Cobalt Blue Holdings Ltd (ASX:COB) (OTCMKTS:CBBHF) (FRA:COH) is ideally placed to benefit from the auto industry’s revolution that encompasses electric vehicles, lithium-ion batteries and battery metals such as cobalt.
The revolution is underway and gathering strength with COB’s Broken Hill Cobalt Project (BCHP) being positioned to come online when the revolution is nearing its peak later this decade.
In line with the company’s strategic plan for cobalt supply from BCHP, first production of large cobalt samples is expected next month from the Broken Hill Pilot Plant which is nearing completion.
This forms part of the company’s global cobalt sample program with large samples to be provided to global battery makers and the Pilot Plant will be followed by a larger Demonstration Plant.
It appears the market is already approving of the company’s progress and its future prospects with the share price rising from A$0.115 at market close on December 21 to A$0.47 on Monday, a new high of more than two years.
EV inflection point
As well as the strength of the BHCP, COB is buoyed by trends in the EV and battery industries as outlined in its quarterly report.
“As battery prices decline and performance improves, now for the first time in history, EVs will have a cost advantage over traditional Internal Combustion Engine (ICE) vehicles.
“Optimisation of electric powertrains and the increasing availability of charging infrastructure are making EVs more competitive while rising emission standards and increasingly strict fuel consumption requirements have made ICEs more expensive.
“The change is not limited to powertrains as vehicles are also becoming smarter. Smart driver assistance systems can already relieve pressure on drivers on the road, and full autonomous driving is foreseeable.
“Sitting in the car has also become more comfortable than ever, with voice-controlled functions involving conversation and infotainment systems providing personalised information and entertainment,” COB stated.
According to a major Investment Bank, UBS, the industry is at a crossroads, that will witness a global demand inflection point during FY2021.
EV demand is on target to reach 15%/40% of sales by FY25/FY30 then dominating global auto markets beyond.
EV sales forecast by region (% of total passenger car sales).
Cobalt sulphate trends
The quarterly also outlined how these trends will impact the supply of cobalt sulphate.
“Cobalt sulphate is a cobalt-based salt used specifically for the production of larger lithium-ion batteries, typically EV and Energy Storage System (ESS) batteries using a nickel-cobalt-manganese (NCM) or a nickel-cobalt-aluminium oxide (NCA) cathode.
“Cobalt sulphate prices continued their upward trajectory in December, increasing by 3.2% on average during the month, reaching a yearly high in US dollar terms.
“Despite early stability, prices started to climb in the latter part of December, partly in reaction to rumours that China’s State Reserve Bureau (SRB) is set to conduct a further round of cobalt metal purchasing in the first half of 2021.
“Looking ahead, we expect further upside potential for cobalt sulphate prices in the coming months, as rumours of the imminent SRB purchase and continued concerns around the potential impacts of COVID on logistics,” COB said.
Cobalt sulphate prices over the last four years, including a 28% rise over 2020.
The company is expecting a robust year ahead as it gears up for the start of sample production from the Broken Hill Pilot Plant along with a steady rise in demand for battery inputs from increasing EV sales across the world.
Pilot plant work
During the quarter ended on December 31, 2020, the company continued the construction of the Pilot Plant.
Key equipment and steelworks were installed while electrical and instrumentation works are expected to be completed shortly.
The company expects production of Mixed Hydroxide Product (MHP) to begin by late February 2021, with cobalt sulphate samples shortly after.
COB will prepare battery-ready cobalt samples from the facility on a scale sufficient to provide test samples for global commercial partners and will then build larger Demonstration Plant, with activity scheduled for the second half of 2021.
COB is working with 15 global partners who have expressed interest in receiving cobalt samples, with a view to qualifying COB as a supplier to the global battery industry.
The sample program (ranging from 100 to 200 kilograms and from 2 to 3 tonnes for the later demonstration plant) is potentially one of the largest undertaken within the global cobalt market, where typical project test work normally ranges from 1-20 kilograms.
Test-work for OZ Minerals
During the quarter COB completed a test-work program and provided a testing report to OZ Minerals Ltd (ASX:OZL).
Results confirmed that the COB Process was suitable for treating and extracting copper, gold and cobalt from OZL’s Carrapateena pyrite concentrate.
The company anticipates further dialogue between the two companies to consider the potential for further collaboration.
“Advanced and unique”
Chairman Rob Biancardi said in a letter to shareholders earlier this month: “[BHCP] remains one of the most advanced and unique cobalt projects in the world.
“Cobalt Blue believes the successful development of BHCP will position it globally as a low-cost, long-term supplier of ethically derived, battery-grade cobalt sulphate.”
He said the Broken Hill Pilot Plant “will prove up the processing technology that COB has developed and de-risk the project for future investors”.