One of the world’s largest miners made news recently when they announced they would halt production at the world’s largest cobalt mine. As prices for the crucial battery metal continue for fall drastically, it’s no longer become sustainable for the company to keep operating the mine.
Recently, Glencore has been moving to limit the fallout from this mine suspension, promising to keep paying workers in the area until the mine is officially closed.
The Mutanda mine, which is the source of around one-fifth of the cobalt used to make batteries in mobile phones and electric cars, will officially stop operations sometime by the end of the year and enter a pro-longed maintenance program until prices recover.
Considering that the country it’s located in, the Democratic Republic of Congo will end up losing all taxes derived from the operation, the decision is a disaster for one of the continents poorest economies. The mine in question provides around 3,000 jobs to local workers and provides over $600 million in taxes, accounting for over 10 percent of the government’s target budget.
In response to the potential political fallout, the mining giant will try to mitigate the response by offering to retain the local workforce as well as provide training programs so that they can find other jobs. Glencore’s management also announced that they would keep funding local hospitals and other projects near the mine to soften the blow of the projects closure.
“There’ll be a fiscal impact, that’s sure. It’s very early to have a position or something detailed to say. We are analyzing the situation,” said Nicolas Kazadi, President Felix Tshisekedi’s roving ambassador responsible for economic matters. “The suspension of Mutanda should put a floor under cobalt prices. This effectively removes the surplus we have in the cobalt market over the next couple of years,” added Colin Hamilton, an analyst at BMO Capital Markets.
This decision is just the latest in a series of setbacks for the company in the Democratic Republic of Congo. Following earlier scrutiny of its relationship with Israeli businessman Dan Gertler as well as higher taxes levied under a new mining code in 2018, Glencore has been struggling to made do with these difficulties. At the same time, the company has been under investigation by the U.S. Department of Justice over its practices in the African country.
Prices for cobalt have fallen by over 40 percent so far this year due to surging supplies from the DRC, which is the world’s top producer of the metal. However, now that the Mutanda mine, which produces around 200,000 tones of copper and over 27,000 tones of cobalt annually, is shutting down, prices are expected to drop significantly.
Specifically, Glencore’s Mutanda output accounted for one-fifth of the global cobalt supply, so prices should fall significantly over the next 12-24 months.
Glencore Company Profile
Glencore is one of the world’s largest commodities traders, active in markets for metals and minerals, energy products, and agricultural goods. The firm’s marketing business provides sourcing, logistics, transportation, storage, and financing services to commodity producers and consumers around the globe.
After the 2013 merger with diversified miner Xstrata, the company now ranks as one of the world’s largest commodity producers in its own right. Core exposures are in the production of thermal coal, coking coal, copper, zinc, nickel and ferroalloys. – Warrior Trading News