There has never been a better time to develop cobalt-focused mining assets with demand for the battery component predicted to double over the next decade.
According to research house Roskill, the market is expected to expand by 14.5% every year for the next ten, hitting 210,000 tonnes by the end of 2027.
That’s the base case. A more bullish scenario sees total global demand moving to 310,000 tonnes over the next decade.
Elon Musk’s Tesla (NASDAQ:TSLA) is often cited as one of the driving forces behind the insatiable demand for the element, which is used in the lithium-ion batteries that power his cars.
And indeed, widespread adoption of green vehicles of all makes and sizes will underpin the next expansion phase.
“Several automotive manufacturers are looking to position themselves to be able to meet particulate matter and carbon-dioxide emissions targets have very publicly began to seek out sources for the cobalt they will soon require,” the Roskill report points out.
“Such moves have bolstered the bullish sentiment in the cobalt market and have helped to elevate prices too.”
But remember, cobalt has uses other than propelling fleets of next-generation sports cars, hatch-backs and saloons.
It is a component of alloys used for aircraft engine parts, while the chemical industry is a big consumer too.
In other words, there’s a base demand for production outside the battery sector.
Keeping the market supplied should be reasonably straightforward over the next five years, Roskill says.
Known and identified opportunities
There are “known or identified” expansion opportunities from existing producers, especially in China, it points out.
Recycling and the use of tailings could also help feed the beast until 2023, on Roskill’s base case outlook for the sector.
“Thereafter, a combination of further expansions from existing miners, new projects, and perhaps the re-start of some operations on care and maintenance will be required if supply is to meet demand,” analyst Jack Bedder said in his report.
“With the vast majority of cobalt mined as a by-product of copper and nickel mining, future mine supply is complicated by the fact that cobalt output is principally governed by demand for, and subsequent supply of, copper and nickel.”
The last 18 months have seen the cobalt price “sky-rocket”. Between 2012 and 2016, it cost just US$13 per pound.
By the final quarter of last year, it had hit US$32 per pound, while the year-high was over US$43.
So as a by-product of zinc, copper or nickel production, cobalt has gone from an afterthought to what in mining parlance would be known as a very valuable production “credit”. At current prices, it has the capacity to significantly affect the economics of a deposit.
Underlining the thirst for cobalt and the boon it can provide, Fortune Minerals Ltd (TSE:FT), which is developing the NICO cobalt-gold-bismuth-copper project in Canada, says it was recently approached by several global mining and refining companies interested in buying metal concentrates directly from the mine.
If this panned out, Fortune would be able to defer its proposed Saskatchewan refinery, reducing up-front capital for the project by about 50% and mitigating risks in commissioning and downstream processing.
Fortune is already in talks with a number of companies interested in participating in the development of NICO project and/or securing a reliable Canadian and ethical supply of cobalt.
Consolidating the position
Meanwhile, First Cobalt Corp (CVE:FCC) is consolidating its position in the space. It has now completed its C$150mln acquisition of US Cobalt.
The deal combines the US Cobalt's exploration properties in Idaho and Utah with First Cobalt’s large portfolio centred on Cobalt, Ontario. This includes a permitted cobalt refinery.
Elsewhere, Royal Nickel Corp (TSE:RNX) with a market cap of over C$52mln, has a portfolio of nickel, cobalt, and gold assets, including a 50% stake in a nickel joint venture with Waterton that owns the Dumont Nickel-Cobalt project in the Abitibi region of Quebec which contains the second largest nickel reserve and eighth largest cobalt reserve on the planet.
Today's (June 2018) news underlined the group's confidence on the Dumont project by withdrawing US$12 million of its capital from the JV, thereby avoiding significant equity dilution at current price levels and allows a significant reduction in the firm's debt with the elimination of the majority of its debt payments in 2018.
Junior resource group Canada Cobalt Works (CVE:CCW) has been focused on the recovery method of this most sought-after metal.
This month, it revealed it had used its environmentally friendly, proprietary Re-2OX process to recover 99% of cobalt and 81% of nickel from various concentrates while also removing 99% of the arsenic from its Castle mine in the Cobalt Camp of northern Ontario.
And location is everything for ePower Metals (CVE:EPWR), which is advancing the 1,247 hectare Panther Creek cobalt property, which adjoins eCobalt Solutions' Idaho Cobalt deposit, which is at feasibility level, and environmentally permitted.
Idaho has a measured and indicated resource of 3.87mln tonnes grading 0.59% cobalt and 0.85% copper.
Panther also adjons the Blackbird Copper-Cobal mine and its claims are contiguous with the Ram cobalt-copper-gold mine.
These days, expansion is a top priority for BlueBird Battery Metals (CVE:BATT), which has just acquired its fourth project in three months and is starting to build a large portfolio in Australia. The company currently has projects in Yukon, Canada and multiple projects in Australia.
It's most recent acquisition is the manganese-cobalt Ashburton project located in Western Australia, which has increased BlueBird Metals' land position to about 520 sq/km.
Global Energy Metals (CVE:GEMC) also straddles two continents, with projects in Ontario, Canada and Australia. Its newer project is the Millennium project - a cobalt-copper sulphide project in the Mount Isa mining district in Queensland - and is held in joint venture with a local Australian partner called Hammer Metals (ASX:HMX).
Global Energy Metals is currently completing the first phase of work on Millennium, with ten drill holes for approximately 1,000 metres.
So clearly the rush to get involved in cobalt is firmly on and with the current consumer backdrop and pricing, it looks like a commodity that won't be disappearing any time soon.