The fate of Glencore’s mines in the Democratic Republic of Congo could determine who controls cobalt, a metal whose price has soared given its use in electric car batteries.
Glencore is the world’s largest supplier of cobalt, and is set to more than double its production by 2020. But its operations in the DRC have been challenged by Israeli billionaire Dan Gertler, the company’s former business partner, who was sanctioned by the US in December.
Mr Gertler, who the US accused of “ opaque and corrupt mining and oil deals” in the Congo, last month launched legal action against Glencore for failing to pay him royalties under existing contracts.
Glencore has also been taken to court by the country’s state-owned miner Gécamines, who has accused it of draining money from its local joint venture, in which it owns a 20 per cent stake. Gécamines has a close relationship with Mr Gertler.
The tussles could cause Glencore to sell a stake in one or both of its DRC copper and cobalt mines, with the most likely candidates seen as Russian or Chinese companies, according to analysts. Bringing in a partner could help Glencore mitigate against future risks in the resource-rich country, where elections are expected later this year.
But it would also bring another player into the cobalt market, just as global carmakers are looking to lock up supplies of the metal to meet ambitious plans to increase electric car production.
Glencore has so far sold most of its cobalt production to China, striking deals with its largest battery maker CATL as well as battery materials producer and recycler GEM Co.
That would give China an even greater hold over global cobalt supplies just as its battery companies are scaling up production. CATL is about to raise $2bn in a Shenzhen listing and has agreements to supply batteries to Volkswagen and BMW.
Analysts at Deutsche Bank reckon Glencore could command a premium for its assets. They value Glencore’s two mines in the country — Mutanda and Katanga — at $9.7bn.
Others warn there is a risk of forced asset sales should the legal disputes remain unresolved. That outcome is seen pushing up the price of cobalt and raising costs for global battery makers — limiting the ability of electric cars to compete with their gasoline rivals.
Source: FT.com
