DRCONGO: Kabila declares colbalt strategic, raises tax from 2% to 10%
Cobalt to be declared a strategic mineral in Congo
LONDON (Reuters) – Democratic Republic of Congo will declare cobalt and coltan, used in electric vehicle and renewable energy technology, as “strategic” minerals which will earn the country higher royalties, an advisor to the prime minister said on Wednesday.
A new mining code was signed into law on Friday by President Joseph Kabila despite vigorous opposition by global mining companies with operations in Congo such as Glencore, Randgold and China Molybdenum.
Royalties paid to the government from cobalt and coltan mining will jump to 10 percent from 2 percent previously. Miners of the two metals used in batteries, would have paid a royalty of 3.5 percent under the new code if they had not been designated as strategic.
The government considers minerals with the “strategic” designation important for the economic, social and industrial future of the country.
“We need to make enough money before we run out of these minerals so that is why they are strategic to the country,” said Jean Nkunza.
“We have to make sure for the next 20 years we make money from these minerals because demand is going to be so high. It’s going to continue to grow and we are not going to stop raising the royalties on these minerals.”
Other “strategic” minerals on the list include lithium and germanium, Nkunza said.
Congo is the world’s biggest source of cobalt, the price of which more than doubled last year. The central African country is also Africa’s top copper producer.
International mining companies have said the new mining code will deter foreign investment but have agreed to start negotiations with the government over measures to implement the code.
The announcement by the prime minister’s office, however, appears to pre-empt those negotiations, which were due to determine, among other things, how metals would be classified.
The code also removes a clause that protected miners from changes to the fiscal and customs regime for 10 years and raises royalties and taxes across the board.
Low commodity prices in recent years hit Congo’s resource-dependent economy hard, causing inflation to swell to nearly 50 percent in 2017, and the government is desperate to increase its revenues.
Glencore signs massive cobalt sale deal with China’s GEM
Glencore Plc, the world’s biggest producer of cobalt, has agreed to sell around a third of its cobalt production over the next three years to Chinese battery recycler GEM Co Ltd, according to a filing by GEM on Wednesday.
Glencore will sell 52,800 tonnes of cobalt hydroxide to GEM between 2018 and 2020 as demand for cobalt, a critical metal in lithium-ion batteries, soars on a forecasted boom in electric vehicle sales.
Reuters reported last week that Glencore was in talks to sell around a quarter of its cobalt output in a one-year deal to GEM, according to sources. Price was a sticking point as the Swiss-based global miner and other major producers are now able to exert more influence in negotiations.
Expectations of supply shortages have fueled a cobalt rally that has taken prices to around $39 a pound, from near $10 a pound in January 2016 and to their highest level since July 2008, before the financial crisis started.
According to the filing, GEM and its subsidiaries will purchase 13,800 tonnes of cobalt hydroxide from Glencore in 2018. They will buy 18,000 tonnes in 2019 and 21,000 tonnes in 2020.
Glencore, whose cobalt is mined as a byproduct from its copper and nickel mines in the Democratic Republic of Congo, Canada and Australia, expects to produce around 39,000 tonnes of cobalt in 2018 – equal to about 35 percent of estimated global production.
Glencore expects its cobalt production to rise to 65,000 tonnes in 2019 and dip to 63,000 tonnes in 2020.