The Democratic Republic of Congo’s state-owned mining company, Gecamines, is making a $1 million offer to acquire the cobalt and copper assets of the indebted mining firm Chemaf. This move is aimed at preventing China from expanding its control over critical metal resources in the country, according to sources familiar with the situation.
Chemaf, which has partnered with commodities trader Trafigura, agreed to sell its assets to the Chinese defense and industrial conglomerate, China North Industries Corp (Norinco), in June. However, Gecamines, which holds the lease for Chemaf’s mines, declined to approve the sale when asked.
In a twist, Gecamines submitted an unsolicited bid for Chemaf’s assets, escalating the standoff amid U.S. lobbying efforts to counter China’s influence in the mineral-rich Central African Copperbelt. Chinese companies are significant players in Congo’s mining sector, with CMOC Group now recognized as the world’s largest cobalt miner after acquiring the Tenke Fungurume Mine from Freeport-McMoRan just four years ago.
Gecamines’ offer of just under $1 million is intended for the mines and processing plant, and the company seeks to audit Chemaf’s debts before finalizing a payment plan. Chemaf’s financial situation is dire, with debts estimated between $900 million and $1 billion, and the company requires an additional $300 million to boost production and achieve profitability.
Norinco’s proposal ranges from $900 million to $1 billion, which includes settling Chemaf’s debts and outstanding taxes. The Chinese firm has also committed to increasing Chemaf’s copper and cobalt output to approximately 75,000 metric tons and 25,000 tons, respectively.
Gecamines chairman Robert Lukama confirmed to Reuters that they made a more favorable offer than Norinco’s, contingent on conducting due diligence on Chemaf’s debt. He emphasized that the Congolese government has already informed Chemaf that it will not approve the Norinco transaction, asserting that Gecamines will not allow any other bidders.
The potential acquisition by Norinco has raised concerns among U.S. officials, who are lobbying the Congolese government to reject the deal. The U.S. is advocating for alternative buyers to Norinco, which has faced sanctions since 2021.
Cash Crunch Deepens for Chemaf
The stalled negotiations have exacerbated Chemaf’s financial difficulties. If the deal with Norinco collapses, Chemaf’s key investors, including Trafigura, may need to provide additional funding or face prolonged uncertainty in recovering their investments.
Sources indicate that Chemaf’s creditors have endured significant financial strain over the past year due to unpaid debts. Currently, Chemaf is only processing stockpiles from its Etoile mine, as expansion efforts at the Mutoshi mine have been halted due to a lack of financing. The company is struggling to meet payroll for its 3,500 employees and cover operational costs, including power and security.
Chemaf entered a 24-month creditors’ protection agreement in August 2023, which will expire next year. While the company could seek interim financing, its lenders are eager for a resolution to the Norinco deal.
U.S. officials are actively encouraging Western companies to consider purchasing Chemaf’s assets. Norinco has not responded to inquiries regarding the situation.