Skip to main content
rob magazine

Better lucky than smart is an old adage in the business world. Luck can deliver unexpected fortunes in a hurry. The alternative is spending time, money and brainpower scouring the market for potentially lucrative opportunities. While often fruitful, that's not nearly as much fun as hitting the jackpot overnight.

In the art world, luck is buying a rotting old painting only to discover it is a Modigliani. In mining, luck is what happened in 2007 to Switzerland's Glencore, the world's biggest commodities trader, when it invested in troubled copper developments in one of the world's least safe and most corrupt countries, the Democratic Republic of the Congo (DRC). Over the past two years, the company has watched the price of cobalt, a by-product of copper mining, more than triple.

Unwittingly, Glencore had bought into the then nascent and now burgeoning electric car industry. The company stands to make billions from cobalt, an essential ingredient for the lithium-ion batteries that propel the cars. It is only a slight exaggeration to say that Glencore CEO Ivan Glasenberg, a savvy South African accountant whose gambling instincts cannot account for the cobalt coup in the Congo—he wasn't even thinking of the element at the time—can now make or break the electric vehicle (EV) market.

These days, Glasenberg has auto bosses fawning all over him. They're in a near-panic. They now realize one of the main risks to the success of their EVs lies in a poverty-stricken African kleptocracy that has been wracked by some of the bloodiest conflicts since the Second World War.

Contrast today's cobalt rush with the situation a decade ago. When Glencore dipped into the DRC in 2007, the timing couldn't have been worse. It bought a minority stake in a copper company in Katanga, the DRC's southernmost province, called Mutanda Mining. Glencore also acquired a stake in a small, London-listed miner called Nikanor, which would merge in 2008 with Katanga Mining, which was listed on the Toronto Stock Exchange.

The financial crisis of 2008 and the subsequent deep recession sent all commodity prices spiralling downward, making Glencore's DRC foray look, at best, unlucky. But cobalt prices then steadied. At first, smartphone batteries provided support—when Glencore bought into the DRC, the iPhone was just launching.

Then came EVs, and Glencore's DRC bet began to look heroic. Last year, the company boosted its stake in Mutanda to 100% and in Katanga to 85%. In Toronto, Katanga shares are up 380% over the past year—roughly tracking the rise in cobalt prices—giving the onetime penny-stock company a market value of  $4 billion.

The DRC is the world's biggest supplier of cobalt and, through Mutanda and Katanga, Glencore has emerged as the biggest single cobalt player. Up to 10 kilograms of  the metal go into each EV, and 10 grams into every smartphone. Last year, Glencore's DRC operations produced 27,000 tonnes of cobalt. That should climb to 39,000 tonnes this year, and up to 65,000 tonnes in 2019, well above half of last year's total global production.

As battery production for EVs surges, demand for cobalt will probably exceed supply for many years. According to a recent report by Transparency Market Research, global sales of lithium-ion batteries are expected to reach $74 billion (U.S.) by 2024, for a compound average annual growth rate of 11.6% over the years beginning in 2016.

Glasenberg is no doubt enjoying his unlikely role as Battery Boy. Cobalt was a forgotten metal a decade ago. Now the EV and smartphone companies are so desperate to secure enough of the element that they are trying to negotiate direct supply deals with Glencore. The company has said it is in talks with Tesla, Volkswagen and Apple, among others.

These companies know that if they don't get there first, China will. It wants to become the Detroit of EVs. Glasenberg can pretty much name his price—all the more so because diesel cars, the lifeblood of the German auto industry, are being slowly regulated out of existence.

What could go wrong for Glencore? Dozens of rebel groups are fighting the DRC army in the east, and the violence could spread south. The DRC could jack up the royalty and tax rates on the miners—in fact, it has promised to do so.

Another threat is competition. Cobalt explorers and miners can easily raise funds. Toronto's First Cobalt, which bills itself as the biggest pure-play cobalt development company, has launched a large exploration program in Northern Ontario. Robert Friedland's Vancouver-based Ivanhoe Mines is building an enormous copper project in Katanga province, one that will also dribble out cobalt.

At the moment, Glasenberg's lucky streak looks both awesome and sustainable. But luck can work both ways.

Report an editorial error

Report a technical issue

Editorial code of conduct

Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 4:00pm EDT.

SymbolName% changeLast
AAPL-Q
Apple Inc
-1.06%171.48
IVN-T
Ivanhoe Mines Ltd
+2.54%16.16

Follow related authors and topics

Authors and topics you follow will be added to your personal news feed in Following.

Interact with The Globe