BMW to Source Cobalt Directly From Australia, Morocco Mines

(Bloomberg) -- BMW AG will buy cobalt directly from mines in Australia and Morocco to ensure the metal purchased for its electric vehicles is sourced responsibly, according to the head of procurement at the German automaker.

The measure comes as the London Metal Exchange carries out a supply-chain review to address concerns that cobalt stored in its warehouses may be linked to child labor. The supply of the commodity, mostly mined in the Democratic Republic of Congo, faced scrutiny in recent years as humanitarian groups said it’s being produced in unethical conditions.

The newly sourced metal will be used in BMW’s next generation of electric vehicles that will be built from 2020, Andreas Wendt said at a briefing in Paris on Tuesday. The company won’t buy directly from small-scale Congolese mines in the short-term, he said.

Mines in Morocco and Australia “operate in line with our sustainability standards and there are no issues with working conditions such as child labor,” Wendt said.

Congo last year produced more than two-thirds of the world’s cobalt. While the commodity is mainly extracted from large industrial mines by companies including Glencore Plc, about 17 percent is dug by hand by thousands of miners operating in the southeastern Katanga region, before being sold on to intermediaries, according to trading house Darton Commodities Ltd.

Glencore Mine

Glencore will supply cobalt to BMW from its Murrin Murrin mine in Australia, a spokesman for the mining and trading group said by phone, declining to elaborate on volumes and other terms of the contract. This deposit is the largest source of mined cobalt in Australia, yet its production was less than a 10th of that from Glencore’s deposits in Congo last year, according to Darton.

The current situation at non-mechanized Congolese sites, known as artisanal mines, is “simply not compatible with our sustainability standards,” Wendt said.

Belgian battery-materials manufacturer Umicore SA said on Tuesday that an inflow of cheap, artisanal cobalt from mines that use child labor is distorting market prices and putting the company at a competitive disadvantage. Umicore in 2004 pledged to only tap bona fide sources of the metal.

BMW set up a three-year project late last year with Samsung SDI and the German government’s development agency in southeast Congo to improve working conditions at a single pilot mine. Should it prove a success “and can be transferred to other small non-industrial mines over the long term, sourcing cobalt from small mines could then become an option for us,” Wendt said.

In the meantime, the Australian and Moroccan cobalt will help BMW “achieve better long-term supply security and price stability,” he said.

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