Move to sell miner Chemaf to stoke tension between US and China

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Chemaf Resources, the struggling Gulf mining group, has hired an adviser to help sell the company and its strategic copper and cobalt mines in the Democratic Republic of Congo for a valuation in the order of $1bn.

The planned sale of the Dubai-based mining group, whose largest creditor is global commodity trading house Trafigura, is set to become a key clash in the battle between the US and China for critical minerals.

The launch of a sales process has prompted strong interest from Chinese bidders, according to three people familiar with the matter.

But the US government is also trying to broker proposals by western or Middle Eastern investors to avoid the assets falling into Chinese hands, according to two people with knowledge of the situation.

Both copper and cobalt are considered key for the transition to clean power because they are essential materials for renewable power, electric cars and batteries, as well other industrial uses.

Washington has stepped up its engagement this year in finding ways to counter China’s dominance of Africa’s mineral resources as the world’s largest economy seeks to compete in clean energy technologies.

The US government is undertaking a review of $250mn of financing for the Lobito Corridor railway, a key trade route, to export the DRC and Zambia’s commodities westbound through Angola.

Dubai-based Chemaf needs to inject capital into its business to meet creditor bills and finish off projects under construction as falling cobalt prices and rising cost inflation have deepened losses and increased capital expenditure needs.

It is considering a range of options with a full rather than partial sale the company’s preferred option, the three people said.

The group has hired Jeremy Meynert, a former executive at Australian iron ore group Fortescue and an ex-investment banker at Citi, to run the sales process. Chemaf declined to comment.

The sale would include $690mn of debt, of which about $510mn was arranged by a syndicate led by Singapore-based Trafigura, while navigating the desire for the founder and owner Shiraz Virji to cash out.

The sale could force Trafigura, which holds a contractual promise to receive all of Chemaf’s future production for the entirety of the mines’ lives, to take a big haircut on the debt or adjust its future supply deal, the three people said.

Chemaf’s woes have added to problems for Trafigura’s metals division with an ongoing court battle over a huge nickel fraud, which was revealed earlier this year, still hanging over the group.

Trafigura alleged in February that it was the victim of a “systematic fraud” that led to a $590mn writedown after discovering supposed nickel shipments did not contain the valuable metal.

“We are supportive of Chemaf’s efforts to conclude a successful sale process,” said Daniel von Arx, global head of battery metals at Trafigura.

The company has asked bidders for proposals to realise value for the Virji family, settle with creditors and the supply partner Trafigura, as well as plans to spend $250-300mn to finish an extension of its Etoile Mine and construction of its new Mutoshi Mine in the DRC.

Chemaf aims to produce 75,000 tonnes of copper and 25,000 tonnes of cobalt hydroxide per year, once the two mining projects are completed, making them important assets to the DRC government and global supply.

Chemaf was founded in 2001 by Virji, who used to run a cash-and-carry business in the UK and owns a pharmaceutical export business. It entered the DRC’s mining sector as it was opening up to the private sector when former President Joseph Kabila came into office.