Cobalt does not usually get much attention from investors. Recent news about Tesla’s (NASDAQ:TSLA) and worldwide demand for lithium ion batteries has driven the price of lithium and the companies producing and exploring for the resource to new highs. However, analysts and experts have been looking at the battery supply chain so they can pick … Continued
Cobalt does not usually get much attention from investors. Recent news about Tesla’s (NASDAQ:TSLA) and worldwide demand for lithium ion batteries has driven the price of lithium and the companies producing and exploring for the resource to new highs. However, analysts and experts have been looking at the battery supply chain so they can pick the next boom resource and many are betting on cobalt.
The basic battery commodities are lithium, graphite and cobalt, but very few companies are focused on mining the latter. It is typically a by-product of copper mining, with the largest production coming from Democratic Republic of Congo (DRC). Some reports suggest that this year 60 percent of the world’s cobalt supply will come from the DRC, which could be an issue for companies that want full visibility of their resource supply chain. The declining and volatile copper price is further impacting the supply of cobalt and is leading to specialist companies entering the market.
Tesla may only use 1 percent of the world’s lithium, but it holds a far bigger share of the public’s view on this growth in the market. The same is true for cobalt. Tesla has said it will produce over 500,000 electrically powered vehicles by 2018, and each one will need an electric battery containing lithium, graphite and cobalt.
However, Tesla claims it will stop sourcing its cobalt from the Philippines this year, instead working with a North America supplier from 2017. The company went forward with this change due to environmental concerns, which will be a future issue for cobalt extraction as demand rises. China has already had to shut down some of its mines due to environmental concerns – and as consumers start buying more locally, the price for cobalt may rise.
Companies ready to meet the challenge
As this new era begins, some companies have staked great cobalt project and are building world-class teams to help develop the world’s next great cobalt mine.
eCobalt Solutions (TSX:ECS) (formally Formation Metals)
eColbalt Solutions are working to deliver “ethically sourced” cobalt, hoping to meet Tesla’s demand upon completion of a $120 million dollar project in Idaho called The Idaho Cobalt Project (ICP). Paul Farquharson, eCobalt Solutions President and CEO, said “Having the spec sheets and flow sheets defined facilitates our moving forward with pursuing offtake and other potential means to assist in the future development of the ICP,” and “These developments coincide with an improved outlook for the cobalt markets with deficits expected this year and increasing significantly into 2018—previous deficit situations in the cobalt market resulted in significant rises in the commodity price.”
Cruz Capital Corp (TSXV:CUZ)
Cruz capital is taking advantage of the lack of expertise and projects by building a world-class team and securing the rights to several projects. Projects in Canada and USA minimize political risk and provide a conflict-free solution to meet the demands of customers who want a North American supplier. The world-class team would be able to rapidly evaluate properties to either develop themselves or use the prospect generator model that investors (e.g. Rick Rule) favor to advancing such projects. Cruz now holds seven cobalt prospects so the company is well on its way to achieving its goal of being the number 1 cobalt project generator and developer on the TSXV.
Fortune Minerals Limited (TSX: FT)
Fortune is advancing a cobalt-gold-bismuth-copper project in Canada. The company has invested $115 million, advancing the project from discovery to a development asset that has already achieved major milestones including a feasibility study and environmental assessment. The company has targeted an annual supply of 1,615 tonnes of cobalt contained in a battery grade cobalt sulphate. They have a very strong board, including Dave Ramsey – who is a former Northwest Territories Minister of Industry, Tourism and Investment – and Glen Koropchuk, who was most recently COO of De Beers Canada.
American Manganese (TSX.V:AMY)
Perhaps we don’t need to find new cobalt, but we need to recycle the huge amounts already in circulation. American Manganese has developed a process to recycle batteries, achieving a leach recovery rate of 100 percent for lithium and cobalt. Companies like Tesla will be excited by the opportunity for a closed circle and a lesser environmental impact. Accepting the time it takes to find, finance, and develop new mines, recycling could be the quickest way to fill the supply gap in the short term.
Watch this space
There will be new companies entering this market who will be working to meet this growing need for cobalt in the battery market. At least 12 mega factories have either been announced or are under construction including the famous “Tesla Gigafactory” so although Tesla dominates the public perception there is a much bigger demand for these resources. When experts like John Hykawy are highlighting the importance of cobalt, it will not be long before the investors run to its stocks.
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Securities Disclosure: I, Nick Smith, hold no direct investment interest in any company mentioned in this article.