😃New Cobalt Supply Needed as DRC Faces Child Labor Woes😃 New Supply Chain Needed as Congo Cobalt Buyers Face Child Labor Scrutiny
Cobalt is unrivalled among metals in the key battery metric of energy density. Without it, your smartphone battery can run out by lunchtime, and an electric vehicle (EV) would need a 4-hour recharge in the middle of a 100-mile ride from
New York to
Philadelphia.
Industry players such as
eCobalt Solutions Inc. (OTC: ECSIF) (TSX: ECS), First Cobalt Corp. (OTC:FTSSF) (TSX:FCC), Clean TeQ Holdings Limited (OTC:CTEQF) (TSX:CLQ) (ASX:CLQ), Fortune Minerals Limited (OTC:FTMDF) (TSX:FT) and Pacific Rim Cobalt Corp. (OTC:PCRCF) (CSE:BOLT) are exploring global solutions to an expected cobalt shortage.
Shortage Leaves Market Heavily Reliant on Congo Supply
The importance of cobalt in the lithium-ion battery has caught the mining industry off-guard. A sudden spike in demand for smartphones led manufacturers to the Democratic Republic of Congo (DRC), where cobalt-rich ore is often mined in precarious conditions and sometimes using children.
Cobalt prices surpassed a ten-year high of $90,000 per metric ton on the London Metal Exchange this year due to shortages, and the price has almost quadrupled since 2016. This has created a conundrum for major cobalt users including Apple Inc. Faced with greater scrutiny, Apple said it will buy material directly from mining companies to ensure it comes from sustainable sources.
A new generation of mining entrepreneurs are looking to convince the automobile and electronics industries that they can build a new and more sustainable supply chain. Other Top 10 producing countries still include areas of high geopolitical risk including Cuba, Madagascar and Russia, according to the U.S. Geological Survey.
One such company is Pacific Rim Cobalt (OTCQB:PCRCF) (CSE:BOLT) that has purchased five cobalt-nickel targets in Indonesia spanning 5,000 hectares. Previous drilling at the Cyclops project indicates a resource of 37 million tonnes of 0.11% cobalt and 1.31% nickel, see the historical estimates section below for more information. Pacific Rim Cobalt (OTCQB:PCRCF) (CSE:BOLT.CN) is currently drilling to further define the historic estimate this year and seeks an offtake agreement. Several areas of the Cyclops projects have yet to be explored, leaving the potential for further discoveries.
Pacific Rim is looking to join a market dominated by UK-listed Glencore, which produces 27,400 tons from mostly DRC mines, according to S&P Global Intelligence. Second and third ranked producers China Molybdenum and Fleurette Group also source ore from the DRC. Brazil's Vale comes fourth and Gecamines, a DRC-based commodity trading company, is ranked fifth.
Pacific Rim is currently looking for a new source of untapped cobalt, often found in nickel laterite deposits that are scattered among Pacific Rim islands such as Indonesia, Papua New Guinea and parts of Australia. Some of these resources were previously explored in the 1990s but never developed because the pre-smartphone value of cobalt was close to zero. Project economics could be highly favorable, as nickel will also benefit strongly from broader use of EV vehicles.
Industry peers are finding offtake partners that allow projects to be financed, a trend that could benefit Pacific Rim. Australian Mines Ltd. signed a long-term supply deal with SK Innovation Co., South Korea's top oil producer, for its Sconi nickel and cobalt mine project in Queensland state. Vale recently signed a $700 million deal in June to sell future cobalt output from its Voisey's Bay mine in Newfoundland.
"It appears that the raw material supply chain for the battery sector is becoming increasingly recognized as an opportunity with significant growth potential," said Ranjeet Sundher, Pacific Rim Cobalt's (OTCQB:PCRCF) (CSE:BOLT) President & CEO.
Smartphones Aside, Demand for Cobalt is Projected to Triple
The world currently ships 1.4 billion smartphones annually and that market is expected to grow 3% in 2019, according to consultants IDC. However, the bulk of future demand lies in EV battery usage. More than a dozen countries, including China, legislated for entire EV car adoption in a 2024-2025 timeframe last year, according to Ken Hoffman, a basic materials expert at McKinsey & Co.
The average EV contains 84 kilograms of copper, 30 kilograms of nickel and 8 kilograms of cobalt, according to Glencore. If EVs represent 30% of the global car fleet in 2030, that will require 314,000 tons a year of new supply of cobalt, more than triple what it is now, Glencore said.
Cobalt demand for EVs is expected to surge to 115,000 tons per year in 2025 from 55,000 tons a year in 2017, according to Darton Commodities. China is leading the demand for cobalt consumption and is on track to use over 8,000 tons per year alone by 2021 for EV assembly lines.
Even with lower proportions of cobalt in the modern battery mix, rising demand for large electrical storage solutions such as Tesla's Gigafactory in Nevada could boost cobalt usage. The metal remains an essential alloy ingredient for products like jet engines and medical devices.
The likes of Pacific Rim Cobalt (OTCQB:PCRCF) (CSE:BOLT) hope to ultimately offer a diverse and safer source of supply of cobalt than the DRC, especially as there is a drive from major global corporations to ensure that their supply chains are free of labor abuse. The Cyclops project is located close to the port of Jayapura on the island province of Papua and provides good future port access to Chinese markets.
Other Dominant Industry Players
CleanTeq (OTCQX:CTEQF) (TSX:CLQ) (ASX:CLQ) is developing the Clean TeQ Sunrise nickel-cobalt-scandium laterite project in New South Wales, Australia. The company also owns a proprietary hydrometallurgical process to treat ore at the facility that will be dedicated to the supply of battery metals. CleanTeq also owns a wastewater treatment business that recycles waters in power, mining and industrial applications. The company has signed an offtake agreement with Beijing Easpring last year, a five-year agreement for 20% of the company's cobalt and nickel sulphate production.
eCobalt Solutions Inc. (OTCQX:ECSIF) (TSX:ECS) has permitting in place to redevelop a former a cobalt mine in Idaho. The company is due to start production in 2019. The company has spent $120 million developing the project over the past 20 years. The Idaho Cobalt Project also contains copper and gold reserves. eCobalt has signed letters of intent with several potential offtake partners and is seeking to convert one or more of those into a long-term offtake agreement.
First Cobalt Corp. (OTCQX:FTSSF) (TSX:FCC) is developing three cobalt projects in both Canada and the US, including the 727-hectare Iron Creek project in Idaho which has 9,100 meters of historic drilling carried out by major mining company Noranda. Exploration concessions in Ontario total more than 10,000 hectares and include a former mill and permitted cobalt refinery in the historic Cobalt Camp. The project also contains 0.3% copper besides 0.59% cobalt grade average.
Fortune Minerals (OTCQX:FTMDF) (TSX:FT) is a company developing the NICO cobalt-gold-bismuth-copper mine and mill project in the Canadian Northwest Territories. The company discovered the deposit in 1996. Fortune Minerals also plans to build a refinery in Saskatchewan, Canada. NICO holds more than 10% of global bismuth reserves. The company also holds other mining assets in the Northwest Territories.
A New Generation of Mines
With artisanal miners in the DRC acting as a supplier of last resort, the mining industry needs to quickly develop a new generation of cobalt mines that will create a reliable supply chain for global manufacturers.
Electronics manufacturers such as Apple Inc., and carmakers are under growing pressure to ensure that their supply chains are free of materials sourced from underage or abused labor. The industry needs explorers with profiles like Pacific Rim Cobalt (OTCQB:PCRCF) (CSE:BOLT) working to identify cobalt sources that meet the environmental and social criteria of the 21[st] century.
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