Trafigura Signs Cobalt Offtake Deal with DRC Producer

Commodities trader Trafigura has signed a three-year offtake deal for cobalt hydroxide with one of the largest producers of cobalt in the Democratic Republic of Congo (DRC).

The agreement with Shalina Resources subsidiary Chemaf, which will run until December 2020, will allow Trafigura to increase its exposure to metals used in electric car batteries.

Chemaf is based in the DRC, the world’s top cobalt-producing country. Its total cobalt output reached 5,000 tonnes last year, but it expects production to increase to 7,000 tonnes in 2018.

“This offtake agreement will enable us to work together to transform DRC’s precious cobalt resources into jobs and fiscal revenues for the country, as well as to meet rapidly increasing international demand,” Shiraz Virji, chairman of Chemaf, said in a press release.

Part of Chemaf’s portfolio includes the giant Mutoshi concession in Kolwezi, a property containing a cobalt resource of approximately 300,000 tonnes. Chemaf is developing a processing plant at the site with capacity for 20,000 tonnes of copper and 16,000 tonnes of cobalt per year.

Interest in cobalt, a key element in lithium-ion batteries, continues to surge on the back of a strong demand outlook for electric cars. In fact, carmakers and technology companies continue to look for ways to secure long-term supply of the metal.

Last year, Trafigura acquired a 15.5-percent stake in Finland’s Terrafame, which produces cobalt, as well as nickel and zinc.

“If as expected electric vehicles account for an increasingly significant proportion of a growing global vehicle fleet from 2025, it will drive sharp rises in demand for nickel and cobalt,” Trafigura CEO Jeremy Weir said in the company’s 2017 annual report.

“That provides a very promising environment for our growing cobalt and nickel trading activity.”

The Switzerland-based trader is not the only firm trying to take advantage of increasing demand for electric cars by signing offtake deals with DRC-based producers. Chinese firms have also signed agreements with mining giant Glencore (LSE:GLEN), the world’s top cobalt producer.

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