Cobalt explorers remain unfazed by an industry push to engineer the material out of electric vehicle batteries, saying exponential growth occurring in new energy vehicle sales will spur significant global demand, even if the proportion of cobalt used in each battery is halved.
Since the end of 2016, the price of cobalt traded on the London Metal Exchange has more than doubled as global supply – most of which comes from mines in the Democratic Republic of Congo – has struggled to keep pace with growing demand.
Surging demand for cobalt has been driven by a rapidly increasing take-up of electric vehicles, particularly in China, with the metal a key ingredient in lithium-ion batteries.
Battery manufacturers responded to the scarcity by seeking to use less cobalt, with Tesla founder Elon Musk and Japan’s Panasonic both making worldwide headlines with their plans to achieve zero cobalt usage.
But that’s not necessarily bad for prospective cobalt producers, according to the Sean Gregory, chief executive of cobalt explorer Barra Resources.
Speaking at the 2018 World Mining Summit, hosted in Perth last month by Clariden Global, Mr Gregory acknowledged that a substitution of materials away from cobalt was occurring, but remained confident around the growth prospects for new producers.
“The main battery chemistry at the moment is 6-2-2, which is six parts nickel, two parts magnesium, two parts cobalt, but the industry is moving towards an 8-1-1 chemistry – moving from 20 per cent cobalt in the battery to 10 per cent cobalt in the battery,” Mr Gregory said.
“That’s driven by the necessity of the supply shortage.
“But despite that reduction in proportion, the growth is still exponential.”
Cobalt Blue chief executive Joe Kaderavek, also presenting at the World Mining Summit, was similarly dismissive of the potential for the metal to disappear from lithium-ion batteries.
Mr Kaderavek said the technology required to reduce cobalt to around 10 per cent of the material in an electric vehicle battery would not be widely available until around 2022.
“You are approaching the theoretical limit of how much cobalt you can rip out of the cathodes,” Mr Kaderavek said.
“Cobalt is, in my terminology, like a glue.
“It effectively provides a stabilising agent for the cathode while it is going through tremendous shocks.
“The 8-1-1 chemistry represents the theoretical minimum for cobalt in a cathode.
“Interestingly, when you see an 8-1-1 car in 2022 and beyond, it will come with its own thermal management software, it will have a circuit breaker built into the software of the car to stop you overstressing the battery.”
Mr Kaderavek said Cobalt Blue’s forecasts, which he described as conservative, indicated cobalt demand would grow by a factor of 70 per cent over the next 10 years.
Cobalt Blue is aiming to begin production at its Thackaringa operation near Broken Hill in New South Wales by 2022, with the company aiming to bypass the refining industry and produce a material that will readily feed into the battery manufacturing sector.
The company has partnered with LG at Thackaringa, with the multinational electronics giant’s chemicals division advising Cobalt Blue on what the industry will demand from cobalt producers in coming years.
“They understand where the technology is today to meet specifications, but importantly for us, because we won’t be in production until 2022, they will tell us where the specifications will be in 2022,” Mr Kaderavek said.
“The last thing I want to do as a CEO is to build and commission a plant which will be technologically obsolete by the time it’s in production.
“The one thing you can guarantee in the battery space is there will be a lot of evolution between now and 2022.”
Mr Gregory said confidence in the cobalt sector was driven largely by the rapidly growing electric vehicle sector, which is responsible for around half of the global demand for cobalt.
Bloomberg’s Electric Vehicles Outlook 2018 report indicated that by 2025, global electric vehicle sales were expected to hit 11 million.
The report said electric vehicles would likely account for 19 per cent of all passenger vehicle sales in China, 14 per cent in Europe and 11 per cent in the United States.
Bloomberg said it expected electric vehicle to increase pace in the mid-2020s, as reduced costs of battery manufacturing brought vehicle prices more on par with internal combustion engine vehicles.
“In many jurisdictions it’s actually presently cheaper to purchase an electric vehicle than it is to buy a traditional internal combustion engine vehicle,” Mr Gregory told the World Mining Summit.
“That’s in those jurisdictions where there are generous government subsidies, such as California, the UK and Japan.
“When you look at the total cost of ownership, the total cost of a vehicle … the running costs and the maintenance over the life of the vehicle are lower, such that over the life of the vehicle it actually makes economic sense in those jurisdictions.”
There are around 34 other industrial uses for cobalt which account for the other 50 per cent of demand, including in mobile telephones and other personal electronics, and jet aircraft engine manufacturing.
Barra Resources, which counts Barminco founder Peter Bartlett’s private investment vehicle FMR Investments and diversified mining group Mineral Resources as its biggest shareholders, is advancing plans to develop a 1.5 million tonnes per annum cobalt operation near Norseman, in Western Australia, in a 50:50 joint venture with West Perth-based Conico.
Barra and Conico’s Mount Thirsty tenements are in an area Mr Gregory described as having the potential to emerge as ‘Cobalt Valley’, where a handful of ASX-listed players, including the Mark Creasy-backed Galileo Mining, are pursuing the development of several high-grade deposits.
He said while major automotive manufacturers such as Tesla, BMW and Volkswagen made worldwide headlines with their electric car commitments, it was Chinese manufacturers such as BYD, BAIC, Kandi and Great Wall that were behind the rapid growth.
“All of the automakers have invested heavily in this space,” Mr Gregory said.
“But to me the exciting bit is while all of the big brand names are doing it, the real growth is actually coming from our friends in China.
“China is the largest car market in the world, and significantly so.
“In terms of EV production, you can see that quarter by quarter sales growth is being led by China, over half of the electric vehicles being sold are in China and the most rapid growth is coming from China.
“It’s driven of course by their government, they have very strong government policies and when the Chinese government sets policies, they get met.”
Another factor helping prospective cobalt producers, Mr Gregory said, was the structural dynamics of global cobalt supply.
Mr Gregory said the vast majority of cobalt produced worldwide was a by-product of nickel and copper mining.
But he said the high costs of processing relating to geological factors in nickel and copper deposits, meant that producers were not necessarily incentivised to increase production of cobalt as a by-product as its price increases.
Mr Gregory said there were also specific challenges to increasing supply in the DRC, which produces around 68 per cent of the world’s cobalt.
“Within the DRC there are some very large mines no doubt run ethically, but there is also a lot of artisanal mining employing child labour and so forth,” he said.
“UNICEF estimates that there are 40,000 children working in those mines for as little as $3 a day.
“What we are seeing with the multinationals, with the Apples and the Samsungs and so forth, their investors and their investment funds are demanding to see that people take ownership for the fully supply chain, both upstream and downstream.
“These companies are now auditing the source of their cobalt, and the intelligence that we are getting from the market is there is around about a $2 per pound premium for a product which can demonstrate it has come from an ethical source.”