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DRC artisanal cobalt 'vital' to market balance, but getting harder to track: Mining Week

London — Artisanal supplies from the Democratic Republic of Congo are vital to keep the cobalt market balanced, but have become harder to track and audit due to a higher incidence of local processing, participants in an introductory webinar to DRC Mining Week said June 9.

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"Since 2016, most artisanal ore is blended and processed into cobalt hydroxide in the DRC, making it harder to track and audit supply chains," said George Heppel, senior analyst, CRU Group, on the webinar organized by DRC Mining Week together with Mining Review Africa.

This contrasts to the situation before that date, when artisanally mined (ASM) cobalt was traditionally shipped directly to China in the form of concentrates, making it easy to trace, according to the analyst.

As ASM accounts for between 20%-40% of cobalt production from the DRC – which in turn supplies two thirds of total global production of the minor metal and employs as many as 200,000 people there -- "we can't ignore ASM," said James Nicholson, head of corporate responsibility of global trader Trafigura, a major buyer of the metal. Trafigura has set up a semi-mechanized pilot project, Mutoshi, together with local concession-holder Chemaf, the COMIAKOL cooperative and PACT, an NGO to formalize some ASM activities in the DRC.

"ASM has never been so important to the cobalt sector," Nicholson said. He added, however, that the market is now changing fast with financiers and institutions including the London Metal Exchange "increasingly articulating the need for mandatory due diligence" on the provenance of cobalt supplies as ESG concerns gain prominence in the mining sector.

Typically, the ASM supply chain has been opaque: individual miners often sell to local cooperatives, who sell on to local merchants and traders, then onto international traders, the webinar participants noted.

ELECTRIC VEHICLES

Cobalt is a key ingredient in batteries used in electric vehicle and mobile phones. Prices for cobalt more than doubled in 2017 to more than $75,000/mt after the Paris Agreement led the market to believe that EVs would quickly become the rage, and as copper production – cobalt is produced by major miners as a by-product of copper – failed to keep up with demand growth. With greater market stability, even despite COVID-19 mine and transport disruptions, its LME cash price is currently $29,500/mt, just slightly lower than its February average of $32,987.50/mt, its highest point so far this year.

ASM accounted for around 10% of 2019's global supply of around 15,000 mt of cobalt and possibly 20% of the world's minerals overall, according to the webinar participants.

"The world would have been in a gigantic (cobalt) deficit had ASM not increased in 2018, because non-artisanal supply shrank due to curtailed copper production in the previous year," Heppel said.

"ASM is never going to go away, even in its most unscrupulous form," he said, noting that visibility has increased on improving health and safety standards in the ASM sector.

For this reason, Trafigura is advocating the setting up of projects with local cooperatives to establish a formalized approach to cobalt production and sales, which can provide improved working conditions, notably for women miners, and regular pay.

However, this is not an easy task, Nicholson said. At Mutoshi "there are challenges every single day," he added.

Lazarre Potier, DRC country manager of US Agency for International Development told the webinar it would be ideal to link ASM miners in the DRC to large-scale industrial mines operating nearby.

"Not every ASM mine needs to remain as a full ASM in every case," Potier said. However, "the market needs to be stimulated to get the attention of investors to invest in the DRC."

Heppel referred to the growing added-value of ASM production. ASM production was originally exported as concentrates containing 6% cobalt and is now being exported as hydroxide containing 35%-40% cobalt.

"The next step for Central Africa could be production of cobalt sulfate but this will require a great deal of investment," he said.