South Africa’s largest pharmaceutical manufacturer, Aspen Pharmacare, may have announced a relatively tepid set of annual results for the year ended 30 June 2019, but the anticipation of a reduced debt load freeing up cash flows pushed its share price up 12% the day after its results announcement.
DRC mining risks worsen as artisanal cobalt miners turn to copper
Artisanal miners in the Democratic Republic of the Congo (DRC) have been turning to copper following the slump in cobalt prices. That means security risks for miners in the DRC are set to intensify.
The DRC’s industrial miners are facing a “battle on all fronts”, says says Indigo Ellis, DRC analyst at Verisk Maplecroft. Artisanal miners shifting from cobalt to copper will mean that industrial miners will face more illegal incursions as the hunt for copper intensifies, Ellis says. “Industrial copper miners’ risk exposure will rise” as crackdowns by the DRC armed forces become more frequent.
Large-scale copper mining companies face local opposition because of high levels of unemployment in mining areas and the “common perception that firms do not allow communities to share in the benefits of resource wealth,” Ellis says. “Aside from regulatory challenges and depressed cobalt prices, the crackdown on illegal mining at industrial mine sites will increasingly threaten their social licence to operate.”
The DRC’s biggest copper miner, Chinese-owned Tenke Fungurume, told employees this week that it’s operating at a loss.
Mining security will be high on the agenda at China Molybdenum, which holds a controlling stake in Tenke Fungurume, after the Congolese army killed an artisanal miner at one of its mines in Lualaba province on August 18, Ellis says.
Lualaba is part of the former Katanga province in southern DRC and is the country’s most significant copper and cobalt mining area.
- June’s military deployments were just the beginning of a long battle between the army and illegal miners in Lualaba, Ellis says.
- Amnesty International in July called on the DRC to withdraw its forces from Lualaba, given their long history of excessive use of force and a “lack of appropriate training in managing public order.”
Poor price outlook
The difficulties faced by artisanal miners in the DRC in ekeing out a living are unlikely to be reduced by turning to copper. According to a note from Capital Economics in London on August 16, deteriorating investor sentiment will probably prevent any meaningful rebound in copper prices this year.
- Chinese demand for copper has weakened, and Capital Economics expects further declines in demand in coming months as construction activity tails off.
- That prompts Capital Economics to cut its end-2019 forecast for copper to $5,800 per tonne from $6,000 previously.
- Meanwhile, cobalt prices have started to firm after Glencore announced plans to freeze output in the DRC, but at around $30,000 per tonne remain well short of their peak levels around $100,000 per tonne in the first half of 2018.
Due diligence by mining companies in the DRC has been shown to have a real impact in improving security. The International Peace Information Service (IPIS) visited 623 DRC mine sites employing an estimated 115,500 artisanal miners between 2016 and 2018, before publishing its findings this April.
- The Congolese national army (FARDC) or irregular armed groups were present on 35% of sites and were interfering in 26% of them, the report says.
- There was a clear difference between the sites where due diligence programmes have been implemented and those which have no such programme.
- There was a military presence on only 10% of due diligence sites, versus 40% where due diligence is lacking.
- Abusive taxation by state officials was also less prevalent if due diligence was being carried out, IPIS found.
- Minerals supply chain actors need to support more comprehensive and systematic impact monitoring, the report says.
- Linking due diligence programmes to mining technical assistance and economic development programmes is critical: IPIS.
Bottom Line: Mining companies and the supply chain have it in their hands to improve the lives of those hunt for copper and cobalt in the DRC.