Democratic Republic of Congo (DRC) is set to earn more from mining, as it has now classified Cobalt and coltan, used in making batteries for electric cars, as well as other renewable energy technology, as strategic minerals. This means international miners will now pay triple what they used to pay per tonne of the metals sold.
The reclassification is part of DRC’s new mining code, which will increase royalties on the strategic minerals from 3.5 percent to 10 percent.
DRC finance ministry data showed that the country’s mining revenue grew 147.4 percent in the first nine months of 2018 — against the same period last year — to $1.21 billion. The new decree will see the country further grow its mining revenue, as demand for its minerals grows.
According to a report published by Transparency Market Research, the global lithium-ion battery market is expected to reach $77.42 billion by 2024, at a compound annual growth rate of 11.6 percent from 2016 to 2024, driven by increasing use of consumer electronic devices and growing adoption of sustainable clean energy in the automotive sector.
As the world battle climate change, governments of top world economies including France, China, the UK and Germany, have announced restrictions (or bans) on vehicles using internal-combustion engines. the International Energy Agency forecasts that there will be 125 million electric cars on the road around the world by 2030. Car manufacturers are responding, and are now investing more in developing electric vehicles. Many are doing this responsibly.
German automaker BMW has signed up to a pilot project to improve conditions for cobalt miners in DRC, their families and neighbouring communities. Up to a fifth of extraction in DRC is done by artisanal miners which, according to activists, is rife with human rights abuse, child labour, poor labour laws, as well as health and safety issues. Hence, BMW will be acquiring cobalt from mines directly. It has signed up to a pilot project that should improve the living and working conditions of miners at the selected mine site, their families and the neighbouring community in the DRC.
As responsible companies like BMW are looking to improve the lives of people in Congolese mining communities, the government also wants the country’s mineral wealth to improve people’s lives. The new mining code will ensure this.
However, international miners such as Glencore and Randgold, are not happy. While they are still trying to hold talks with the government concerning the new mining code, the miners may resort to taking legal actions against the DRC government.
The miners have in the past tried to fight the new mining code signed into law by President Joseph Kabila in March which saw royalties paid on cobalt rise to 3.5 percent from 2 percent, forming a group to fight the government as one. However, their efforts have been futile and the decree on strategic minerals dated November 24, signed by the Prime Minister, Bruno Tshibala is the latest government action the miners strongly oppose.
“These are issues, we don’t accept them – even the current royalty we’re paying under duress,” Glencore CEO Ivan Glasenberg said in an investor update on Monday before news broke about the new decree.
In October, Glencore reported cobalt production of 28,500 tons, up 44 percent year-on-year, for the first nine months of 2018. It expects to produce approximately 39,000 tons by the end of the year, a 42.3 percent rise over last year’s production. The company has also forecast a 74 percent increase in cobalt production between 2018-2021 to 68,000 tonnes, despite a setback at one of its unit Katanga Mining, after “unacceptable” levels of uranium was found in its cobalt exports.
Glencore and Co. keeping Congolese poor
Mining and hydrocarbons account for about 95 percent of Congo’s export revenues. The country is the world’s top cobalt miner, accounting for about 60 percent, and Africa’s leading copper producer. However, despite the country’s mineral wealth, poverty remains widespread.
President Kabila said at a mining conference in September that the mining sector was a growth driver of the economy. “However, my concern has always been to see this growth translated into the improvement of the daily lives of our population as a whole, naturally starting from those located in ore-producing areas.”
One of the major reasons the people of DRC have not really enjoyed their mineral wealth is corruption, fostered by international mining companies, which Congo’s state-owned miner Gecamines has blamed for the country’s lost wealth. At the middle of different allegations of corruption is Israeli Dan Gertler, a close associate of President Kabila, who despite being investigated earns millions from mines in DRC through companies he’s connected with. Gertler was Glencore’s major link to Congo until recently, when the company had to distance itself from him due to investigations bordering on corruption. Glencore has its share of corruption-related matters; it is facing legal pressure, including a probe by the US Department of Justice (DOJ) over allegations of corruption in the DRC.
Gecamines accused the international mining companies of under-evaluating the results of project companies in the DRC leading to the loss of $4.9 billion in revenues between 2002 and 2016. The state-owned company which holds minority stake in most mining projects in the country, is in support of the new mining code, claiming that it remains in the standards of the global mining industry and will not affect the profitability of the international miners that are crying foul.
Cobalt prices have more than doubled since the beginning of 2017 to trade at $33.5 a pound, according to Fastmarkets.