The consequences of ending Cobalt production in the southern part of the Democratic Republic of Congo, one of the world’s largest mines have a major impact on the country’s economy and on the population.
This is a major blow to the employment sector in the Democratic Republic of Congo with the cessation of cobalt production announced for 2 years by operator Glencore.
More than 3,000 people are now unemployed, while the Swiss giant is accused by activists of wanting to take advantage of the global drop in the price of this mineral to obtain a revision of the mining code and avoid tax.
To this end, the company closed the Mutanga mine, which produces nearly one-fifth of world production, pending a further increase in the price of cobalt.
Earlier this month Glencore informed the Congolese government it was closing the mine, the government said it’s still formulating a response.
“There’ll be a fiscal impact, that’s sure,” said Nicolas Kazadi, President Felix Tshisekedi’s roving ambassador responsible for economic matters. “It’s very early to have a position or something detailed to say. We are analysing the situation.”
Mining companies have argued the Congolese government should lower royalties on cobalt production but to no avail. The levy was hiked to 10% from 3.5% in November when then Prime Minister Bruno Tshibala gave it a new classification as a “strategic mineral.”
For resource companies operating in Africa, relationships with host governments are often fraught, as politicians seek to protect jobs and boost the tax take. Zambia is trying to liquidate the assets of Indian-owned Vendanta Resources as part of a multi-billion tax dispute. Tanzania slapped gold miner Acacia Mining with a $190 billion tax in 2017.
Glencore is the only one of the world’s main publicly-traded mining companies with a significant presence in Congo — as well as Mutanda, it operates the Kamoto copper and cobalt mine — and the country is slated to be Glencore’s main source of growth in coming years.
But investments in the African country have been marred by operational and political problems for Glencore and billionaire CEO Ivan Glasenberg.
The US Department of Justice is probing the miner’s activities in the country, where its former partner, controversial Israeli tycoon Dan Gertler, has already been sanctioned by Washington.
Glencore bought out Gertler’s shares in Kamoto and Mutanda, but without his support had less political clout in Kinshasa. The company clashed with the government of Joseph Kabila, Tshisekedi’s predecessor, over a new mining code.
Most importantly, the assets haven’t performed terribly well. Kamoto, where 43 illegal miners were killed in an accident this year, lost money in the first half of this year as costs jumped.