Congo's Flooded Mine Is Latest Threat to World Copper Supply

Mint

3 days ago

(Bloomberg) -- The status of one of the world's most important copper mines remains clouded in uncertainty, more than a week after seismic activity caused widespread flooding deep below ground.
Ivanhoe Mines Ltd.'s Kamoa-Kakula complex in the Democratic Republic of Congo is one of the world's top sources of copper and was on course to become the third-biggest supplier of the key energy-transition metal this year. Yet its current condition is a mystery, with contrasting messages from its biggest shareholders.
Some information has been disclosed: water levels have risen after pumping and electrical infrastructure in the Kakula underground mine was damaged. Ivanhoe's Chinese partners — Zijin Mining Group Co. and CITIC Metal — are helping to secure powerful pumps that can help remove that water.
The impacted mine accounts for at least 70% of the complex's current production, according to a note from analyst at Citigroup Inc. The flooding could shut the Kakula underground operation until at least the fourth quarter, Citi said, while adding that output can be ramped up without significant cost once the water has been pumped out.
Toronto-based Ivanhoe declined to comment, but said it plans to provide an update next week. Zijin didn't immediately respond to requests for comment.
Ivanhoe has said that there is damage to cables and pipework needed to pump water out of the mine, and that it was working with experts to evaluate the cause and effect of the seismic activity. One person who visited the site earlier this week said that a lot of water had entered the mine and workers were not being allowed to enter.
The incident at Kamoa-Kakula and its fallout underline the vulnerability of the world's vital copper supplies. The metal — used in everything from electric cars and power grids to water pipes — is essential to efforts to decarbonize the global economy, yet many investors and mining executives expect future production will struggle to meet demand.
In the past 18 months, there have been several supply shocks. Fellow Canadian miner First Quantum Minerals Ltd. was forced to shutter its biggest copper mine in Panama after widespread protests, while Anglo American Plc is among the major producers to scale back output amid operational problems.
The new uncertainty comes in a period of tight copper supplies. Despite President Donald Trump's trade war fueling concerns about global growth, the metal is being buoyed by resilient demand from No. 1 consumer China.
Kamoa-Kakula has been one of mining's great success stories in recent years. Discovered by billionaire Robert Friedland, Ivanhoe's chairman, and developed swiftly since Zijin invested in the project a decade ago, it taps into one of the world's richest copper seams and has helped make Congo the second-biggest producer of the metal.
Now it faces its biggest challenge. Ivanhoe reported on May 20 that two days earlier it had temporarily suspended operations at Kakula underground following seismic activity.
Its Chinese co-owner, Zijin, went further, saying there had been a roof collapse and full-year production was likely to be impacted. Ivanhoe quickly disputed this account, saying there was no evidence of collapsing stopes or structural pillars. It said the potential impact on output would only be determined once a full investigation was completed.
But, within days, Ivanhoe withdrew its 2025 output guidance of 520,000 tons to 580,000 tons for Kamoa-Kakula.
With only sparse information to go on, analysts have estimated that 84,000 to 275,000 tons of copper output could be lost this year. That would potentially wipe out a sizable chunk of the 289,000 ton global surplus forecast for this year by the International Copper Study Group.
'There is high uncertainty on the timing of a restart and the level of remediation or mine redesign which may be needed,' Goldman Sachs Group Inc. said in a note on Thursday.
For now, Kakula's concentrator facilities can process sizable surface stockpiles, which means there hasn't been any immediate interruption to supplies.
In a statement on Monday, Ivanhoe said it was pumping 1,000 liters (264 gallons) of water every second from the shallower western section of the underground mine, but its team was trying to increase that to above 3,000 liters to stabilize levels. Ivanhoe didn't mention the eastern section of the mine, where structural damage was flagged by Zijin.
Ivanhoe has said the complex's Kamoa underground and processing operations continue to run normally, and Kakula's surface infrastructure is unaffected.
Zijin and Ivanhoe both hold 39.6% of Kamoa-Kakula, while Congo's government has a 20% stake. Zijin also owns more than 10% of Ivanhoe and CITIC is the Canadian miner's biggest shareholder.
--With assistance from Alfred Cang, Winnie Zhu, James Attwood and Annie Lee.
(Updates with company response in fifth paragraph.)
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