Just wanted to chime in on subject of artisanal mining and exploitation by of conditions of poverty in DRC by certain trading houses and the word “ethical cobalt”.
Firstly this idea that the major producers will avoid the DRC due to labour conditions. The facts are the latecomer major automakers are in negotiation with Glencore. Glencore almost exclusively produces its cobalt in the DRC from mechanised mining. Existing major brands who have DRC cobalt in their products like Apple and Tesla conduct regular audits and communicate with their suppliers sources down at the mine level. I know this from my consultant who turned around the operations of three copper/cobalt mines in Katanga and had to deal with their rules. Apple previously supported artisanal sources as a way of supporting people of DRC but now wants zero artisanal ore. It is not hard to work with reputable partners in the DRC who follow the rules and there are a few reliable operations. We will be one of those and can expect extra attention as a result.
Secondly this idea that the majors will avoid the DRC due to political situation. Again the facts and their actions show otherwise. The huge shift to NMC chemistry and the subsequent ramp in cobalt demand means there is no other choice. It costs around $300-450/T to process and refine laterite ore to a battery grade chemical, it’s around $35-50/T for a DRC oxide ore body. It is not just about cost - it is about available supply. If you intend to build a multi billion dollar business with cobalt playing a role you need to have partners that can meet your schedule of a quick ramp up. Waiting 5 years for pilot plants and then 5 years to fine tune operations after spending $2-3B is just not happening. Not when there is leachable cobalt oxide ore at 30m in the DRC.
Third the economic reality of artisanal mining is that it is a short term phenomenon. Yes with cobalt being a small market today it plays a role. But not at scale. A conversation I had with a large tantalum miner in east DRC was instructive. They have been using 3000+ artisanal miners to hand mine and sort tantalum. Now after 10 years they are left with only low grade portions and unable to finance the plant and equipment to mine in bulk and deeper. For their next operation they will be skipping artisanal and going mechanised - for the superior economics. Then you have the issue of water. You simply can’t mine artisinally past 30m and the surface pods of ore are running out. For those small pits still in existence the long DRC wet season really slows things down. On top of this you have mineralogy. This idea of just pumping any ore through a plant doesn’t work so well in practice and output is not reliable. One mine owner I spoke to had a pit with 8% cobalt grade on average but 6-8 different cobalt minerals. This needs systematic diamond drilling and met testing to match the ore with a suitable recovery process.
What will the artisanals do for work? I have seen a success story at one operation where they transitioned them to agriculture on ground acquired and allocated to them by the mine owners, with training provided and a guarantee to purchase excess produce / cash crops. That is a great idea given DRC current reliance on food imports and abundant fertile agricultural land.
Now all the negative media about conditions in DRC is needed because the country has significant issues that need addressing and it will continue to walk a fine line between order and chaos that all young nations walk and it is unreasonable to expect them to resolve it alone. But the idea that we can walk way from the country and proceed with the electrification of transport and adoption of renewable energy is laughable. This is simply one of those unavoidable circumstances of living in a global village, we need them, they need us and it’s inescapable. You don’t need to be comfortable with investing in the DRC to recognise that basic truth of what Mother Nature gave them and didn’t give anyone else. Ignorance + Apathy =\= Ethical. Fantasy + Wishful thinking =\= Supply of cobalt at scale.
NZC Price at posting:
32.0¢ Sentiment: Buy Disclosure: Held
