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Trafigura Group Ltd To Invest In Cobalt Extraction And Processing In DRC

Updated: Feb 2, 2022

Africa | Manufacturing | Commentary | Democratic Republic of Congo January 19, 2022

(Photo: Downtown Lubumbashi, DRC)

Trafigura Group Ltd will invest $600 million in cobalt extraction and processing in Democratic Republic of Congo (DRC), reported some media on January 19, 2022.

According to the reports, Trafigura Group Ltd has inked an investment deal with Shalina Resources Ltd and Chemaf SA, by which the latter two firms will complete an ongoing mechanization of their cobalt and copper mine in Mutoshi, as well as build a cobalt ore processing plant in Lubumbashi, both in DRC’s Katanga Province, while the former will source and provide $600 million required for the two projects. Trafigura Group Ltd will also be responsible for export of processed cobalt (cobalt hydroxide) from the processing plant.

DRC seems to have now moved full-fledged in the right direction of ensuring that it benefits more from extraction of its vast natural assets alias natural resources, by stopping export of mineral ores and instead processing the ores locally first before any export is done. In so doing, DRC does not only earn more revenues from extracted mineral ores, but also creates jobs for its people. Export of mineral ores and raw forms of other natural resources like unprocessed timber, unprocessed coffee beans, raw cocoa, etc. implies voluntary giving away of revenues as well as export of jobs to importing countries.

In strict terms, because natural assets are owned by countries where they are located, profits after taxes and capital costs, emanating from sale of raw or processed products, should be shared between applicable countries and investors. While investors often contribute the bulk of capital costs of extraction and processing, contribution by applicable countries should be ownership of the natural assets in question. How the profits should be shared should be part and parcel of all mining investment deals, and could entail applicable countries having reasonable amount of shares in the mining firms of the investors involved, that could be up to 50%. Failure to do this, applicable countries will be allowing looting of its own natural assets.

We would elaborate further the above model of profit sharing as thus.

Investors don’t gain ownership of natural assets just because they have extracted and processed them. However, they can claim share or part ownership of extracted and processed natural assets from the country where the natural assets originate, because they incur capital costs and also create economic and social opportunities for the country during the extraction and processing endeavor.

Some African countries use this profit sharing model in their deals for extraction and processing of their natural assets, with investment firms. However, many of such countries take very low ownership stakes in the firms as if the naural assets do not belong to them, with most of the countries settling for about 15% ownership stake.

Only Botswana and probably a few other African countries, have made the right bold move of taking reasonable ownership stakes in firms involved in extraction and processing of natural assest hence benefited properly from its natural assets. For instance, the government of Botswana has 50% ownership stake in the country's sole private diamond mining and processing firm called Debswana. In this way, Botswana is said to have benefitted imensely from extraction and processing of its vast deposits of diamonds becoming one of the wealthiest nations in Africa. One wonders why other African countries are not emulating Botswana.

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