Kinshasha — Trafigura on Monday agreed a five-year cobalt supply deal with Congo’s state buyer under which the commodities trader will finance the creation of controlled artisanal mining zones, buying centres and logistics to trace supply.
The Democratic Republic of Congo houses around 70% of the world’s reserves of cobalt, crucial for the lithium-ion batteries used in the fast-growing electric vehicle sector.
Congo’s artisanal miners are the second largest source of cobalt worldwide after the country’s industrial mines. Consultancy CRU expects the country to produce more than 100,000 tonnes of cobalt this year or 71% of the global total, of which 8,000 will come from artisanal sources.
Trafigura’s supply deal — not exclusive — is a major step for Congo which established the Entreprise Generale du Cobalt (EGC) a year ago to help control artisanal supplies and boost government revenue through price controls.
Child labour and a lack of safety precautions in artisanal mining are behind many initiatives to formalise the sector.
“For our country to benefit from the intrinsic value of cobalt…it was critical that measures be taken to support the formalisation of this industry,” said EGC director-general Jean-Dominique Takis Kumbo.
The EGC, Trafigura, and non-governmental organisation Pact will ensure cobalt bought and marketed by Trafigura meets Organisation for Economic Co-operation and Development (OECD) responsible mineral supply guidelines.
George Heppel, analyst at CRU, said the deal is evidence that attitudes towards artisanal mining have shifted in favour of formalisation. “End-users have become more pragmatic about the role of artisanal mining in the supply chain.”
UNIQUE QR CODES
Trafigura’s head of corporate responsibility James Nicholson said the programme will likely start with five or six sites within state-defined artisanal mining zones, and would aim to start buying cobalt in three months’ time.
Nicholson declined to say how much cobalt Trafigura aims to buy through the agreement or how much Trafigura is spending. “It all hinges on Trafigura being confident that all controls are in place.”
A senior government official told Reuters the EGC plans to buy and sell to Trafigura and others $10 million of cobalt a month or more than 300 tonnes at current prices, with the aim of expanding to $50 million a month.
Trafigura will work with miners’ cooperatives, approved by Congolese authorities and working to OECD guidelines.
On-site controls will include the presence of Congolese regulators, oversight from Pact, and quarterly site reviews by UK-based supply chain consultancy Kumi Consulting. Cobalt will be bagged and tagged with unique QR codes to ensure traceability.
Higher artisanal cobalt supplies could help price stability, CRU’s Heppel said. Artisanal miners are a swing producer, typically producing more when prices are high and less when prices are low.
Industrial operators such as Glencore and China Molybdenum produce most of the country’s cobalt, but their mines employ far fewer people than more labour-intensive artisanal mines.
(Reporting by Hereward Holland and Helen Reid; writing by Helen Reid; editing by Pratima Desai, Ramakrishnan M, Jason Neely and Emelia Sithole-Matarise)