The Biden administration has held talks with three firms in recent weeks about purchasing one of the world’s largest non-Chinese cobalt producers, according to people familiar with the matter, as the U.S. attempts to loosen Beijing’s global grip on a metal seen as central to the green-energy revolution.
The talks over Chemaf, a mining company based in the Democratic Republic of Congo, are part of a push by the administration to secure global supplies of a metal used in everything from jet fighters and drones to electric-vehicle batteries.
For more than a decade, Chinese companies have spent billions of dollars buying out U.S. and European miners in Congo, which produces nearly 75% of the world’s cobalt supply. That has put China in a dominant position in both the production and processing of the mineral.
The Biden administration has pledged billions of dollars in investments in infrastructure projects across Africa, including a railroad intended to carry Congolese minerals such as copper and cobalt across Angola to the Atlantic Ocean port of Lobito. But it has been difficult for the U.S. government to interest American investors in any sector in Congo because of the country’s poor infrastructure, limited skilled labor, resource nationalism and reputation for government corruption.
“Things are getting better, but it’s still one hell of a place to operate,” said Daniel van Dalen, a senior analyst at Signal Risk, an Africa-focused political-risk consulting firm.
President Biden has pledged to take a more active role in finding ways to motivate American companies to invest in Congo. He had planned to visit Angola this month, but put off the trip to focus on responding to the deadly hurricanes hitting the U.S.
In recent weeks, U.S. government officials have spoken with mining and artificial-intelligence company KoBold Metals, copper miner First Quantum Minerals and investment firm Orion Resource Partners about participating in a deal to acquire Chemaf, either separately or jointly, according to people familiar with the matter.
It is the second time in a year that Washington has tried to generate Western interest in the mining company, and reflects a recharged U.S. attitude toward securing critical minerals. The U.S. has been asking buyers and nations that Washington sees as friendly to consider various mining assets around the world.
The Congolese have also been speaking with potential bidders. The countries are working together to ensure the process of finding a new bidder is fair and transparent, one of the people said.
U.S. officials have said their goal is to offer a model that won’t result in indebtedness, corruption and environmental degradation.
Chemaf, which says its mines could produce 20,000 tons of cobalt annually—making it one of the world’s largest cobalt producers—was put up for sale last year by its founder, Shiraz Virji. At the time, U.S. officials looked for Western miners or investors to buy Chemaf, according to people familiar with the matter.
Chemaf’s past business practices and debts have complicated a potential sale, according to people familiar with the matter.
When The Wall Street Journal visited Chemaf’s Mutoshi mine in 2018, freelance Congolese miners could be seen descending underground without helmets, shoes or safety equipment. Miners were using picks, shovels and bare hands to unearth rocks rich with the metal. Water sometimes rushed into holes and drowned people, and an earth mover buried one alive, said local workers and mine officials.
According to former executives, the company resorted to paying bribes at times in the past. Virji didn’t respond to a request for comment. People close to the company said he has stepped back from the day-to-day running of the company.
Trafigura, a Switzerland-and-Singapore-based commodity-trading giant and longtime Chemaf partner, arranged a $600 million syndicated loan in 2022 to complete the mechanization of the Mutoshi mine as well as a processing plant and expand processing at the Etoile mine. In exchange, Trafigura would get to trade all the cobalt hydroxide produced by the mines through 2027.
Some would-be Chemaf buyers found the price of acquiring the company too steep, in part because any sale would have been contingent on compensating Trafigura, according to people involved with the sale.
Last year, Chemaf said it needed an additional $250 million to $300 million to finish the projects, amid low cobalt prices.
Chemaf currently holds $900 million of debt, including money owed to a large number of in-country contractors, according to a person close to the company.
In June, Chemaf agreed to sell itself to Chinese state-backed Norin Mining. Shortly after, U.S. pressure helped block the sale, according to people familiar with the transaction. The Congolese government was also eager to diversify away from Chinese partners, the people said.
A Chemaf spokesperson, however, said the company remains committed to the Norin Mining transaction.
And the U.S. is once again trying to encourage a Western buyer, according to people familiar with the matter. Duncan Blount, chief executive of U.S. company Chilean Cobalt Corp., looked at the project last year but said it was too expensive, among other concerns. He is still interested, he said recently, and has told the State Department he is talking to other companies about forming a consortium.
Doing business in Congo can be complicated even for companies that have been there for years. Commodity giant Glencore recently had some of its Congolese assets frozen amid a dispute over royalties, according to people familiar with the matter. Bloomberg earlier reported the freeze.
In general, U.S. investors want Washington to offer inducements before they invest in Congo, possibly including financial support, insurance against expropriation or sudden tax increases, and waivers to the Foreign Corrupt Practices Act, according to industry participants.
“Without those instruments, they won’t be able to invest,” said Christian-Geraud Neema Byamungu, Africa editor at the China-Global South Project, a nonprofit. “A balance or compromise will have to be made between humanitarian principles and geopolitics.”
Anglo American, Rio Tinto and KoBold have all been considering mining projects in Congo, according to people familiar with the matter.
The U.S. government recently asked Phoenix-based copper company Freeport-McMoRan whether it would be interested in returning to Congo, people familiar with the matter said. Freeport operated there until 2016, when, during a troubled period, it sold its stake in a copper and cobalt mine to a Chinese company to raise cash.
Freeport isn’t currently focused on acquiring new assets, but it would go back in for the right project, one of the people said. It hasn’t looked at Chemaf, the person said.