Katanga Suspends Cobalt Exports from Kamoto Mine in DRC

Battery Metals

Shares of Glencore’s Katanga Mining, which produces cobalt and copper, declined more than 30 percent after the news.

Glencore’s (LSE:GLEN) Katanga Mining (TSX:KAT) has suspended cobalt production at its Kamoto mine in the Democratic Republic of Congo after finding high levels of uranium in the ore, the company announced on Tuesday (November 6).

Shares of the cobalt and copper producer declined more than 30 percent after the news.

Katanga said it plans to build a US$25-million ion exchange system to remove the uranium found in its product, which exceeded the acceptable levels for export through main African ports.

If the company receives the necessary permits, it expects to commission the system by the second quarter of 2019.

About 1,472 tonnes of finished product has been impacted by the suspension. The company will continue to mine and sell copper from the site, while stockpiling cobalt until it finishes the ion exchange plant.

As a result of the suspension, Katanga forecasts revenue in the fourth quarter of 2018, and the first two quarters of next year will be affected.

The news comes at a time when cobalt prices have been on a downturn due to several factors impacting market sentiment, including increased supply, despite a positive long-term demand forecast for the metal used in electric car batteries.

Benchmark Mineral Intelligence analyst Caspar Rawles told the Investing News Network earlier this year that the market was probably waiting to see what happened with prices before any big purchasing was closed.

After the news, Rawles said the timing for cobalt production issues at Katanga seemed opportunistic as Glencore is negotiating hydroxide supply deals for 2019.

Meanwhile, analysts at Eight Capital said in a note they expected the news to have negative implications on the stock, “although some of this impact might be mitigated should cobalt prices rise in response to today’s news.”

Top cobalt producer Glencore, which owns the majority of Katanga Mining, has previously said it expected sales of around 65,000 tonnes in 2019, with Katanga making up around 34,000 tonnes of that.

The mine restarted operations almost a year ago, after halting production since 2015, with its output reaching 6,500 tonnes of cobalt this year as of the third quarter.

On Tuesday, shares of Katanga were down 24.22 percent in Toronto, closing at C$0.48.

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

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