Congo Launches State Cobalt Company With Trafigura Financing

(Bloomberg) -- A Democratic Republic of Congo state-owned company with monopoly rights to the purchase and sale of the country’s hand-mined cobalt announced the start of operations Wednesday.

Entreprise Generale du Cobalt will sell cobalt hydroxide under a five-year deal with trading house Trafigura Group, which also will provide financing for the Congolese company. Congo is the world’s biggest producer of cobalt, a mineral used in the lithium-ion batteries that power electric vehicles.

The cobalt industry has been criticized for dangerous working conditions at artisanal mining sites, where deaths and child labor are common. Despite its mineral riches, Congo remains one of the poorest countries in the world.

“Our mission is to defend our most vulnerable communities as well as to ensure that the Democratic Republic of the Congo, which has 80% of the world reserves of this strategic mineral, can continue to benefit from its significant natural resource wealth,” EGC Managing Director Jean-Dominique Takis Kumbo said in an e-mailed statement.

The company will choose its first pilot mining site in Lualaba province in the coming days, and it expects to begin production at the end of April, Takis said Wednesday in a virtual press conference.

Trafigura will help finance the creation and control of artisanal mining zones, ore purchasing stations and “all costs related to buying, transforming, and delivering of cobalt hydroxide to end buyers,” EGC said in the statement.

Cobalt has risen almost 70% in the last year and now trades at more than $50,000 a ton on the London Metal Exchange.

The Singapore-registered company is a longtime booster of cobalt sourced from artisanal mining, in contrast with competitors such as Glencore Plc, which promises cobalt free of artisanal sources from its two massive copper and cobalt projects in Congo.

“As long as you have the right controls in place, then, indeed, this material should be considered legitimate and is an important part of the chain,” said James Nicholson, Trafigura’s head of corporate responsibility. The company hired London-based Kumi Consulting Ltd. to provide quarterly monitoring reports on the EGC sites to buyers, he said.

Read: Trafigura Signs Deal to Fund Congo’s State Cobalt Venture

EGC is a subsidiary of state miner Gecamines, which will provide future artisanal sites from its own permit areas. The terms of its agreement with Trafigura haven’t been made public, and EGC eventually will work with other cobalt buyers.

Congo’s artisanal miners are responsible for as much as 20% of the country’s cobalt exports when prices are high, according to the ministry of mines. In 2019, amid lower prices, artisanal production dropped below 8,000 tons, representing about 8% of the country’s output, according to Darton Commodities.

The price crash was caused in part by an increase in illicit artisanal cobalt on the market, and the new state company will help monitor cobalt supply and better control world prices, Gecamines and EGC chairman Albert Yuma said.

“EGC will have the right to all cobalt produced on Congolese territory” from artisanal mines, Yuma said. Companies buying hand-mined cobalt from non-EGC sources eventually will have to cease their purchases if requested by a new regulatory body monitoring the export of strategic minerals, he said.

©2021 Bloomberg L.P.