Africa seeks more from mining: As demand for raw materials rises, African governments are looking to negotiate more profitable arrangements with mining companies.

Author:Collins, Tom
Position:MINING
 
FREE EXCERPT

For nearly six hours senior mining executives met privately with President Joseph Kabila in Kinshasa to debate the controversial mining code proposed for the Democratic Republic of Congo (DRC). Heads of industry giants like Glencore, Ivanhoe and China Molybdenum had all flown in for the meeting. The new code, they argued, would knock back development of the DRC's mining sector and dissuade international investment. Kabila disagreed. Two days later the president signed the code into law.

In the past 18 months tussles like these have been unfolding across the African continent. Rising commodity prices and ballooning market demand for minerals--especially base metals--have bolstered mining profits and African governments are looking for a greater slice of the pie. While this rebalance is long overdue, those in office must strike the delicate balance between securing a greater percentage of the proceeds and not spooking the miners.

Surging commodities

For the past year commodity prices have been gradually rising after taking a fall in 2015. In turn, the mining sector has seen an influx of activity and investment as companies seek to capitalise on the boom. Kevin Van Wouw, CEO of gold and copper miner Cradle Arc, points out that their Mowana copper mine in Botswana was profitable at anything above $1.50 per pound. The current market price for copper is around $2.50 per pound and the uptick has prompted the company to arrange a $10m loan to significantly ramp up production. "The higher the price, the happier everyone becomes," he says.

On the demand side, shifting consumer trends have seen prices rocket for certain materials. Cobalt, a metal used in long-life lithium-ion batteries, more than doubled in price in 2017. As consumer-driven trends motivate automobile manufacturers to turn to electric cars, which use batteries, cobalt is fast becoming one of the world's most coveted metals.

According to cobalt trading company Darton Commodities, 68% of the world's cobalt was produced in the DRC last year. Most of this is then shipped to China for processing and eventual sale to large technology companies and manufacturers. While supply and demand are currently balanced, trader Andries Gerbens from Darton Commodities predicts a market deficit in around 2020 as demand outstrips output. This presents an enormous opportunity for African governments if they are able to sufficiently ramp up output and take a greater share of the profits. Indeed, as...

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