A Bloomberg article suggests that Trafigura Group has been forced to seek new funding for its Mutoshi project owing to spiralling costs and weak cobalt prices.

Last year, Trafigura announced a US$600M loan for Shalina Resources’ Chemaf. The funds were to be used to complete the mechanisation of the Mutoshi mine, including a solvent extraction-electrowinning (SX-EW) processing plant in Kolwezi and the expansion of Chemaf’s Etoile SX-EW processing plant in Lubumbashi. At the time, Trafigura said it intended to syndicate the majority of its financing to international banks and that it would market the cobalt hydroxide produced from Chemaf’s assets. However, according to Bloomberg's anonymous sources, the project has overshot its budget and can’t be completed with the current loan facility, leaving Trafigura to seek additional funding of upwards of US$200M.

Mutoshi’s development has been far from straightforward. The project comprises two deposits, Mutoshi North and Northeast. Chemaf initially set out to develop the project as an ASM operation, employing a cooperative on a pilot basis. In 2018, Trafigura entered into a three-year marketing agreement with Chemaf for cobalt hydroxide. A component of the agreement provided for Trafigura’s ongoing support to Chemaf in building the company’s ability to manage social and environmental impacts across its operations. Trafigura engaged PACT (an NGO) to support Chemaf in the ongoing maintenance of a Responsible Mineral Sourcing programme in line with Trafigura’s standards.

However, in response to COVID-19, operations at the Mutoshi Pilot Project were suspended in March 2019. It was later determined that operations would not restart owing to changes in DRC law which saw the establishment of Entreprise Générale du Cobalt (EGC), a DRC state-owned entity responsible for the purchasing of all ASM cobalt. As a result of this development, the owners pivoted towards developing Mutoshi as a mechanised mine.

Mutoshi remains an important potential producer of cobalt in the DRC. The plant project has a potential production capacity of 16ktpy cobalt hydroxide (and 50ktpy copper cathodes). However, prevailing market conditions (and prices) make it a difficult time to advance the project. 

Project Blue expects the intermediates market to be comfortably supplied over the medium term, negating the need for many new projects. Project Blue estimates that there is still somewhere in the region of 40kt of cobalt in hydroxide overhanging the market, with some key producers (such as Glencore) able to increase output considerably if desired, and with some major DRC projects (excluding Mutoshi) set to enter production over the short-to-medium term. Meanwhile, the huge ramp-up of Indonesian HPALs continues to add more cobalt intermediate units, contained in MHP, to the market. 

It should be noted, however, that on a short-term basis, intermediates are tight in China, with major producers in the DRC looking to satisfy long-term contracts before offering spot material. What’s more, logistics issues (especially in South Africa), some of which are seasonal, mean that moving material to China takes time. These trends, and a pick-up in battery demand, have seen prices trend upwards a little in recent weeks.