Huayou terminates investment in DRC cobalt mine

China's Zhejiang Huayou Cobalt will terminate its investment in a cobalt mine operated by New Minerals Investment (NMI) in the Democratic Republic of Congo (DRC) because of a weak cobalt market.

Prices for cobalt products and their profitability have fallen sharply in the past year. The termination is designed to improve the firm's capital use efficiency as further developments at the mine requires large capital investments over a long period.

Huayou's wholly-owned subsidiary Huayou International Mining in 2017 acquired a 51pc share in Lucky Resources from Summit Reward Investment for $66.3mn. Lucky Resources owns 100pc of NMI that had the DRC mining licence.

Huayou International Mining will transfer the 51pc share in Lucky Resources to Summit Reward or its designated third party, with Huayou's representatives withdrawing from Lucky Resources and NMI's board of directors and management.

Huayou paid $5mn to Summit Reward in February 2018 and $4.94mn in April 2018, accounting for 15pc of the total investment. Summit Reward or its designated third party shall return the funds to Huayou no later than 30 June 2021.

Huayou produces around 25pc of global cobalt chemical products. It produces cobalt hydroxide, cobalt sulphate and lithium anode materials, as well as several copper and nickel products. The LME) in July this year added cobalt produced by Huayou to its list of brands approved for delivery.

The Chinese firm is exploring raw material resources in the global market. It acquired in 2017 a 14.7pc stake in Australia-based Nzuri Copper, which is developing the DRC's Kalongwe copper-cobalt project. Huayou's copper/cobalt interests in the DRC include Mikas and Congo Dongfang International Mining. It also has smelting and refining operations in China.

China's cobalt metal prices were at a peak of 650-700 yuan/kg ($92.34-99.45/kg) on 16 April last year then fell steadily. Prices fell in late March this year were at Yn250-275/kg before rising to over Yn270-285/kg by the end of April. But this rise proved to be short-lived and was largely based on speculative buying by trading firms. The Chinese domestic market saw prices for 99.8pc grade metal last assessed at Yn235-245/kg, up by Yn5/kg from 8 August amid a rise in activity among trading firms.

Argus assessed European prices for chemical-grade cobalt metal higher at $15-15.80/lb yesterday from $13.50-14.75/lb on 13 August. Alloy-grade prices were assessed up at $15.75-16.75/lb from $14.70-15.70/lb on 13 August.