ERG Will Halt Copper, Cobalt Output at Congo Mine This Month
(Bloomberg) -- Eurasian Resources Group Sarl will halt production at a copper and cobalt mine in the Democratic Republic of Congo, as it considers future investment in new production methods.
The shutdown at Boss Mining Sprl will curb cobalt supplies from a nation that accounts for three-quarters of global production of the metal used in rechargeable batteries. The suspension comes at a time of strained relations between Congo and investors after the nation last year introduced new taxes, including a 10 percent levy on cobalt exports.
Operations are being suspended while a feasibility study is conducted on building two processing facilities to treat ores at the site, ERG said Tuesday in an emailed response to questions. Boss is running out of easier-to-refine oxide ores that can be processed and the company will have to invest in new treatment methods to exploit the remaining sulfide deposits, a person familiar with the matter said.
“Boss Mining will be placed into care and maintenance from the end of February,” ERG said. “We are in discussions with the relevant labor unions and once these are completed we will be writing to employees directly.”
The company plans to dismiss 2,700 workers and the conditions of their departure are being negotiated, according to the person familiar with the matter.
A rapid surge in supply by Congolese mines last year outpaced demand by refiners and contributed to a collapse in cobalt’s value. The price has fallen more than 60 percent since it peaked last April at nearly $100,000 per ton on the London Metal Exchange.
Rival producer Glencore Plc is also considering plans to stop mining oxide ores at the Mutanda mine in Congo -- the world’s largest and richest source of cobalt. The company also plans to cut jobs at the mine.
Boss is a joint venture between ERG, which owns 51 percent of the Lubumbashi-based company, and state-owned Gecamines. Albert Yuma, the president of Gecamines, didn’t answer calls and emails seeking comment. Mines Minister Martin Kabwelulu said in an email he didn’t have any official information about Boss’s closing.
Yuma has repeatedly criticized Gecamines’ existing partnerships as too generous to international mining companies, yielding minimal benefits to the government and state miner in the form of profit taxes and dividends.
ERG and Gecamines in December concluded a second revision of their joint venture agreement, after the state mining company initiated international arbitration to secure more revenue from the project. Gecamines boosted its stake to 49 percent from 30 percent and ERG converted into equity more than $1.5 billion of intra-group loans granted to Boss.
Boss exported about 24,000 tons of copper metal and 33,000 tons of cobalt concentrate in the first nine months of last year, generating revenue of about $310 million, according to Mines Ministry data. The company’s concentrate production was equivalent to about 3,300 tons of cobalt in the whole of 2018, according to Darton Commodities Ltd., accounting for about 3.5 percent of Congo’s output.
ERG has three other mines in Congo, including the Metalkol Roan Tailings Reclamation project, which recently resumed operations and may become one of the world’s largest cobalt producers.
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