For the next few years, the global cobalt market will continue to be dominated by the Democratic Republic of the Congo. Global mining companies will be forced to comply with an increasing aggressive government there, but Chinese investment into the strategic metals within the country will remain strong.
After implementing the Democratic Republic of the Congo's demanding new mining regulations on June 9, President Joseph Kabila's government has shown little interest in bending to mining companies' requests or suggestions. After all, Kabila's country has the upper hand, buoyed by continued Chinese investments, a lack of real competitors in the cobalt markets and a substantial share of other strategic metals like copper. The Congolese government will likely be able to force mining companies and manufacturers operating in the country to comply with its increasingly onerous demands — at least until alternative markets and technologies come online, which will take at least three years to emerge and more to fully diversify.
Mining company Glencore, in particular, has faced numerous additional court battles with the government recently. On June 12, Glencore agreed to a new deal with the state-owned Gecamines in order to maintain ongoing operations at Kamoto Copper Co., which is set to be country's largest copper and cobalt producer. The deal included both a one-time $150 million payment to Gecamines and a $5.6 billion debt-equity exchange. The end result: billions of additional dollars for the Congolese government over the next 10 years.
Then, on June 15, it was reported that Glencore will resume royalty payments to Israeli businessman Dan Gertler, which had previously been frozen. Since there are U.S. sanctions on Gertler, who has known ties to the Kabila family, for alleged corruption in his business dealings in the Democratic Republic of the Congo, Glencore will be making the payments in non-U.S. currency. The company publicly stated that it felt this was the only way to avoid seizure of both its Mutanda Mining Sarl and Katanga Mining Ltd. assets.
There are few options cobalt producers outside of the Democratic Republic of the Congo at the moment, and battery makers and automobile manufacturers are scrambling to obtain electric vehicle materials as demand is set to rapidly increase in the next several years. Even as Kabila's time in office is coming to an end, his government has been making moves to better exploit the country's metal and mineral resources by changing the terms of working there.
Kinshasa is further buoyed by continued Chinese investments in the mining sector. On June 11, Chinese conglomerate CITIC Metal Co. agreed to purchase a 20 percent stake in Ivanhoe Mines Ltd.'s mining operations, becoming the largest shareholder of the Canadian-headquartered mining company. Ivanhoe currently operates the Kipushi zinc and Kamoa-Kakula copper mines in the Democratic Republic of the Congo. In public, Chinese mining companies have joined their Western counterparts in speaking out against new mining regulations. But they likely will continue investing in the Democratic Republic of the Congo regardless of their continued opposition to the regulations, since ensuring control of the entire supply chain of battery technology is one of Beijing's major strategic goals.
Kabila's government knows just how strong of a position the Democratic Republic of the Congo holds within the international mining sector. And it will leave very little room for the sector to fight back against the country's new mining regulations. As Kabila works to ensure a succession plan is in place, the subsequent government will be operating with significantly more mining revenue, at least over the next couple of years.