COBALT

Energy consumption for global development is growing at an unprecedented rate. Whether it be for communication, transport, business operations or everyday living requirements, we are constantly having to innovate new ways of producing and delivering energy.

Storage, perhaps even more so than production or transmission is the greatest challenge facing the technological and renewable energy space.

A boom in battery manufacture technology, predominantly lithium-ion, has been charged by cobalt powered chemistry. This has enabled the progressive development of portable electronic devices and accelerated growth in other emerging markets, such as fixed energy storage and electric cars.

There are five types of lithium-ion batteries, three of which are cobalt based. In 2015, cobalt-based lithium-ion batteries accounted for approximately 75% of the lithium battery market – Lithium Cobalt Oxide (LCO) provided for 41% of this share.[1]

It is forecast that demand for cobalt will increase by 8% CAGR from 2015-20, predominantly driven by battery chemicals and superalloys as seen below.[2]

 

Cobalt demand by end product/use market[3]

 

cobalt-chart

 

Cobalt is unique compared with other minerals in that it is not purely demand that generates opportunity for producing mines – supply is fundamentally challenged by the “by-product” weighted nature of cobalt’s production profile. Approximately 94% of cobalt mined globally is recovered as a by-product of copper and nickel operations.[4]  Therefore, increasing production or investing in new supply lines is not significantly incentivised by changes in cobalt demand. Additionally, over 50% of global supply of cobalt is highly dependent on a single, high sovereign risk country, the Democratic Republic of Congo (DRC). The DRC is estimated to hold half of the world’s cobalt resources which, coupled with an artisanal mining sector that may account for up to 20% of the DRC’s production, leaves the market vulnerable to a highly unpredictable supply feed.[5]

Against this backdrop, Gindalbie’s Mt Gunson Project has long term potential to provide an attractive, stable and dependable supply of cobalt to battery producers.

Current forecasts suggest that the economics of the cobalt market will shift from a supply surplus in 2015 to a perpetually growing deficit in the mid-long term. It is likely that as new supply fizzles in comparison to demand, an upward trend in prices will occur.

 

Cobalt market balance and price forecast[6]

 

cobalt-chart2

 

[1] CRU Group. 2017. https://www.crugroup.com/

[2] ibid.

[3] Darton Commodities Limited. 2017. http://www.dartoncommodities.co.uk

[4] The Cobalt Development Institute. 2016. ‘Cobalt Supply & Demand 2015.’ Cobalt Facts http://www.thecdi.com/cdi/images/documents/facts/Cobalt%20Facts%20-%20Supply%20%20Demand%20-%2015.pdf

[5] Home, Andy. ‘If you thought lithium was exciting, try cobalt.’ Australian Financial Review. Accessed 11 April 2017 http://www.afr.com/business/mining/if-you-thought-lithium-was-exciting-try-cobalt-20170410-gvi7t0

[6] ResearchInChina. 2016. http://www.researchinchina.com/