Congo state miner proposes deal for cobalt producer prized by US

Congolese state-owned miner Gecamines has proposed acquiring Chemaf SA, before bringing in a new majority shareholder, as interest in the troubled copper and cobalt producer intensifies.

The fate of Trafigura Group-backed Chemaf has taken on a significance beyond its modest output of metals because the company is building one of the world’s biggest cobalt mines and holds dozens of untapped licenses. At the same time, Chemaf has also come to symbolize the growing competition between the US and China for critical minerals in the Democratic Republic of Congo.

Chemaf abandoned a sale in March to a Chinese firm after Congo withheld the necessary approvals. Gecamines now wants to buy heavily indebted Chemaf for a maximum of $1 million, and then transfer most of the shares to a new investor, according to people familiar with the matter. 

Under the plan, Gecamines would market Chemaf’s production to US buyers and hold a 5% so-called “free carry” stake in the company, according to a document seen by Bloomberg and a person familiar. The state miner would also seek to fund an additional shareholding of at least 20%. 

Still, there’s no certainty that Gecamines’ proposal will be supported by other key players, including Congo’s government and Chemaf’s owners and creditors. The latter includes trading house Trafigura, which arranged a $600 million loan for Chemaf in 2022 mainly to finance the construction of its flagship Mutoshi project, before a slump in cobalt prices drove the miner to seek fresh funds by putting itself up for sale.

The situation is complicated as some interested buyers have already made direct approaches to Chemaf, which belongs to the businessman Shiraz Virji and his family

Under Gecamines’ strategy, the incoming investor introduced by the state miner would restructure Chemaf’s substantial debts, the people said, asking not to be identified as the matter is private. Bloomberg News reported in July that the company owed around $900 million to creditors.

Gecamines’ move to guide the transaction has coincided with a deepening collaboration between Congo and the US on mining. The countries signed an agreement last month giving American investors preferential access to some of the central African nation’s abundant reserves of minerals including copper, cobalt and lithium.

The state miner is influential in the process because it owns a permit Chemaf leases for its Mutoshi project. Gecamines informed potential buyers of its plan late last year, the people said. 

At least five companies have joined the race.

Virtus Minerals Inc. — run by veterans of the US military and intelligence services — teamed up with New York-headquartered financier Orion Resource Partners to submit a binding offer last year to Chemaf’s shareholders, according to people familiar with the matter.

United Critical Minerals LLC is also considering a takeover, according to a proposal seen by Bloomberg. The Wyoming-registered company’s chairman is Justin Dibb, the founder and vice chairman of Africa-focused Allied Gold Corp.

A subsidiary of India’s Jindal Steel & Power Ltd. and Global Critical Resources Corp. – a Delaware-registered entity controlled by Austrian real estate entrepreneur Cevdet Caner – have both made proposals, according to people familiar.

Buenassa Sarl, which aims to build Congo’s first locally owned copper and cobalt refinery, formally notified Chemaf of its intentions in November, two people familiar with the matter said.

Chemaf, Trafigura, Gecamines, Virtus, Orion, UCM, GCR, JSPL and Buenassa all declined to comment. Congo’s mines ministry didn’t respond to a request for comment.

Buenassa would prioritize American offtakers for Chemaf’s output to consolidate the US-Congo minerals pact, the people said. Similarly, UCM’s proposal involves arranging supply agreements in partnership with the US government. 

(By William Clowes and Michael J. Kavanagh)