Standard & Poor's believes risks remain high around the supply of ethically sourced cobalt from the world’s largest producer, Democratic Republic of Congo (DRC).
Although the DRC government claims that child labour has been eliminated from copper-cobalt mining, end-use manufacturers are putting in place assurances to guarantee that their cobalt is ethically sourced.
This includes attempts to acquire cobalt directly from a miner and utilising blockchain technology to provide a secure chain of custody record.
DRC produces 60% of the world’s cobalt
Supply risks are associated with the dominance of the DRC in cobalt supply given it is currently the source for 60% of global supply.
S&P believes these risks must be managed as there is no region that can match The DRC's output.
S&P also expects mined cobalt supply to increase at a CAGR of 12% to 2021 with the majority of the growth from formal mining operations in the DRC.
Cobalt production dropped in 2017
Global mined cobalt production showed a slight drop in 2017 to 115,071 tonnes from 116,272 tonnes in 2016.
The majority of cobalt supply is sourced from copper-cobalt operations in the DRC and the bulk of the remainder is attributed to nickel-cobalt operations worldwide.
ASX cobalt juniors have a role to play
Although supply risks are starting to be realised, market commentators agree that peak cobalt isn't on the horizon.
This means that developing ethical suppliers of cobalt both inside and outside the DRC have an important role to play in future global supply.
ASX-listed companies developing cobalt projects include:
The company recently completed an engineering study to build a leaching plant to process existing tailings.
A pre-feasibility study (PFS) released in early July 2018 estimated a pre-tax net present value (NPV) for the project of $792 million.