Battery Metals

Cobalt Investing

The dust is yet to settle on the result in the world’s cobalt capital; analysts and operators say it’s too early to predict the impact.

In an upset, the Democratic Republic of Congo’s (DRC) electoral body has announced that opposition politician Felix Tshisekedi has won the presidential election held on December 30.

On Thursday (January 10), the National Independent Electoral Commission (CENI) reported that Tshisekedi, the leader of the Union for Democracy and Social Progress party, had won the election with 38.57 percent of the popular vote, ahead of businessman Martin Fayulu and Emmanuel Ramazani Shadary — who was backed by outgoing president Joseph Kabila.

The dust is yet to settle on the result in the world’s cobalt capital — in fact, it is already being questioned in the rumor mill as a deal between Kabila and Tshisekedi. So far, analysts and operators are saying that it’s simply too early to say what impact it will have.

Fayulu, who according to CENI received 34.57 percent of the vote, called the result an “electoral coup,” while the Catholic Church in the DRC has also challenged the result, saying CENI’s numbers do not match its own polling. Meanwhile, both France and Belgium are casting their own doubts.

CENI reported that Kabila-backed Shadary won a meager 23.84 percent of the vote.

The period leading up to the election and the election itself to replace longtime president Joseph Kabila were fraught with controversy in the jurisdiction, which accounts for 58 percent of global cobalt production at 64,000 tonnes per year in 2017.

Market analysts, miners that operate in the DRC and investors kept a close eye on the DRC as it lurched through a turbulent election season, as market demand for cobalt — a key component in battery technology — keeps the world shackled to the Central African nation.

While disagreements over the result, which will be formalized on January 15, may cause unrest, Benchmark Mineral Intelligence does not foresee long-term cobalt supply disruption.

“In the event of civil unrest borders may be closed and small supply disruptions may be expected, [but this is] likely to be short lived and no impact to price,” said analyst Caspar Rawles.

He added that any new government will need exports to continue if it wants to earn royalties, meaning long-term disruptions are unlikely; however, existing mining contracts could be in for a revisit.

“With mining playing a key role in the DRC economy, and being a hot topic amongst the voting public, new government may look to renegotiate current mining contracts to be seen to fix the previous government’s dealings,” said Rawles.

He concluded that for the DRC, “uncertainty is the norm” and cobalt buyers will continue to buy despite the surprise result.

“The situation remains extremely fluid until the final result is confirmed.”

Chris Berry, founder of House Mountain Partners, said much the same: “my sense is that the results wouldn’t materially affect the cobalt market either way due to the overall uncertainty.”

The DRC has been drawing attention for its mining code from late 2017 to now — in 2017, the Kabila government revealed plans to claw back more royalties from the lucrative metal, which along with copper it classes as “strategic.” It was hit with an additional 10-percent tax, prompting fierce backlash from miners operating in the country.

The alliance of major miners pushing back against the code included Glencore (LSE:GLEN), Ivanhoe Mines (TSX:IVN) and Randgold Resources, which later merged with Barrick Gold (TSX:ABX,NYSE:ABX). But it was all for naught as Kinshasa stonewalled negotiations.

Whether a new government will have the desire to revisit the mining code is yet to be seen.

Through 2018, cobalt spent the year heading downwards in value from a high above US$40 per pound. As of early 2019, the metal was trading at US$19.

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Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.


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