Glencore will axe workers at a key mine in the Democratic Republic of Congo, as it faces lower cobalt prices and higher costs under a new mining code.
The Swiss-based miner and trader is cutting expatriate workers at its Mutanda mine, the largest cobalt operation in the world, and also not renewing contracts for external contractors, according to people familiar with the matter. No DRC workers will be asked to leave, they said.
It comes as Glencore has taken a more pessimistic view on the development of Mutanda.
In its 2018 resources and reserves report, published this week, the company said it had reclassified an ore body at Mutanda to “probable” rather than “proved” because of the “uncertain political and increased cost environment” in the DRC.
Mutanda is one of Glencore’s core assets. It produced almost 200,000 tonnes of copper last year and more than 27,000 tonnes of cobalt, or a fifth of global supplies of the critical battery metal.
The company, which is run by billionaire trader Ivan Glasenberg, revealed in December that Mutanda was under review following drilling results that showed a faster-than-expected transition to a new type of metal bearing ore.
To process this material — and give Mutanda a mine life of 15 years — Glencore would need to invest heavily in new processing equipment.
The decision facing Glencore comes as cobalt prices have fallen to their lowest in two years because of ample supplies. It follows a contentious presidential election that saw opposition leader Felix Tshisekedi named as the winner, the first peaceful transfer of power in the country in 59 years.
Analysts hope to hear more about Glencore’s plans for Mutanda when it announces annual results this month. In its resources report, it said a feasibility study would be completed this year.
“An investment decision on sulphide mining and processing will be considered upon completion of the updated feasibility study,” the report said.
This will weigh several factors, including costs, returns, the outlook for prices and the political backdrop in the DRC, one of the poorest countries in the world.
Last year, Joseph Kabila, the DRC’s former president, signed into law a new mining code that increases royalties and taxes on international mining companies, especially on cobalt, which was declared a “strategic” metal because of its use in electric car batteries.
International miners have threatened to take legal action unless its concerns are addressed. So far the DRC has showed no signs of backing down.
Speaking at a major mining conference in South Africa last week, the DRC’s secretary-general of mining Joseph Ikoli said there would be “no more debate” on the code. “We must respect it,” he added.
Glencore has faced a string of problems in the DRC over the past year. This month, the ministry of mines told a subsidiary to stop work on a new plant that would allow it to resume exports of cobalt from its Kamoto project.
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