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Cobalt Blue buoyant on fundamentals of cobalt market

There are signs of a strengthening market, including a price rebound, increased payability of cobalt inputs/derivatives and recent long-term cobalt deals.

Cobalt Blue Holdings Ltd - Cobalt Blue buoyant on fundamentals of cobalt market
The company is establishing a pilot plant for its process to produce high-quality cobalt sulphate

Cobalt Blue Holdings Ltd (ASX:COB) is buoyant about the future of the cobalt market which underpins plans to develop the Broken Hill Cobalt Project (BHCP) while also focusing on progressing its cobalt processing technology.

In an update to shareholders, the company’s CEO Joe Kaderavek said there were signs of a strengthening market, including a price rebound, increased payability of cobalt inputs/derivatives and recent long-term cobalt deals.

This comes as COB prepares an updated ore reserve statement for the BHCP and makes progress with establishing a pilot/demonstration plant in Broken Hill for its technology.

Steady price recovery

The CEO stated that the cobalt spot price had undergone a steady recovery from lows in July 2019, up more than 50% to around US$18 per pound.

At the same time, he said that cobalt inputs/derivatives such as hydroxides and sulphates had seen increased payability, reflecting market tightness.

“Our view is that cobalt sulphate will retain on average a small premium (US$1-2/pound) to metal in the long-term.”

Longer-term deals

While the spot price was undergoing a period of repair, Kaderavek said there were also longer-term developments which provided strong pointers to the metal’s future.

An unprecedented number of larger 5-6 year deals had been or were being finalised, he said.

“These dealings reflect market tightness sourcing cobalt units in support of long-term production plans.”

The deals include Glencore PLC (LON:GLEN) (OTCMKTS:GLNCY) and:

  • Samsung SDI – totalling 21,000 tonnes over five years;
  • SK Innovation – 30,000 tonnes over six years;
  • GEM Group – 61,200 tonnes over five years; and
  • Tesla Inc (NASDAQ:TSLA), Umicore and BMW - details undisclosed.

Improving batteries

Kaderavek said at present ‘nickel-rich’ cathodes such as (Nickel Manganese Cobalt) NMC 811 were expected to become the major chemistry adopted for passenger electric vehicles over the next 10-15 years as this chemistry provided excellent energy density per battery weight.

However, the limitations of NMC battery thermal and chemical stability were being reached, and further reductions in cobalt content were not practical from an end-user safety perspective.

“In fact, many current NMC 811 batteries are based on a 'core' of 811 surrounded by 'shells' of 622, 532 and even 111 to provide operational stability,” he said.

“Regardless, COB welcomes the development of improved batteries that will lead to higher uptake of electric vehicles and thus increased overall demand for cobalt cathodes.

“We at COB look forward to producing ethical cobalt as part of a decarbonised future,” he added.

In updating the company’s progress, the CEO said the updated ore reserve statement was expected to showcase improved project economics.

Unique pilot plant

Concurrently, the company remains focused on establishing and commissioning the unique pilot plant and subsequent demonstration plant, which will demonstrate COB’s ability to produce a high-quality cobalt sulphate.

Kaderavek said the company was taking this challenge very seriously.

“For example, to satisfy a 20.5% cobalt contract specification the product must typically contain no more than 1 part per million iron or copper.”

He said through the plant the company aimed to:

  • Deliver cobalt samples to global partners to assess product quality. Most top 10 companies active in the cobalt precursor battery supply chain are expected to commit to this program;
  • Provide a 'one-roof' approach for interested partners to conduct detailed reviews as part of investment due diligence studies; and
  • Promote third-party evaluation by test work and engineering studies, and ultimately commercial adoption, of the COB Process for treating cobalt sulphides. To date, COB has evaluated projects in NSW, South Australia and Queensland.

In regard to the pilot plant, critical long lead time equipment has arrived in Australia and is in transit to Broken Hill.

Quick facts: Cobalt Blue Holdings Ltd

Price: 0.095 AUD

ASX:COB
Market: ASX
Market Cap: $22.56 m
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