NEWS
NON-FERROUS   Precious Metals  

Miners find out the hard way why cobalt is called the goblin

Cobalt, a semi-rare metal that derives its name from the German word for goblin, was given its moniker by medieval miners who frequently came across its noxious ores in their hunt for silver and gold. After a 50% drop in prices this year, it’s turned toxic for Glencore Plc too.

After reporting the worst financial results in three years, the world’s biggest commodities trader is shutting its Mutanda copper and cobalt mine in the Democratic Republic of Congo. The move will remove about a fifth of global cobalt supply and send shockwaves through a market that’s awash with unsold metal, much of it in Glencore’s hands.

“The cobalt price today isn’t helping us, so why rush it?” Glencore chief Ivan Glasenberg said as the company reported earnings on Wednesday. “The only thing you can do that’s under your control is shut or reduce tonnages.”

While cutting back production when prices are low seems like an obvious strategy, it’s one that most companies are loath to try. Glencore and De Beers are the only mining majors with a track record of actively controlling their operations to pull a market out of oversupply. For other raw materials, like iron ore, the decision to keep resources in the ground is usually seen as a recipe to handing your competitors a bigger slice of the market.

The last time Glasenberg made a big cut to production was in late 2015, when the company slashed zinc output as prices were tanking. That maneuver helped create shortages and zinc prices surged 60% in 2016.

Shares in Chinese cobalt companies rallied on Wednesday as traders bet they’ll benefit from the higher prices caused by Glencore’s cutbacks. China Molybdenum Co., which also mines in Congo, rose the most in four years in Hong Kong.

For Glencore, the precipitous fall in cobalt is more bruising because the metal, a key ingredient for batteries, was its shining star back in 2017. The miner made its copper and cobalt assets a big part of its selling pitch to investors, touting the future boom in electric cars and global urbanization.

But the strategy hit pitfalls. Excess supply has overwhelmed demand for battery materials and because it’s a niche market, Glencore hasn’t been able to hedge its exposure to cobalt, leaving the metals trading business exposed to losses. To make matters worse, Glencore detected uranium in some cobalt last year, rendering it unsaleable.

To be sure, Glencore isn’t giving up on Mutanda entirely. It expects to bring it back online in 2021 and is looking at a new mine plan that could boost production over the long term. The restart might coincide with electric cars becoming more popular with consumers, which would boost demand.

That could leave Glencore’s traders on a strong footing as they negotiate supply deals with customers who pulled out of contracts when prices were weak. “People who have reneged on us in the past, of course they’re not going to be top of our list,” Glasenberg said.

Closing the mine is an easy decision to defend when it’s not making money, but it may get harder to justify if prices rebound, said Colin Hamilton, managing director for commodities research at BMO Capital Markets Ltd. Mutanda produced about 27,000 tons of cobalt last year out of a global total of around 135,000 tons, according to trading firm Darton Commodities.

“We’re not being OPEC. We’ve got an operation that wasn’t making money at these levels,” Glasenberg said. “You’re not going to run an operation that’s not making money.”

News No: 5832
Date: 2019/08/07 - 23:21
News Source: MINING.COM

Miners  cobalt  Glencore  gold  silver 

Comments:

Leave a Comment:

   
   
   
 

Leicester City Council with Alupro aims to increase citywide aluminium foil recycling rate

According to a recent report, Leicester City Council has teamed up with Alupro, the aluminium packaging recycling organisation, to help residents recycle more of their aluminium foil trays and wrapping foil.
 

Colombian authorities file claim against AngloGold Ashanti’s subsidiary

Antioquia’s Autonomous Regional Corporation Corantioquia filed an administrative claim that allows it to lay charges against Minera de Cobre Quebradona, a subsidiary of AngloGold Ashanti (JSE:ANG) (ASX:AGG) (NYSE:AU), in Colombia’s northwestern Antioquia department.
 

China’s Huayou pulls out of Congo cobalt mine investment after price slump

China’s biggest cobalt refiner Zhejiang Huayou Cobalt said on Thursday its overseas unit is pulling out a deal to invest $66.3 million in a cobalt mine in the Democratic Republic of Congo (DRC) after prices of the metal slid.
 

Avesoro regains control of Burkina Faso gold mine after security breach

West Africa-focused gold miner Avesoro Resources (TSX, AIM:ASO) has regained control of its Youga gold mine in Burkina Faso after being forced to halt operations last week.
 

Acacia Mining resumes gold exports from North Mara; processing remains halted

Embattled Acacia Mining (LON:ACA), Tanzania’s top bullion producer, has resumed exports from its largest mine in the country, but noted that ore processing is now officially halted, as a ban issued by the government last month has come into effect.
 

Anti-mining protests in Peru threaten $5bn Quellaveco copper project

Ongoing anti-mining protests in Peru, triggered by the recent approval of a now halted construction permit for Southern Copper’s (NYSE:SCCO) $1.4 billion Tia Maria project in Arequipa, have extended to Anglo American and Mitsubishi’s $5 billion Quellaveco project, in the neighbouring region of Moquegua.
Upcoming Events
Publications
 Mines & Metals

Mine & Business Today

 Scrap & Recycling

Ahangan

Our partners