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Cobalt Prices Sink as DRC Delays Export Ban
Jul 30,2013 10:07CST
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Source:SMM
Prices for the metal saw an uptick after the ban’s announcement, but in the past couple of weeks they have begun to move downward

Thursday July 25, 2013, 4:00am PDT
By Charlotte McLeod - Exclusive to Cobalt Investing News

Making waves in the cobalt sector earlier this month was the Democratic Republic of the Congo (DRC), which revealed two weeks ago that it will be delaying a ban on the export of copper and cobalt concentrate until next year; the ban was originally intended to come into effect this month.

Instead, the country is pursuing an alternative that Moise Katumbi, governor of the DRC’s Katanga province, employed during 2010: taxation. Cobalt concentrate exports from the DRC will now be subject to a tax increase of $40 per metric ton (MT), according to Metal-Pages6. That means duties rose to $100 per MT on July 15.

As Cobalt Investing News reported, many are unsurprised that the ban is being pushed back. Aimed at encouraging miners to refine and process the affected metals within the DRC, since its announcement skeptics have stated that the region simply does not have enough electricity to run processing plants.

Prices for the metal saw an uptick after the ban’s announcement, but in the past couple of weeks they have begun to move downward.

Price update

Cobalt tetroxide prices in China began dropping last week, Metal-Pages reported, with mainstream transaction prices for cobalt tetroxide 73-percent grade sinking from 171,000 to 176,000 renminbi (US$27,868 to $28,683) per MT to 171,000 to 174,000 renminbi ($27,868 to $28,357) per MT. One producer based in Southern China told the publication that “[c]urrent offer prices are in disarray,” while another stated, “I am pessimistic about market outlook due to a lack of solid support from consumers.”

Since then, cobalt tetroxide prices have continued to fall along with declining European prices. As of yesterday, cobalt tetroxide 73-percent grade was trading in a range of 170,000 to 171,000 renminbi ($27,705 to $27,868) per MT.

Similarly, Chambishi 99.8-percent grade cobalt fell midway through July, dropping 2,000 renminbi per MT to a range of 203,000 to 208,000 renminbi ($33,084 to $33,898) per MT. Prices for the metal sat at 200,000 to 208,000 renminbi ($32,595 to $33,898) per MT on July 23.

Mainstream transaction prices for cobalt chloride 24.2-percent grade came in at 52,000 to 53,000 renminbi (US$8,475 to $8,638) per MT, down 1,500 renminbi per MT from the previous week, on July 18, while 99.95-percent metal produced in China is stable at 210,000 to 212,000 renminbi ($34,224 to $34,550) per MT, said Metal-Pages.

Company news

Freeport-McMoRan Copper & Gold (NYSE:FCX) informed its customers towards the end of June that as a result of electricity supply issues, deliveries of cobalt hydroxide from Tenke Fungurume Mining (TFM), located in the DRC, will be lower in the second half of 2013.

That production reduction, along with the overall situation in the DRC, could eventually result in a rise in cobalt prices, Metal Bulletin reported at the time.

Junior company news

Formation Metals (TSX:FCO,OTCQX:FMETF), which at the beginning of May halted work at its Idaho cobalt project due to the weak pricing environment, said on July 12 that the project is still its main focus and “warrants renewed attention” due to the fact that cobalt prices have risen 52 percent since December 2012. Project permits are being maintained and mining and milling equipment maintenance is ongoing, the company’s press release states. Additionally, optimization studies continue.

The news comes on the heels of the termination of Formation’s agreement to sell its Sunshine Precious Metals Refinery to Waterton Global Resource Management for US$9 million. The transaction had been vigorously opposed by Dundee (TSX:DC.A), a major shareholder in the company.

Global Cobalt (TSXV:GCO) closed an earn-in agreement with Imperial Mining Holding for up to a 100-percent interest in the Altai cobalt properties, located in Russia. Further, it closed a debt financing for proceeds of up to US$4.67 million with Imperial; it will use the funds to advance the Altai properties, for working capital and to repay its debts.

Erin Chutter, president and CEO of Global Cobalt, commented, “[w]e are very pleased to complete on this strategic acquisition as it positions us as first movers in a historic, mineral rich area of Central Asia with significant exploration and development potential. Coupled with the planned advancement of properties in Altai, Russia and Global Cobalt’s current share structure, management is optimistic about what the second half of 2013 will provide in terms of corporate growth.”

Fortune Minerals (TSX:FT,OTCQX:FTMDF) announced last week that the Tlicho government, along with the federal minister of aboriginal affairs and northern development Canada, has approved its Northwest Territories-based NICO gold-cobalt-bismuth-copper5 mine and mill. The decision allows the company to “complete the water licensing and land use permits process and to secure the primary permits required for the mine development.” Subject to the completion of project financing and the receipt of all applicable permits, Fortune anticipates beginning construction next year.

The company reported earlier this month that it is currently working with  Deloitte & Touche Corporate Finance Canada to find at least one strategic partner to finance the project.

 

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

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