Global Cobalt

Richard (Rick) Mills
Ahead of the Herd

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As a general rule, the most successful man in life is the man who has the best information

Most of the world’s cobalt is mined in Africa and the majority of Africa’s cobalt comes from the Democratic Republic of Congo. The DRC represented about 55 percent of global mine supply in 2012 and the country contains almost 50 percent of known worldwide cobalt reserves.

The DRC wants miners to process all their mined ore in the country to encourage more value-added production. On April 5th 2013, the government gave companies 90 days to clear stocks and halt exports of unrefined copper and cobalt – export streams are to be switched from ores and concentrates to refined products.

“It (the export ban – editor) will be fully enforced by July or August in order to allow mining operators to re-adjust themselves. The government is fully aware that mining operators have electricity problems.”  DRC Mines Minister Martin Kabwelulu speaking to Reuters

The DRC has tried to impose such an export ban twice (in 2007 and again in 2010), imposition failed on both counts because of a lack of power in the country – the DRC suffers from acute electricity shortages despite a vast network of rivers.

Existing hydro plants, Inga I and Inga II, only produce about a quarter of their joint capacity of 1,700 MW because of low Congo River water levels and poor maintenance. Inga 3 wasn’t built because of concerns over the business climate in Congo. If the first phase, called Inga 3 Low Head does get built, South Africa will receive just over 50 percent of planned power output. The government actually expects power shortages to worsen in the coming years and that by 2020/21 there will be a power shortage of some 5,000 MW.

SFP Metals (UK) Limited, Cobalt Metal Production

The country’s frequent brownouts and blackouts, and an expected increase in electricity shortages, do not bode well for an increase in refining capacity. Already less than 10 per cent of the DRC’s 70 million people have access to power, and mining companies are scaling back production and expansion plans because of power shortages.

The news of the DRC’s impending export ban comes as the country is reviewing its mining code – the government is going to overhaul mining laws with an eye to boosting state revenues by increasing tax rates and raising the government’s minimum automatic stake in mining projects, proposals include:

• Enlarge governments stake from five percent to 35 percent in projects, the 35 percent would be “free and non dilutable”
• Increase royalties to gain greater state revenues from the sector
• Introduce a 50 percent levy, a windfall-profit tax, on miners’ “super profits” – when a commodity’s price rises over 25 percent compared with its level at the time of the project’s feasibility study
• Scale back the length of exploration permits to three years, from the four and five year permits available under the current code
• Exploitation phase of mining licenses to be reduced to 25 years from 30 years
• Companies be required to sign written commitments to protect the environment and help local communities
• Pay a capital-gains tax in the event of a takeover
• Projects, after production start, may no longer benefit from preferential customs rates on imports destined for use in mining