The Assay - Cobalt – Chasing Electric Dreams
ADVERTISEMENT
The Assay - Mining investment news, insights and company profiles
Mining investment news, insights and company profiles
No Result
View All Result
Subscribe
  • Home
  • News
    • All News
    • Gold
    • Silver
    • Copper
    • Nickel
    • Lithium
    • Precious Metals
    • Base Metals
    • Battery Metals
    • Exploration
    • Development
    • Production
  • Articles
  • Assay Insights
  • Videos
    • CEO Interviews
    • Investor Panels & Presentations
  • Company Profiles
  • Magazine
  • Newsletter
  • 121 Mining Investment
  • About
    • About Us
    • Our Team
    • Contact Us
    • Partners
The Assay - Mining investment news, insights and company profiles
  • Home
  • News
    • All News
    • Gold
    • Silver
    • Copper
    • Nickel
    • Lithium
    • Precious Metals
    • Base Metals
    • Battery Metals
    • Exploration
    • Development
    • Production
  • Articles
  • Assay Insights
  • Videos
    • CEO Interviews
    • Investor Panels & Presentations
  • Company Profiles
  • Magazine
  • Newsletter
  • 121 Mining Investment
  • About
    • About Us
    • Our Team
    • Contact Us
    • Partners
No Result
View All Result
Subscribe
The Assay - Mining investment news, insights and company profiles
No Result
View All Result
Home Battery Materials

Cobalt – Chasing Electric Dreams

By Anthony Milewski, Chairman, Cobalt 27

byThe Assay
5 years ago
Reading Time: 6 mins read
Cobalt – Chasing Electric Dreams

A day hardly passes without news of the future of electric vehicles (EVs) and battery storage. Whether you read about countries mandating EV sales, the creation of entire fleets of EVs, or new electric grid storage innovations, there’s a lot to contemplate. In fact, we are looking at a structural change in both the energy market and the automobile industry. Over the next decade we will see a decrease in terminal value of energy stocks and a complete upheaval in the car industry.

Investors often point out that they are confident about EV penetration rates over the next few years and the expansion of grid storage. However, they do not necessarily know who will win the race. Will Tesla or Ford sell the most EVs? Whose lithium ion battery will have the most efficient chemistry? Should I own a publicly traded chipmaker? Hard to answer, but there is one thing investors can be sure of. If you believe that consumers are going to buy EVs and home storage battery systems, basic materials will be a winner.

The key basic materials that comprise the lithium ion battery and the industrial revolution now underway include, copper, nickel, cobalt, graphite, and manganese. In the next decade the impact of EVs and battery storage on these commodities will unfold in dramatic fashion.

In the early years of the cycle cobalt and lithium are most impacted by the adoption of new technology. As battery chemistries change and penetration rates accelerate, nickel will become more exciting. We have already started to see a bifurcation of the nickel market that will accelerate and result in several distinct markets. Finally copper, the largest and most liquid of these commodities, will be affected due to increased need for both the grid and EVs. Of these metals, however, I’m going to look at cobalt.


Why Cobalt?

Annual cobalt production is approximately 100,000 tonnes, with over half coming from the Democratic Republic of the Congo (DRC). Half of it is used in the broader battery industry in one form or another (including the cellphone market). The amount of cobalt required to supply expected future demand is staggering. Analysts are not great at predicting future penetration and adoption rates for new consumer products. But, if we take their projected rates as a guide, the cobalt market will need to expand dramatically between now and 2025. Bank analysts have 2025 EV penetration rates at anywhere from a few per cent to upwards of 15 per cent. If we imagine a world in 2025 with 10 per cent EV penetration we may need double the world’s cobalt supply, with a majority of it going into EV batteries.

Perhaps this all sounds like the bull markets that precipitated huge spikes in the uranium price and the rare earths market at various points over the past decade. Should we worry?

First and foremost, a critical distinction between cobalt and uranium/rare earths is that unlike the “if you build it they will come” mentality that surrounded both of those latter commodities, the gigafactories of the world are currently being built. The industrial capacity that requires cobalt exists and is being expanded. This is in stark contrast to uranium where the planned reactors were not been built at the rates anticipated.

 

Cobalt - Chasing Electric Dreams

 

To understand the future of cobalt you need to understand its past. In 2008, war in the DRC caused the price of cobalt to jump to about $50 per pound. Immediately, anyone that could use cobalt more sparingly in their industrial process did so. Around the time of the spike in cobalt prices the global financial crisis struck, precipitating a significant decrease in the price of many metals, including cobalt. There were other reasons for the subsequent decrease in price, including the tail end of a Chinese boom that saw more nickel mines (which create cobalt as a byproduct), and more artisanal miners in the DRC.

The price of cobalt is currently around $30 per pound. Most of the reduction in usage that can occur with cobalt happened a decade ago. End users such as airplane makers that make up 20 per cent of the cobalt market are not interested in saving a few dollars to eliminate cobalt and make their hundred million dollar planes less safe.

Times have also changed for artisanal miners in the DRC. Companies such as Apple and Tesla are requiring suppliers to show sourcing data to avoid negative publicity associated with child labour. Even if the cobalt price goes higher it is unlikely that cellphone and carmakers are willing to buy and use conflict cobalt, so there will be a far smaller corresponding increase in artisanal mining compared to 2008. Will someone invent a new battery and ‘engineer out’ cobalt, as sometimes suggested? This is nonsense. Carmakers say that even if a new battery was invented today we would not see it in an electric car for at least eight years.

“The world needs more cobalt. Around ninety eight percent of the world’s cobalt is a byproduct of copper or nickel.”

That is not to say that scientists are not working on new battery technology. Instead, it highlights the time it takes to create a new battery, make it cost effective and then convince carmakers and regulators it is safe enough to be in a car. I am reminded of Betamax v VHS. The argument about which format was better was largely academic. VHS was the format of choice for the film industry and crushed Betamax. The same is true of the lithium ion battery. The market has chosen the lithium ion battery as the winner for a decade.

There are other aspects of the cobalt market to consider: battery chemistry changes; new projects coming into production; and the possibility of collecting additional material from existing operations and tailings.

Lithium ion battery chemistry will change in the next five years. The two most common chemistries are the NCA (a combination of lithium with nickel, cobalt, aluminum oxide, used by Tesla) and NMC (lithium with nickel, manganese and cobalt oxide, used by most everyone else).

“There are tailings in places such as the DRC that could be brought on faster than a new mine”

The NMC configuration is a ratio of 5-2-3 of nickel, manganese and cobalt. A 6-2-2 configuration is being rolled out and companies are working on an 8-1-1 configuration, which is probably four or five years away. I would note that all of these changes in chemistries are built in supply demand models and are expected. Even the lithium air battery, a decadeout, contains cobalt. If the price goes high enough you may see companies put more scientists on the task of changing the chemistry to the 8-1-1 and so theoretically this could be brought forward a few years.

The world needs more cobalt. Around 98 per cent of the world’s cobalt is a byproduct of copper or nickel. This makes increasing supply difficult. That said, cobalt is like all other commodities – there is a price point which acts as an incentive to bring on new supply. The current cobalt price is just off the 20-year inflation-adjusted average, and in my opinion a long way from the incentive price. When the price of cobalt is high enough there are mines in North America, Africa, Russia, Cuba, and Australia that can and will be built. If history is a guide, the market will go well past the incentive price for new cobalt production, sparking investment in new mines. There are few large-scale new mines with significant cobalt credits that I can think of that will be in production in the next three years, and the timeline for most mines is more like four to six years. The two obvious cobalt producers that will enter the market are Katanga and ERG’s mine.

When a commodity moves sharply the market always seems to manage to find units in forgotten places. That may come in the form of adding or changing a circuit at an HPAL (High Pressure Acid Leach) facility, or optimising a current process for cobalt. There are tailings in places such as the DRC that could be brought on faster than a new mine.

In a nutshell: cobalt has a new and massive source of demand in the form of the EV. Cobalt is a byproduct and so there are not many, if any, mines that can quickly and easily be brought into production, so the supply response will be muted and slow. It is a critical element of the lithium ion battery and not technologically possible to engineer-out at this time. Cobalt’s price at $30 per pound is less that 1 per cent of the price of an EV and well below the incentive price for new mines.

Investing in cobalt producers and the metal is an exciting pure play on the EV adoption trend.

TweetShareSend
Previous Post

Cobalt Shifts From Metal To Chemical Market

Next Post

Baby Steps Into The New World Of Battery Investing

Related Posts

Desert Metals Set For Active Wave of Gold and REE Exploration Programmes
News

Desert Metals Set For Active Wave of Gold and REE Exploration Programmes

byColin Sandell-Hay, Contributor - The Assay
24 March, 2023
Cyprium Metals Enters into A$6M Secured Loan Deed
News

Cyprium Metals Enters into A$6M Secured Loan Deed

byColin Sandell-Hay, Contributor - The Assay
24 March, 2023
Ausgold Intersects Further High-Grade Gold at Katanning Gold Project
News

Ausgold Intersects Further High-Grade Gold at Katanning Gold Project

byColin Sandell-Hay, Contributor - The Assay
24 March, 2023
Magmatic Recommences High Impact Drilling at Corvette
News

Magmatic Recommences High Impact Drilling at Corvette

byColin Sandell-Hay, Contributor - The Assay
24 March, 2023
Sparc Obtains Exceptional Results on Sodium Ion Battery Materials Project
News

Sparc Obtains Exceptional Results on Sodium Ion Battery Materials Project

byColin Sandell-Hay, Contributor - The Assay
24 March, 2023
OD6 Identifies High-Grade REEs in Grass Patch Drilling
News

OD6 Identifies High-Grade REEs in Grass Patch Drilling

byColin Sandell-Hay, Contributor - The Assay
24 March, 2023
Next Post
Baby Steps Into The New World Of Battery Investing

Baby Steps Into The New World Of Battery Investing

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Popular Articles

  • The Rise and Rise of Indonesian HPAL – But Can It Continue?

    The Rise and Rise of Indonesian HPAL – But Can It Continue?

    0 shares
    Share 0 Tweet 0
  • The Assay Guide to Palladium vs Platinum

    0 shares
    Share 0 Tweet 0
  • Zinc Mining & Market Outlook 2022-2025

    0 shares
    Share 0 Tweet 0
  • For Rare Earths It’s All About the Magnets

    0 shares
    Share 0 Tweet 0
  • The Assay’s Guide to Manganese Mining and Production

    0 shares
    Share 0 Tweet 0
  • Home
  • News
  • Articles
  • Investor Discussions
  • CEO Interviews
  • Company Profiles
  • Newsletter
  • Magazine
  • About Us
  • Our Team
  • Contact Us
Hyve logo

Please note: This Web site and The Assay magazine and the information and materials on this Web site and in The Assay magazine are not, and should not be construed as, an offer to buy or sell, or as a solicitation of an offer to buy or sell, any regulated products, securities or investments. This Web site and The Assay Magazine do not, and should not be construed as acting to, sponsor, advocate, endorse or promote any regulated products, securities or investments. This Web site and The Assay magazine and the information and materials on this Web site and in The Assay magazine do not, and shall not be construed as, making any recommendation or providing any investment or other advice with respect to the purchase, sale or other disposition of any regulated products, securities or investments, including, without limitation, any advice to the effect that any mining or metals related transaction is appropriate or suitable for any investment objective or financial situation of a prospective investor. A decision to invest in any regulated products, securities or investments should not be made in reliance on any of the information or materials on this Web site or in The Assay magazine. Before making any investment decision, prospective investors should seek advice from appropriately qualified and licensed financial, legal, tax and accounting advisers, take into account their individual financial needs and circumstances and carefully consider the risks associated with such investment decision.

Privacy Policy
Cookies
Hong Kong Residents Privacy Statement

© 2023 The Assay

No Result
View All Result
  • Home
  • News
    • All News
    • Gold
    • Silver
    • Copper
    • Nickel
    • Lithium
    • Precious Metals
    • Base Metals
    • Battery Metals
    • Exploration
    • Development
    • Production
  • Articles
  • Assay Insights
  • Videos
    • CEO Interviews
    • Investor Panels & Presentations
  • Company Profiles
  • Magazine
  • Newsletter
  • 121 Mining Investment
  • About
    • About Us
    • Our Team
    • Contact Us
    • Partners

Please note: This Web site and The Assay magazine and the information and materials on this Web site and in The Assay magazine are not, and should not be construed as, an offer to buy or sell, or as a solicitation of an offer to buy or sell, any regulated products, securities or investments. This Web site and The Assay Magazine do not, and should not be construed as acting to, sponsor, advocate, endorse or promote any regulated products, securities or investments. This Web site and The Assay magazine and the information and materials on this Web site and in The Assay magazine do not, and shall not be construed as, making any recommendation or providing any investment or other advice with respect to the purchase, sale or other disposition of any regulated products, securities or investments, including, without limitation, any advice to the effect that any mining or metals related transaction is appropriate or suitable for any investment objective or financial situation of a prospective investor. A decision to invest in any regulated products, securities or investments should not be made in reliance on any of the information or materials on this Web site or in The Assay magazine. Before making any investment decision, prospective investors should seek advice from appropriately qualified and licensed financial, legal, tax and accounting advisers, take into account their individual financial needs and circumstances and carefully consider the risks associated with such investment decision.

Privacy Policy
Cookies
Hong Kong Residents Privacy Statement

© 2023 The Assay

Go to mobile version