The new age energy storage bandwagon has quite possibly hit the buffers, courtesy of a legislative amendment in the polymetallic-rich Democratic Republic of Congo (DRC).
The DRC’s parliament voted to repeal cornerstone mining law imposed in 2002 giving resource companies a secure operational space guaranteeing tax-free operations for at least 10 years.
The slew of law amendments announced by the DRC on 27 January includes a tax hike from 2% to 3.5% on all mining, the removal or previously-expected tax amnesties and the introduction of a so-called “super profits tax” of 50% if commodity prices rise by 25% over-and-above what was estimated in resource feasibility studies.
Given the sharp increase in cobalt, lithium, copper and gold prices since 2016, the law changes effectively open-up existing mining companies based in the DRC to a significantly higher tax burden and sudden intangible uncertainty within billion-dollar projects currently in mid-construction.
It is feared the law changes will push some projects outside of economic viability and throws doubt on how profitable large miners such a Glencore, BHP and Ivanhoe can be in the DRC.
Cobalt prices have blitzed all analyst estimates, growing from around $20,000 per tonne in January 2016 to around $80,000 today – making the DRC’s law changes uniquely influential and hard-hitting for global commodity markets.
The new legislation directly impacts large miners first and foremost given their comparatively larger mining volumes and operating profit margins; with energy shares reeling since the legislative announcement.