Expected electric vehicle demand drives cobalt deals

March 15, 2018

The expected demand for lithium-ion batteries to power the growing electric vehicle market has sparked a cobalt boom with multi-million dollar deals happening around the globe.

In North America, First Cobalt Corp. announced a friendly takeover of US Cobalt Inc. as the Canadian mine developer accelerates its push to first production of the battery metal on forecasts for a boom in electric vehicles.

Under the all-share deal valued at approximately C$149.9 million ($115.74 million), First Cobalt will add US Cobalt’s exploration properties in Idaho and Utah to its 50 mining properties in Cobalt, Ontario, alongside a mill and permitted cobalt refinery.

In another development, Glencore Plc, the world’s biggest producer of cobalt, announced that it has agreed to sell around a third of its cobalt production over the next three years to Chinese battery recycler GEM Co Ltd.

Glencore will sell 52.8 kt (58,000 st) of cobalt hydroxide to GEM between 2018 and 2020 as demand for cobalt, a critical metal in lithium-ion batteries, soars on a forecasted boom in electric vehicle sales.

“The Idaho project is at a more advanced stage than our work in the Cobalt camp in Ontario. The appeal to us is that it is a faster pathway to production,” First Cobalt Chief Executive Trent Mell told Reuters.

Prices for cobalt  have spiked 60 percent over the past 12 months amid forecasts that demand will double in the next decade as consumers switch to less-polluting cars.

Nearly all cobalt, which prolongs battery life, is mined as a byproduct of copper and nickel, making it difficult for miners to increase output.
According to consultancy Wood Mackenzie, 64 percent of the 117 kt (129,000 st) of cobalt mined in 2017 came from the Democratic Republic of Congo.

A newly revised mining code in the Congo also has the potential to seriously affect mining projects there.

Currently there are no cobalt mines in operation in North America.

Expectations of supply shortages have fueled a cobalt rally that has taken prices to around $39 a pound, from near $10 a pound in January 2016 and to their highest level since July 2008, before the financial crisis started.

According to the filing, GEM and its subsidiaries will purchase 13.8 kt (15,200 st) of cobalt hydroxide from Glencore in 2018. They will buy 18 kt (20,000 st) in 2019 and 21 kt (23,000 st) in 2020.

Glencore, whose cobalt is mined as a byproduct from its copper and nickel mines in the Democratic Republic of Congo, Canada and Australia, expects to produce around 39 kt (43,000 st) of cobalt in 2018 – equal to about 35 percent of estimated global production.
Glencore expects its cobalt production to rise to 65 kt (71,600 st) in 2019 and dip to 63 kt (69,400 st) in 2020.


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