Congo Moves to Monopolize About 25% of All Cobalt Exports

(Bloomberg) --

The Democratic Republic of Congo created a state monopoly for hand-mined cobalt as the government tries to exert more market control on the battery material.

People who extract cobalt from hand-dug pits with rudimentary tools, known as artisanal miners, will have to sell to a new company controlled by state-owned Gecamines, according to a previously unreported government decree dated Nov. 5.

It’s still unclear exactly how the new monopoly will be enacted and how effective it will be, but the change suggests the Congolese state wants to play a bigger role in cobalt production. The move also could affect refiners and traders, who may have to deal with Gecamines as a middleman.

The order is designed to allow Congo to control the whole value chain of the artisanal industry, according to the decree signed by Prime Minister Sylvestre Ilunga and Mines Minister Willy Kitobo Samsoni. The country has insufficient control over the price despite its strategic position, the government said.

Artisanal Mining

This could “hinder the ability of artisanal mining to balance the market,” said George Heppel, senior analyst at business intelligence firm CRU Group. “We don’t think the government can get material to market as efficiently” as the traders currently purchasing the ore, he said.

Heppel said Congo is most likely to exercise its buying rights when prices are high. Due to a supply glut of Congolese cobalt, prices have fallen nearly 70% since April 2018.

Cobalt is a key ingredient for the rechargeable batteries that power smartphones and electric cars and Congo is at the center, accounting for more than 70% of production. Most of the metal comes from large, mechanized mines operated by companies including Glencore Plc, but an estimated 200,000 people make a living digging copper and cobalt in the Katanga region.

Artisanal output soared when the cobalt price rallied in 2017 and early 2018, providing as much as 20% of Congo’s production, according to metals trader Darton Commodities. Congolese officials put the figure as high as 30%.

Ethical Debate

The ethical debate over artisanal cobalt has raged for years. In 2016, Amnesty International accused technology companies like Apple Inc. and Samsung Electronics Co. of acquiring the mineral from mines that rely on child labor.

Mining companies often say artisanal miners trespass on their private permits endangering themselves and employees, while diggers and their families claim they have mined the land for years and should have a right to access parts of the large concessions.

A separate decree, also signed on Nov. 5, established a regulator to ensure that no children are active on mining sites and license artisanal cooperatives. However, neither the regulator nor the Gecamines subsidiary have yet started operating.

Kitobo, Ilunga’s spokesman Albert Lieke, and Gecamines Chairman Albert Yuma and Director-General Jacques Kamenga didn’t respond to requests for comment.

“If the main driver by the DRC government is to formalize the sector and mitigate the various risks associated with ASM mining, then this could be a good move,” said Andries Gerbens at Darton Commodities. “But it comes across as more of a revenue-generating decree rather than anything else.”

The Gecamines subsidiary will have a monopoly for five years with the option of renewing the arrangement, according to the decree. While the state miner doesn’t have significant processing capacity, it’s authorized to establish partnerships or delegate to other companies.

The decree covers all artisanal production of minerals that Congo declared “strategic” in 2018, including coltan and cobalt. As Gecamines isn’t active in the coltan-producing area of Congo, it isn’t clear how the rules will be implemented.

To contact the reporters on this story: William Clowes in Abuja at wclowes@bloomberg.net;Michael J. Kavanagh in Kinshasa at mkavanagh9@bloomberg.net

To contact the editors responsible for this story: Gordon Bell at gbell16@bloomberg.net, Lynn Thomasson, Alaric Nightingale

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