Singapore commodity major secures US$600m financing for DRC cobalt

Singapore-based commodities trading firm Trafigura plans to increase its sourcing of cobalt – a crucial component of renewable energy technology – from the Democratic Republic of Congo (DRC). In November, the company announced that it had secured US$600m in pre-financing for the Mutoshi and Etoile cobalt and copper projects in the southern part of the DRC.

The financing facility, arranged by the Trade and Development Bank (TDB), will enable the completion of the new mechanised Mutoshi mine and processing plant in Kolwezi, and the expansion of the Etoile project in Lubumbashi. Both ventures are operated by Chemaf Resources, a Dubai-based mining and processing company. Under its agreement with Chemaf, Trafigura will market all the cobalt hydroxide produced from the Mutoshi and Etoile projects. The Mutoshi mine, which will be the third largest cobalt mine in the world, is expected to begin production in the fourth quarter of 2023, with an annual capacity of 16,000 tonnes of cobalt hydroxide and 48,000 tonnes of copper cathodes.

The southern region of the DRC is rich in copper and cobalt, two metals that are critical for the transition to renewable energy. As a cost-effective conductor, copper is essential for capturing, storing, and transporting energy from sustainable sources such as wind, solar, and geothermal. The DRC is Africa's top copper producer, with an output of around 1.9 million metric tonnes in 2021. In addition, the DRC is believed to have about 50% of the world's known cobalt reserves, which are used in lithium-ion batteries to power a wide range of devices, from mobile phones to electric vehicles. The global demand for cobalt remains robust due to the rising popularity of electric vehicles. However, the provenance of material is becoming increasingly a matter of concern. While supply is sufficient to meet demand over the coming years, certain volumes may not be accepted by consumers. As a result, prices could diverge between ‘responsibly sourced’ metal and metal that fails to meet industry standards.

In addition to sourcing ‘green metals’ in the DRC, Trafigura is also investing in the transportation of these minerals out of the country. The company is part of a consortium that recently signed a 30-year concession agreement worth US$450m for the operation and maintenance of the 1300km railway line connecting the Lobito port in Angola to Luau, near the border of the DRC. The Lobito Corridor is a shorter route to the ocean for the DRC's metals exports, which currently go through the ports of Dar es Salaam in Tanzania, Beira in Mozambique, or Durban in South Africa. The group more than doubled its net profits (US$7bn) on the back of higher commodity prices. Africa, however, constitutes a very small proportion (less than 5%) of its energy and metals business.

 

References

‘Green metals: Copper is the new oil’, Goldman Sachs, 13 April 2021

‘Profiling the six largest cobalt reserves in the world by country’, NS Energy, 07 June 2021

‘Copper production in Africa in 2021, by country’, Statista, June 2022.

‘Shalina Resources Ltd concludes significant financing and marketing transaction with Trafigura enabling new supplies of cobalt hydroxide and copper cathode at a time of growing global demand’, Trafigura, 19 January 2022

‘Concession agreement signed with the Angolan government for rail services and logistics support for the Lobito corridor’, Trafigura, 09 November 2022

‘TDB closes landmark USD600 million syndicated mining transaction with Trafigura to boost the supply of metals essential to the energy transition’, Trafigura, 21 November 2022