Investors still see these Congo explorers as a good bet – here’s why
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Special report: The cash is still flowing for companies active in the Congo with investors seeing the positives in backing players in the mineral-rich African nation.
At least five ASX-listed companies have raised money in the past few months to fund projects in the Democratic Republic of the Congo (or DRC).
Taruga Minerals (ASX:TAR) was the most recent to secure a backing of nearly $3 million from a group of sophisticated investors, including China’s Hongze Group.
The Hongze Group is also an investor in Okapi Resources (ASX:OKR), which is also on the hunt for cobalt in the DRC.
Prior to that Winmar Resources (ASX:WFE) successfully raised $3.1 million to pick up cobalt projects in the country.
AVZ Minerals (ASX:AVZ) has also been well supported by investors in its hunt for lithium in the DRC.
In late February the company raised a further $15 million through a placement to North American institutional investors.
Nzuri Copper (ASX:NZC), meanwhile, raised $6 million last month to advance its Kalongwe copper and cobalt project.
Major shareholders Tembo Capital and China’s Huayou Cobalt were cornerstone investors in the raising.
China desperately wants cobalt
Chinese companies have been aggressively pursuing deals to secure supplies of lithium and cobalt as the Asian powerhouse looks to establish itself as the leading player in the electric vehicle market.
Both cobalt and lithium are key components of the batteries used in electric vehicles.
China formed the Union of Mining Companies with Chinese Capital (USMCC) on the advice of the DRC mines minister.
Huayou Cobalt is part of the group, along with China Molybdenum, MMG, subsidiaries of China Nonferrous Metal Mining Group, and Sicomines.
Although there has been concerns raised over issues in the DRC, including the government’s recent changes to its mining code, explorers still see great potential in the country.
China Minmetals responded positively to the new mining rules and thinks the sovereign risk is very low.
“In general, we have been very successful in the Democratic Republic of the Congo in the past seven years,” the company said in March.
“Therefore, we believe that the country’s policy risks are not significant in the future.”
Junior explorer Vector Resources (ASX:VEC) announced in February that it was adding to its portfolio of projects in the DRC, with a deal to partner with state-owned company Société Minière de Kilo Moto on the Kibali South and Nizi gold projects.
Okapi, meanwhile, secured an option agreement to earn a 70 per cent stake in three copper-cobalt projects — Tenke, Ntondo and Luisha — earlier this year.
The company is strongly of the view that the DRC’s geological potential is well worth the risk.
According to market intelligence firm Roskill, 2017 cobalt production in the DRC accounted for 69 per cent of global production.
And Chinese investment in mines in the region is expected to see the country’s share of the market rise further over the next five years.
Roskill says the cobalt market is gearing up for a sustained period of unprecedented consumption growth.
The consultant’s base-case forecast suggests that demand from the battery sector alone could reach 240,000 tonnes by 2027 – more than double the size of the whole market today.
The area immediately surrounding Okapi’s Tenke project hosts several large mines, including Tenke Fungurume, which is one of the world’s largest known copper and cobalt deposits.
Freeport sold its 56 per cent stake in the Tenke Fungurume mine, located about 40km west of Okapi’s Tenke project in May 2016 for $US2.65 billion.
Okapi is currently completing due diligence on the projects and while it is still early days, the company believes it has its hands on some potentially large-scale projects.
The company also recently completed soil and rock chip sampling at the Mambasa gold project.
The aim of the sampling was to help Okapi identify drill targets for the next phase of exploration.
This special report is brought to you by Okapi Resources.
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