CRU INTERVIEW: "DRC COPPER VYING FOR THIRD POSITION"

“DRC copper vying for third position”

Hamish Sampson, CRUExclusive interview with Hamish Sampson, Senior Analyst, Base Metals Team-Specialising in Copper/Cobalt in Africa at CRU in the UK. He is a speaker at the upcoming DRC Mining Week in Lubumbashi and will address the conference on: “Understanding the challenges affecting the copper/cobalt markets: How is DRC tracking?”

Please tell us more about your organisation and the work that you do in the mining industry.

My company is called CRUhttps://www.crugroup.com/ Our company specialises in mining, metal and fertilizer commodities, delivering business intelligence through analysis, prices, consulting and events. My role is that of a Senior Analyst in our Base Metals Team, where I’m a specialist on the supply side of the industry.

What in your view do you regard as the highlights for DRC’s mining sector and community during this past year?                                - The smooth transition of power from Kabila to Tshisekedi after the presidential elections at the beginning of the year. This will have reassured investors who want to see stability. 
- The commissioning of CNMC’s two new operations outside Kolwezi: LCS + Deziwa Mine
  o LCS – First major copper smelter to be built in the DRC 
  o Deziwa – JV with Gecamines that came online five-months ahead of schedule

What in your view are the main challenges in the industry for the new year?
- Power supply is perhaps the biggest concern given the droughts that we’ve had across parts of Southern Africa which will affect hydroelectric power output. The mining industry will need to be prepared for power shortages and higher tariffs which will impact their operating costs.

- Major political or legislative developments are a permanent challenge/risk for producers in this region. As demonstrated across the border in Zambia last year, with the 5% import duty on concentrates virtually crippling some of their producers and having repercussions in the DRC as well.

- Also related to this is the recent announcement of the formation of the EGC (enterprise generale du Cobalt), which has the power to completely monopolise all artisanal cobalt in the country. If executed properly, this has the potential to improve living conditions and purchase prices for artisanal miners, while also allowing the DRC government to capture a larger share of the value chain. But if executed poorly, it could cause bottlenecks in the supply chain which carry the risk of price volatility and supply constraints for end users.

The chart below, taken from our LME Week Conference in October 2019, illustrates how much supply from the African Copperbelt was removed from our forecasts between Q1-Q4, as the repercussions of the tough market started to be felt last year.

CRU Breakfast in October 2019 during LME Week London

And what opportunities in the DRC mining sector are you most excited about currently?
I’m always excited by the exploration potential that the DRC has to offer. Copper production has soared in the past decade, and as it stands, the DRC could be producing over 2.0 Mtpa within the next five years and vying for third spot in the global pecking order behind Chile and Peru.

We’re also very keenly interested in Chemaf’s new Mutoshi project, and the potential it holds in getting the industry to rethink artisanal mining as a sustainable source of cobalt.

What is your vision for the sector?
Like anyone, I would like to see the continued growth of the resources sector, but in a more sustainable fashion and with due consideration for all the stakeholders. This industry has the potential to improve the quality of everyone’s lives.

What surprises or delights you most about this sector?
Nothing particularly surprises me about this sector. Of course, I can be surprised to learn about a big discovery or an adverse policy, but experience teaches you to expect this from time to time. That’s not to say the industry isn’t evolving, as evidently it is, and it’s fascinating to learn about some of the innovative approaches being trailed and adopted by our peers. 

What is your message to current and future investors in DRC’s mining sector?
There are plenty of opportunities for investors in the DRC, however the inherent risks have spooked a lot of foreign capital (outside China) in recent years. If the new government manages to avoid too much meddling and helps to improve the regions infrastructure, then we can expect to see a flood of investment across this region.