Trafigura and DRC's Shalina conclude financing, marketing deal on Mutoshi cobalt hydroxide

The Mutoshi mine, with the potential to become one of the largest cobalt and copper producers in the Democratic Republic of Congo, is set to start production in 2023 as a result of a financing and marketing accord set up with Trafigura, the global trader said Jan.19. Trafigura will market all the cobalt hydroxide produced at the site by DRC metals group Shalina Resources as part of the deal, it added.

The $600 million financing accord with Shalina Resources and its subsidiary Chemaf, a vertically-integrated DRC copper and cobalt producer, will facilitate a new supply of high-grade cobalt hydroxide and copper cathode at a time of growing global demand, Trafigura said in a statement.

The financing will enable completion of a fully mechanized mine operation at Mutoshi in Kolwezi, a solvent extraction-electrowinning processing plant also in Kolwezi and the expansion of the Etoile SX-EW processing plant in Lubumbashi to progress without delay, according to the statement. Trafigura intends to syndicate the majority of the financing to international banks. The agreements also provide for the marketing by Trafigura of all the cobalt hydroxide produced from these assets operated by Chemaf, which is expected to continue until the end of 2027.

Etoile is already producing copper and cobalt: however, the current production figures have not been released, according to a Trafigura spokesperson.

A source close to the company said Mutoshi is expected to eventually produce 50,000 mt/year of copper and 16,000 mt/year cobalt.

Etoile, in its phase 2, will produce 30,000 mt/year copper and 4,000 mt/year cobalt, the source told S&P Global Platts.

With the investment in mechanization, the Mutoshi project, with which Trafigura has been associated since 2018, will switch to industrial mining from responsible artisanal mining: potentially upgrading the DRC's image as a cobalt supplier.

The DRC holds around 70% of the world's reserves of cobalt, now widely used in production of batteries for electric vehicles. Surging demand in recent years as interest in e-mobility has grown has brought considerable volatility to cobalt prices. Some battery and carmakers have made moves to source cobalt from outside the DRC, or reduce their dependence on cobalt supplies overall due to fears of purchasing material from the DRC that may be linked with child labor or other practices no longer acceptable to supply chains increasingly governed by environment, social and governance issues.

Artisanal mining accounts for between 20% and 40% of the DRC's cobalt production, Trafigura has estimated. Most of the rest of the country's supplies are produced by major miners including Glencore and China Molybdenum.

The Mutoshi mine has "significant resource development upside," Trafigura said in the statement. "The new production will make Chemaf one of the largest cobalt producers globally at a time when demand for batteries for electric vehicles and copper for increased electrification as part of the energy transition is growing exponentially from customers across the world."

An important component of the transaction involves Trafigura working with Shalina and Chemaf, using their combined experience to enhance the management of social and environmental impacts in line with international standards including the OECD's 'Due Diligence Guidance for Responsible Supply Chains' and Trafigura's own responsible sourcing program, the global trader said.