Cobalt: More changes at the top at Katanga Mining

Mark Davis was appointed CEO this week, replacing Jeff Gerard who had only been in the position since May. Gerrard had replaced Danny Callow, who had held the role since January, having taken over from Johnny Blizzard. Blizzard resigned in December 2018 as part of the company’s settlement with the Ontario Securities Commission.

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Mr Davis takes over towards the end of what has been a challenging two years for Katanga Mining and Glencore’s wider African Copper unit.

Last year saw a court case over unpaid royalties with Israeli businessman Dan Gertler, the discovery of high uranium levels at Katanga, and the introduction of new 10% mining royalties on cobalt in the DRC. This year has seen challenging financial results and a tragic mining accident near to the KOV open pit mine, operated by Glencore subsidiary Kamoto Copper Company (KCC), in which more than 40 artisanal miners perished.

In August, based on its “carried internally sourced priced cobalt exposure of 10.3kt” and “a significant decline in hydroxide payabilities” Glencore reported related EBIT losses within its Marketing segment of approximately US$350M during H1 2019. Q3 results, released earlier this month, showed that cobalt revenue decreased to US$48.2M in Q3 2019 YTD from US$323.0M in Q3 2018 YTD. The decrease was a result of the temporary suspension of exports and sales from November 2018 to April 2019 (because of high uranium levels) as well as sales deferrals due to the mechanical breakdown of dryers.

While the uranium issue hasn’t disappeared, and the medium-term impact on processing capacity is uncertain, reports suggest things are improving. An aggregate of 97% of the cobalt hydroxide produced in Q2 and Q3 2019 complied with international transport regulations (compared to 30% in Q1) and was also below the acceptable limit of contained uranium allowed for export through main African ports.

Katanga also reports that cobalt de-bottlenecking schemes at KCC are progressing, although they are expected to continue throughout 2020. The objective is to upgrade the existing cobalt plant design in order to reduce bottlenecks through modification of the precipitation, thickening, filtration, drying and bagging processes. This will align the design of the cobalt plant with the average life-of-mine cobalt production plan of 30ktpy Co.

Filter press commissioning is complete, as is commissioning of a magnesium oxide plant. However, full drying capacity won’t be reached until 2020. Only at this point will KCC be in a position to export dry cobalt production, including that from processing accumulated cobalt inventories.

Current guidance for Katanga is 16kt this year and 29kt in 2020, which will elevate its output about that of Tenke Fungurume and, with Mutanda suspended, make it the largest operational cobalt mine in the world. Thus, its ramp up rate, and output in 2020 and beyond, will have a considerable impact on future market balance.

Roskill’s Cobalt: Outlook to 2029 report was published in August 2019. Click here to download the brochure and sample pages for the report, or to access further information.

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This article was written by Jack Bedder. Please get in touch below if you wish to discuss further:

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