was done in a completely anarchic, unsupervised way,” Richard Muyej, the governor of Lualaba, said in an interview. “We’re finally going to do something about it.”
The stakes are high, he says. If the free-for-all continues and reports of child labor and “blood cobalt” from mines with frequent accidents persist, it could see international buyers avoid Congo’s cobalt completely, he says.
In Kolwezi, the capital of Lualaba province, the government is trying something new: regulating the informal cobalt mining to show that it can be done safely.
The effort that began about four months ago has relocated about 600 households as bulldozers razed the neighborhood of Kasulo, including the house where Kalenga lived. Excavators dug out individual pits and are steadily transforming the two-square kilometer site into a vast opencast mine.
The provincial government partnered with China’s Congo Dongfang Mining International, a unit of Huayou Cobalt Co., one of the largest manufacturers of cobalt chemicals for batteries. The company agreed to spend $12 million on machinery, safety and resettlement expenses in exchange for the exclusive right to buy ore from the site.
Each morning, miners line up at security gates, where officials check their identity and provide some basic safety gear. Alcohol is banned and pregnant women and children are kept out as police armed with rusty Kalashnikovs patrol the area. About 14,000 people have registered as miners at Kasulo, compared with an estimated 120,000 working the mines in and around Klowezi.
No deaths have been recorded since the project began, according to Serge Miji, an adviser to the local mines minister. It’s still risky work. There’s no official training, and digging and rock-breaking is done by hand.
In fact, the Chinese partner itself has a checkered history. It was identified as the main buyer of illegal cobalt in Amnesty’s 2016 report. The company has since taken steps to address those issues, according to Pact, a Washington-based non-profit that works with mining communities.
Congo Dongfang says it’s working to eliminate child labor, rather than stop buying from small-scale mines. Apple lists its parent, Huayou Cobalt, as an approved smelter.
“We are collaborating with the government and managing the situation,” said Long Yu, its project manager. “The pilot is working well.”
Muyej, the governor of Lualaba, has picked 12 more sites and is pitching the idea to companies that want illegal diggers removed from their mine sites.
The changes haven’t been universally welcomed. Some residents say they weren’t adequately compensated before their houses were destroyed. And then there are the middlemen who have been cut out.
At Musompo, just outside the city, where more than 50 buying houses line the main road, ore arriving from Kasulo aboard motorbikes, rusty bicycles and battered minibuses represents their lifeblood.
“Now we have difficulties finding products,” says Billy, who manages a trader called “Sans Teneur 100%.” He’s down to buying five tons of cobalt ore a month rather than 35 tons and loading one lorry instead of five to be sent onward to a factory.
Acknowledging such complaints, Muyej says he’ll let partnering companies purchase only half of the mines’ production and let middlemen trade the rest. The government is building 10 hangars to house the local traders.
Despite the efforts to bring order to the chaotic industry, the prospect of finding a small fortune in your kitchen or garden is as great as ever. Intensive digging has already restarted in Kasulo outside the mine walls. In one nearby area, miners followed a cobalt seam to a point under the main road heading west from the city, forcing the government to divert a kilometer stretch of the route to keep it from collapsing on the tunnels beneath.
“We really need to open the new legal mining sites very, very quickly,” Muyej said. “People are still digging inside their own homes,” he said. “The temptation is so great.”
By William Clowes and Thomas Wilson.
