* Trafigura to buy cobalt from controlled artisanal mining
zones
* Five-year supply deal isn't exclusive
* Big step in Congo efforts to control artisanal mining
sector
KINSHASA, Nov 23 (Reuters) - Trafigura on Monday agreed a
five-year cobalt supply deal with Congo's state buyer under
which the commodities trader will finance the creation of
controlled artisanal mining zones, buying centres and logistics
to trace supply.
The Democratic Republic of Congo houses around 70% of the
world's reserves of cobalt, crucial for the lithium-ion
batteries used in the fast-growing electric vehicle sector.
Congo's artisanal miners are the second largest source of
cobalt worldwide after the country's industrial mines.
Consultancy CRU expects the country to produce more than 100,000
tonnes of cobalt this year or 71% of the global total, of which
8,000 will come from artisanal sources.
Trafigura's supply deal -- not exclusive -- is a major step
for Congo which established the Entreprise Generale du Cobalt
(EGC) a year ago to help control artisanal supplies and boost
government revenue through price controls.
Child labour and a lack of safety precautions in artisanal
mining are behind many initiatives to formalise the sector.
"For our country to benefit from the intrinsic value of
cobalt...it was critical that measures be taken to support the
formalisation of this industry," said EGC director-general
Jean-Dominique Takis Kumbo.
The EGC, Trafigura, and non-governmental organisation Pact
will ensure cobalt bought and marketed by Trafigura meets
Organisation for Economic Co-operation and Development (OECD)
responsible mineral supply guidelines.
George Heppel, analyst at CRU, said the deal is evidence
that attitudes towards artisanal mining have shifted in favour
of formalisation. "End-users have become more pragmatic about
the role of artisanal mining in the supply chain."
UNIQUE QR CODES
Trafigura's head of corporate responsibility James Nicholson
said the programme will likely start with five or six sites
within state-defined artisanal mining zones, and would aim to
start buying cobalt in three months' time.
Nicholson declined to say how much cobalt Trafigura aims to
buy through the agreement or how much Trafigura is spending. "It
all hinges on Trafigura being confident that all controls are in
place."
A senior government official told Reuters the EGC plans to
buy and sell to Trafigura and others $10 million of cobalt a
month or more than 300 tonnes at current prices, with the
aim of expanding to $50 million a month.
Trafigura will work with miners' cooperatives, approved by
Congolese authorities and working to OECD guidelines.
On-site controls will include the presence of Congolese
regulators, oversight from Pact, and quarterly site reviews by
UK-based supply chain consultancy Kumi Consulting. Cobalt will
be bagged and tagged with unique QR codes to ensure
traceability.
Higher artisanal cobalt supplies could help price stability,
CRU's Heppel said. Artisanal miners are a swing producer,
typically producing more when prices are high and less when
prices are low.
Industrial operators such as Glencore and China
Molybdenum produce most of the country's cobalt, but
their mines employ far fewer people than more labour-intensive
artisanal mines.
For a graphic on Congo's cobalt production, click here: https://graphics.reuters.com/CONGO-MINING/TRAFIG/jznvnnqxavl/
(Reporting by Hereward Holland and Helen Reid; writing by Helen
Reid; editing by Pratima Desai, Ramakrishnan M, Jason Neely and
Emelia Sithole-Matarise)