Trafigura-backed Congo cobalt miner scraps sale to Chinese firm

Copper and cobalt producer Chemaf Resources Ltd. has abandoned a deal to sell itself to Norin Mining Ltd., in a potential victory for US efforts to loosen China’s grip on mineral-supply chains.

Chemaf, which is backed by Trafigura Group, informed creditors that a proposed takeover by a unit of Chinese state-owned arms manufacturer Norinco Group won’t go ahead as the transaction hasn’t received the necessary approvals from the Democratic Republic of Congo, according to a person familiar with the matter.

Congo’s state miner, which owns the key permit that Chemaf leases for its flagship cobalt project, has objected to the deal since it was announced nine months ago, claiming the right to approve a change of control over the license. Chemaf said in June that Congo was backing the sale, but ministers later signaled the government was against the acquisition.

While Chemaf produces only a modest volume of copper and cobalt, the aborted sale took on outsized significance as the US challenges China’s dominance over critical minerals’ supply. US officials have urged President Felix Tshisekedi’s administration to prevent the transfer to the Chinese firm, according to people familiar with the matter.

The deal with Norin would have seen Chemaf’s creditors, including Trafigura, repaid in full. It’s not clear whether any alternative buyers of the company, which still needs several hundred million dollars of investment to bring its main projects to fruition, would value it highly enough to do that.

Chemaf and Trafigura declined to comment. Norin didn’t immediately respond to a request for comment outside of normal business hours. Gecamines, Congo’s state-owned mining company, also didn’t immediately respond to a request for comment.

Republican members of the House Committee on Foreign Affairs last month posted on X that Congo’s leaders “must ensure that Norinco’s bid remains blocked” and China shouldn’t be given “another inch.”

Since February, Congo has been offering the US exclusive access to critical minerals and infrastructure projects in exchange for security assistance as it battles a rebellion backed by neighboring Rwanda. Congo’s mining industry, which is also the world’s top supplier of cobalt and the second-biggest source of copper, is dominated by Chinese companies.

Chemaf and Norin have decided to let the transaction lapse after their sales agreement expires on March 22, the person said, who asked not to be identified discussing private information. Chemaf has written to creditors, including Trafigura, to tell them that it’s engaging with Congo’s authorities to reach an alternative solution that maximizes the company’s prospects of repaying its debt, the person said.

Chemaf’s total debt stands at about $900 million, according to people familiar with the matter.

Isle of Man-registered Chemaf owns dozens of untapped mining permits and is building what could become one of the world’s largest sources of cobalt. That project stalled following a slump in prices that drove the firm to seek extra funds. However, if Norin had completed the Mutoshi mine, it would have increased Chinese control over production of the metal used in electric-vehicle batteries.

Norin is the world’s fourth-biggest cobalt producer, with its two mines in Congo accounting for about 3% of global output last year. China’s CMOC Group Ltd. is by far the biggest supplier of the metal from two assets in the central African nation.

Trafigura arranged a $600 million loan for Chemaf in 2022 to finance the upgrade of the existing Etoile operation and the construction of Mutoshi, which has been designed to produce 16,000 tons of cobalt and 50,000 tons of copper a year. The two metals are extracted alongside each other in Congo.

Chemaf – which is owned by businessman Shiraz Virji – said in June that the deal with Norin would enable the company to address its debt obligations and finish the development works. In 2023, a Congolese court granted the company’s main subsidiary a ruling that barred creditors from bringing claims against the firm.

Gecamines – owner of the Mutoshi permit – approached Chemaf with its own bid in October.

(By William Clowes and Michael J. Kavanagh)