Know Your Supply Chain: The Link Between Tainted Cobalt and Your Electronics

What is the case for knowing your supply chain? Typically, the knowledge of the supply chain is neither in the interest of nor the responsibility of the consumer. We trust the vendor to conduct their business ethically, as they should. However, ethical operations and accountability are limited in some industries. Such dire circumstances call for greater consumer awareness. As it goes, one cannot solve a problem they cannot fully grasp. Public awareness has been a powerful tool in combating major injustices in the past - Britain’s abolition of slavery is a good example. Siddharth Kara’s ‘Cobalt red: How the blood of the Congo powers our lives‘ is the first comprehensive account aimed at revealing the injustices of cobalt mining in the DRC.

Now, how does unethically mined cobalt from the DRC find its way to your phone, tablet, laptop, electric vehicle or stationary storage system? The answer is through supply chains claimed to be extremely complex and obscure at best. The obscurity is heavily enabled by globalization as key parts of the supply chain seldom lie in the same geographical location. A supply chain is typically composed of upstream, midstream and downstream. As the terms suggest, upstream is the source of the raw material which undergoes various transformations (manufacturing processes) to yield the final product downstream.

In the lithium-ion battery industry, upstream covers the extraction of mineral-bearing ores - called heterogenite - from a mine. In the case of cobalt in the DRC, the first step of processing (primary processing) takes place to turn the ore into cobalt hydroxide. The cobalt hydroxide is then moved to the refining step to produce battery grade cobalt sulfate and cobalt tetroxide. The battery grade cobalt is purchased by battery manufacturers who combine it with lithium, manganese or aluminum to yield various cell cathode compositions. The different cell cathode compositions translate to different lithium-ion battery chemistries. The batteries then move down the chain to three main market segments: consumer electronics, e-mobility and stationary storage manufacturers.

Upstream Actors

Who extracts the cobalt ore?

Cobalt exists in an ore - heterogenite - that also contains copper and nickel. Until the uptick in demand in the last decade, cobalt was mainly obtained as a by-product of copper mining. The extraction of cobalt in the DRC is done in two main ways: industrial mining and artisanal and small-scale mining (ASM). Industrial mining produces the bulk share of cobalt while ASM is considered supplementary to the supply chain (~30% of DRC’s cobalt production). ASM has attracted widespread condemnation due to its reliance on and promotion of modern day slavery¹. More on the formal and informal parts of the supply chain in a subsequent article.

A simplified description of the setup process of an industrial mine is as follows: a foreign mining company obtains a mining concession from the government of the DRC. A mining concession is permission purchased from the government to exploit minerals in a given area for a certain period. The deal entitles the government to a share of the mining company’s production revenue and taxes on the company’s profits. The foreign companies do not always pay the correct tax amounts. The issue of tax evasion and corruption will be covered in a subsequent article. The DRC’s 2002 Mining Code required government ownership of at least 5% of a mining concession thereby producing joint ventures between the DRC government and foreign mining companies. The government’s stake was increased to 10% in 2018. The DRC government typically holds its stake (as high as 32% in some cases) through the state-owned mining company, Gecamines. In summary, the Congolese government theoretically gets its share of the mineral wealth through royalties and taxes.

The cobalt mining concessions are located in the copper belt region that stretches from northern Zambia to southern DRC. Particularly, the cobalt mines are concentrated in the provinces of Haut-Katanga and Lualaba. Lubumbashi city in Haut-Katanga is considered the DRC’s main mining hub while Kolwezi bears the world’s known highest grade cobalt. Grade refers to the proportion of a particular mineral in an ore.

Open pit mining is the method employed in the cobalt mines of the DRC. Open pit mining is one of the forms of surface mining used for mineral deposits close to earth’s surface.

Midstream Actors

Who converts the ore into battery grade cobalt?

The leading cobalt mining companies tend to be subsidiaries of the leading global cobalt producers. The first stage of processing, which involves separating cobalt compounds from other metals in the ores, occurs in the DRC. This output is then shipped off to Europe and China for further refining. The table below covers most of the major industrial mines, the mining subsidiaries and their parent companies. The percentages reflect the ownership share of the foreign company in the given concession. Mutoshi and Kasulo are asterisked to reflect their status as ‘model artisanal mining sites’ - a designation to be covered at length at a later date.

Of Note…

1. The Tenke Fungurume Mine is about 1500 km² - about the size of greater London - making it one of the largest mines on the continent…and one of the biggest polluters.

2. The Swiss company Glencore PLC is the leader of global cobalt production with 6 out of the 16 mining sites in the table above.

3. Chinese companies control 7 of the listed 16 mines including 2 of the largest five.

4. The other big producer of DRC cobalt not reflected in the table above is the Eurasian Resources Group (ERG) which runs the Frontier Mine. ERG is headquartered in Luxembourg.

5. The industrial mines leverage various levels of artisanal mining ranging from minimal to full scale.

Now you know where it all begins!

References

1. Kara, S. (2022). Cobalt red: How the blood of the Congo powers our lives. St. Martins.