Shares in China Molybdenum (aka CMOC) jumped by 10% in Shanghai and 12% in Hong Kong on the news that the mining giant reached a deal with the Democratic Republic of Congo that will allow it to resume copper and cobalt exports from the Tenke Fungurume mine, one of the world’s largest sources of cobalt.
Twin disputes around Tenke Fungurume and patchy delivery of infrastructure as part of the DRC’s controversial Sicomines deal with China have strained Kinshasa’s relationship with China. Now, that seems set to change.
Soon after the deal was announced, the magazine Jeune Afrique reported that the DRC’s president Félix Tshisekedi will visit Beijing for the first time on May 26.
CMOC has been stuck in a months-long stalemate with the DRC’s state mining company Gécamines over allegations that it understated reserves at Tenke Fungurume.
Gécamines demanded $7.6 billion in royalties and interest. The dispute saw CMOC being blocked from exporting the minerals, which led to stockpiles of cobalt and copper worth an estimated $1.5 billion building up at the mine. Now that exports will likely start flowing again, the impact will be global:
The CMOC Deal’s Rippling Impacts:
- COBALT: The deal is likely to push cobalt prices down in the short term. Tenke Fungurume makes up about 15% of global cobalt production. Cobalt prices have fallen 60% over the last year due to weak demand for e-vehicles in China and additional supply from other mines. However, with consumer demand in China apparently returning more quickly than expected, this could change.
- DRC-CHINA TIES: Félix Tshisekedi’s upcoming visit could signal a deepening in the relationship, which now also includes defense ties. The DRC has acquired Chinese-made drones for use in its fight against the M23 rebel movement on its eastern border. There are also reports that the Chinese embassy in Kinshasa has committed to $27 million to help upgrade the DRC’s military.
- GEOPOLITICS: The deal is a significant setback to U.S.-led efforts to loosen China’s grip on the strategically important cobalt sector. An MoU between the United States, the DRC and Zambia on onshoring cobalt refining has so far stalled. China is set to control half of the world’s cobalt output in two years, and currently holds 77% of cobalt refining capacity, more than double its level five years ago.
WHY IS THIS IMPORTANT? The CMOC dispute has been a major hitch in both China’s relationship with the DRC and its dominance of the global cobalt market. The newly announced deal could change both those dynamics, but much will be determined by the fine print of the agreement.
SUGGESTED READING:
- Bloomberg: Chinese Miner Gets Congo Deal to Free Stockpile of Cobalt and Copper by Annie Lee
- Jeune Afrique: “Contract of the Century,” Security…Félix Tshisekedi to Visit China Soon by Romain Gras and Stanis Bujakera Tshiamala (in French)
