China's CMOC, Gécamines reach resolution on DR Congo copper-cobalt mine

China's CMOC Group said April 19 it reached a consensus on royalty payment around its copper-cobalt project in the Democratic Republic of Congo with local mining company Gécamines, further improving Chinese access to raw materials critical for energy transition.

CMOC is the world's second-biggest cobalt producer and holds an 80% stake in the Tenke Fungurume Mining (TFM) copper-cobalt ore project in Congo. Congo's state-owned Gécamines holds the remaining 20% stake in the project.

The TFM project's progress got stalled in the third quarter of 2021, and later in July 2022 CMOC was restricted from shipping after the company was unable to reach an agreement with Gécamines.

CMOC conducted discussions with parties in Congo from Q3 of 2021 to boost mineral reserves and relevant royalty payments to its minority shareholder for the TFM project.

But TFM's exports were restricted from the third quarter of 2022, CMOC's annual report showed.

CMOC was asked to suspend marketing and exports from the TFM project in 2022 amid a disagreement on royalty payments.

Assuming production continued at full capacity throughout the export ban, the mine could be sitting on as much as 150,000 mt of copper and 15,000 mt of cobalt inventories.

TFM project

In order to further explore rich resources, boost copper-cobalt production and lower the operating costs of the TFM project, CMOC in August 2021 announced it would invest Yuan 2.51 billion ($365 million) to build three product lines with a total ore processing capacity of 12.4 million mt/year.

CMOC said these product lines are expected to come online in 2023. TFM mine is expected to see an increase of about 200,000 mt/year and 17,000 mt/year in copper and cobalt output respectively, after these product lines reach the designed capacity.

TFM has copper reserves of 7.89 million mt with an average grade of 2.84%, while cobalt reserves are estimated at 822,600 mt, according to CMOC.

The mine has been keeping a normal production routine since 2022 despite the dispute, with copper and cobalt output increasing 21.6% and 9.7% year on year to 254,286 mt and 20,286 mt respectively, CMOC's annual report showed.

Prices under pressure

Ahead of CMOC's statement on April 19, there had been market talk of a potential resolution, according to market sources.

"People are starting to reduce inventories, payables started to drift lower," said an international miner. "Prices will be under pressure in the short term."

Cobalt metal prices posted a consistent decline in the week to April 19 amid mixed sentiments surrounding the status of TFM.

Platts, part of S&P Global Commodity Insights, assessed the cobalt metal price at $16.15-$18.05/lb in-warehouse Rotterdam on April 18, down on the week from $16.75-$18.40/lb.

There was mixed feedback about the potential impact on sulfate and hydroxide prices, as sulfate prices continued to trade at historically low levels amid tepid electric vehicle demand.

"Considering how low prices are now, I don't think this would impact the market too much," said a Chinese refiner.

"I believe refiners are holding back in the market but this strategy could backfire, especially as the market is obviously oversupplied," a Chinese consumer cautioned.

Platts assessed battery-grade 20.5% Co cobalt sulfate at Yuan 35,500/mt DDP China April 18, down Yuan 100/mt on the week.