Analysts and hopeful producers reassured investors at the Perth, Australia, leg of the Benchmark World Tour on Sept. 17 that fears about batteries using less cobalt in the future, while partly true, lack context, and that the world is becoming more reliant on the Democratic Republic of Congo-sourced material.
Cairn Energy Research Advisors' Managing Director Sam Jaffe told conference delegates that while "everybody's trying to get less cobalt in batteries because it's the most expensive part," and battery manufacturers were moving into an NCM (nickel-cobalt-manganese) cathode content split of 6-2-2 and 5-3-2 in the near-term, "eventually it will just be 8-1-1, which means less and less cobalt."
However, Jaffe conceded that the overall battery market is increasing so rapidly that cobalt demand will remain strong even in the long-term, a point also emphasized by Benchmark Mineral Intelligence analyst Caspar Rawles.
Rawles told S&P Global Market Intelligence just before his presentation on how cathode materials are evolving to deal with the cobalt conundrum that while "people talk about 8-1-1 as kind of the holy grail in battery improvements," the 6-2-2 configuration already provides much of the cost savings.
"With 8-1-1 the thermal runaway point — where the cell gets to a temperature where it can't cool itself effectively and catches fire — is lower, so you need better thermal management within the pack. That's something Tesla has done well, and why they have thousands of cells.
"People get scared because they say you're going from 30% to 10% cobalt [in the batteries], but volume of sales is the most important thing here, rather than the reduction."
ASX-listed, Namibia-focused Celsius Resources Ltd.'s Managing Director Brendan Borg noted at the conference that 52% of cathodes currently don't have cobalt in them, and by 2025 that will drop to about 19%, so the amount of cathodes that have cobalt in them will actually increase over that time.
Rawles said the market's misunderstanding was not helped when Tesla Inc. CEO Elon Musk said in response to a question on reducing battery costs in May, "we think we can get cobalt to almost nothing."
Cobalt prices started their downward trajectory later that month in a sharp correction, with LME cobalt falling from US$90,500 per tonne on May 22 to US$54,500 on Aug. 7 having risen "too quickly", as Rawles described it, due to a number of factors, including trade war concerns.
Concerns over the DRC
That sentiment is often detached from reality, and Rawles said this has been particularly the case with the Democratic Republic of Congo, which many non-DRC focused cobalt players mentioning concerns about the country's political instability, legal opacity and child labor in mining.
TSX-Venture-listed Fortune Minerals Ltd. Robin Goad even joked at the Benchmark conference about two-thirds of global cobalt coming from "the not-so-Democratic Republic of the Congo", in promoting his company's NICO cobalt, gold, bismuth and copper project, which is vertically integrated with a mine and concentrator in Canada's Northwest Territories and a refinery in Saskatoon where it will conduct processing to produce cobalt sulfate.
Fortune, which has spent C$130 million on NICO to date, announced Sept. 17 that its Pyrolysis Roast process can successfully remove arsenic from concentrate, making it more salable and not subject to arsenic penalties.
"BNP Paribas is forecasting 240,000 tonnes of demand by 2025, with about 67% of production coming from the not-so-Democratic Republic of the Congo, about 60% of refinery production out of China, 80% of refined cobalt chemical supply is dominated by China, and 98% of cobalt is sourced as a byproduct of either copper or nickel," Goad said.
Goad said Fortune has about 35 confidentiality agreements with major companies including banks, battery and car companies that are interested in looking at an independent source of supply outside the DRC and China.
However, Rawles also said in an interview that the DRC provided 66% of the world's cobalt in 2017 and Benchmark forecasts that by 2021 it will rise to three quarters, mainly due to Glencore PLC's Katanga Mining Ltd. having ramped up production and Eurasian Resources Group B.V. looking to start production soon at Metalkol RTR and should ramp up in 2019.
Shalina Group Ltd subsidiary Chemaf SPRL will also be introducing a new source of cobalt through a solvent extraction-electrowinning plant at Mutoshi producing up to 16,000 tonnes of cobalt.