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The market for cobalt has exploded in recent years, with demand driven by the surge in production of batteries for electric cars. Its strategic importance will only grow, experts say, as carmakers aggressively scale up production of electric vehicles in the decades ahead.

The boom has focused attention on cobalt’s complex and controversial supply chain. In particular, the dominant roles played by both China and the Democratic Republic of Congo (DRC) have raised major concerns about ensuring supply of this increasingly valuable commodity.

What is cobalt?
Democratic Republic of Congo  China Minerals and Rare Earth Elements Technology and Innovation
Cobalt is a metallic element prized for its strong magnetism, hardness, and resistance to extreme heat and corrosion. The vast majority of it is obtained as a byproduct of copper and nickel mining.

In earlier centuries, artisans used cobalt as a base for glass and pigments, the most well known of which is bright blue. Today, cobalt’s unique qualities make it suitable for use in a range of highly manufactured products, such as batteries, turbine blades, aircraft engines, and medical implants and prosthetics. It is also used in petroleum refinement.

Roughly half of cobalt produced globally today is used in rechargeable lithium-ion batteries, which power everything from electric vehicles to smartphones, tablets, and laptop computers.
 U.S. Geological Survey.

 What’s driving the cobalt boom?
The electric vehicle, which requires a large amount of cobalt to produce, is the primary force propelling the cobalt boom. Electric car batteries require between five and fifteen kilograms of the metal, roughly a thousand times the amount in smartphone batteries.

Most global automakers are ramping up production of electrics in response to falling battery costs and aggressive government regulations, particularly in China, the world’s largest and fastest growing car market. Although electric vehicles make up less than 2 percent of auto sales today, analysts say they could account for more than half of new car sales by 2040.

How much is demand expected to grow?
Global demand for cobalt in the battery sector alone has tripled since 2011 and is expected to continue on this trajectory, rising from 46,000 metric tons in 2017 to around 190,000 metric tons by 2026, according to the industry analyst Benchmark Mineral Intelligence. The price of the metal has also soared, reaching more than $30 per pound by late 2017, up from an average of $18 in 2011.

Where are the world’s known cobalt reserves?
Most of the world’s cobalt supply comes from the DRC [PDF], part of Central Africa’s copper belt. The southeastern city of Lubumbashi, in Katanga Province, is viewed as the country’s mining capital.

Australia and Cuba have the second- and third-largest cobalt reserves, respectively, followed by the Philippines, Zambia, Canada, and Russia. The United States is far down the list, holding just 23,000 metric tons in reserves.

Global Cobalt Reserves, 2017
What does the cobalt mining industry look like?
The government in a country with cobalt reserves, such as the DRC, grants permits to a small number of mining companies. Dominating the cobalt extraction market are the Swiss firm Glencore PLC and China Molybdenum Co., among a few others. Once granted rights to a particular site, Glencore, as one example, extracts the cobalt during copper mining and sells it to a battery chemical processor, most likely a Chinese firm, such as Zhejiang Huayou Cobalt. This company sells the refined product in its chemical form to a battery component manufacturer, which then sells its product to a battery maker, say South Korea-based LG Chem or China-based CATL.

Cobalt Supply Chain
Artisanal miners in the DRC, known by the French word for diggers, creusers, are responsible for up to one-fifth of the cobalt coming out of the country, adding yet another facet to the metal’s complex supply chain. There are roughly two hundred thousand creusers [PDF] in copper-cobalt mines, according to government figures, though two million people may be mining various minerals across the country. In 2014, the UN Children’s Fund estimated that forty thousand children were working in mines. The government opened the industry to creusers following the collapse of the state mining company in the 1990s, though they are restricted to sites where industrial mining is not viable.

What are some of the industry’s challenges?
Rigid supply. The cobalt industry is generally considered inflexible because production depends almost entirely on the economics of copper and nickel mining. This means that rising global demand for cobalt is not enough to drive more cobalt mining, especially if prices dip for the base metals. (As of 2015, the only place where cobalt was the principal mineral mined was Morocco.)

DRC political risks. Many industry analysts, companies, and governments have raised concerns over the concentration of cobalt mining in the DRC, which has long been plagued by corruption and political volatility. Should instability disrupt mining operations, no other country would be able to increase production enough [PDF] to meet global demand, write experts from the U.S. Geological Survey.

If push does come to shove, the cobalt that is already in China will stay in China.
Caspar Rawles, Benchmark Mineral Intelligence
Chinese supply-chain dominance. Chinese firms produce more than half of the world’s refined cobalt and more than three-quarters of the world’s cobalt chemicals—the form needed for lithium-ion batteries—and many non-Chinese manufacturers are worried about their future access to the mineral. “If push does come to shove, the cobalt that is already in China will stay in China, for Chinese producers, rather than exported to external battery companies,” says Caspar Rawles, a cobalt analyst for Benchmark.

Human rights and environmental hazards. Advocacy groups have raised alarm over unsafe working conditions and the use of child labor in mines, particularly in the DRC, as well as environmental damage, including air and water pollution. The DRC’s artisanal mining sector is virtually unregulated, allowing rebel militias and corrupt government soldiers to control mining sites. As a result, many workers are vulnerable to injury, long-term health problems, and death.

How are the various industry players responding?
Faced with increased competition and the possibility of a cobalt crunch, car and battery makers such as Panasonic, Samsung, Tesla, and Volkswagen are jockeying to secure a steady supply. Some manufacturers are going directly to the source instead of component suppliers: In 2018, both Apple and Samsung were reportedly in negotiations to buy long-term supplies of the metal directly from miners, a kind of deal that Benchmark’s Rawles says may become more common as the global supply tightens. At the same time, German automaker Volkswagen signed deals with several Asian firms for tens of billions of dollars worth of battery components. Some of the largest battery makers are seeking to avoid the Kinshasa-Beijing supply chain altogether, turning instead to Australia and Canada, countries with more modest cobalt reserves, to diversify their sourcing.

In the DRC, President Joseph Kabila has sought to take advantage of the cobalt boom: In March 2018, his government increased royalties and taxes on mining firms with the aim of boosting state revenue. However, some analysts, such as researcher Ben Radley, argue that mining companies will likely use controversial accounting practices to avoid the new taxes.

Meanwhile, China sees electric cars as a strategic industry, and it is pursuing a range of policies intended to put the country in a dominant position, including vehicle subsidies, production quotas, and higher fuel economy standards. It has also made moves to lead oversight of the cobalt supply chain. In 2016, its chamber of commerce for metals established the Responsible Cobalt Initiative, comprising more than two dozen member companies, including Apple, BMW, Dell, Huawei, LG Chem, Samsung, Sony, and Volvo. Other groups are exploring the use of blockchain technology to track the cobalt supply chain.

President Donald J. Trump has sought to prevent the United States from becoming reliant on foreign mineral resources, including cobalt. In late 2017, he directed federal agencies to identify new sources of “critical minerals” and increase domestic mining and production. Cobalt is also among more than two dozen raw materials [PDF] the European Union has declared “critical,” noting the risk of supply shortage and potential repercussions for the region’s economy.

Are there alternatives to cobalt?
Research into decreasing the amount of cobalt in lithium-ion batteries or replacing cobalt with alternative metals or compounds in batteries has swelled in recent years. As one example, some battery makers have explored boosting the amount of nickel in electric car batteries to take the place of some cobalt.

Experts warn, however, that they may not be as cost-effective and that, without the same qualities that make cobalt such an attractive component, replacing the high-demand metal with something else could jeopardize product performance. Feasible alternatives using less cobalt are years away, while wholly new battery technologies may not be ready for commercial testing for decades.
Sienna looks for cobalt in Sweden |
Sienna Resources (TSXV: SIE) announced that it has started an extended sampling and geophysical program on the Slättberg nickel-copper cobalt project, located 25 kilometres northwest of Falun, Sweden. In a press release, the Vancouver-based company explained that the historic mining camp hosts cobalt-nickel-copper rich massive sulfide mineralization.
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Cobalt Won't Slow Down EV Adoption
In the past two years, cobalt prices have more than tripled from roughly $25,000 per metric ton to more than $79,000 1 in response to supply constraints anticipated as electric vehicles (EVs) continue to gain traction. In 2017, the Congo accounted for 58% of global cobalt production, explaining the fear that geopolitical instability will cause shortages.
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China goes all out to secure lithium, cobalt supplies – key to dominating the world electric car market

Cobalt, however, faces bigger challenges than lithium, which has seen bigger price gains over the past two years amid lack of certainty over new supplies, stockpiling and traders taking speculative positions

The emergence of electric vehicles has seen Chinese companies go on a global hunt to secure lithium resources. Now they are rapidly clinching deals to get hold of cobalt whose supply is even more concentrated geographically.

Cobalt, a hard, shiny, greyish metal, a by-product of copper and nickel mining, has seen the biggest price increase among various metals used to make electric vehicle batteries after a demand boom began two years ago, according to Ciaran Roe, global manager of metals pricing at S&P Global Platts.

“Unlike manganese, lithium and nickel, cobalt is limited in supply not just in terms of tonnage but also origin,” he said. “I can’t think of another commodity where supply is so reliant on one origin nation than cobalt.”

Almost 60 per cent of the world’s unrefined cobalt output last year came from the Democratic Republic of Congo in central Africa, whose output was more than 10 times that of the second producer Russia, according to US Geological Survey. Congo also has just over half the world’s reserves of the metal.

Although demand for lithium and cobalt is expected to rise two to three-fold in the eight years to 2025, the sources of new supply of cobalt is far less clear than that of lithium, Roe noted.

While various new mines are in the pipeline in Canada and Finland, it will take time for them to ramp up production, he said.

Even accounting for battery producers’ efforts to reduce reliance on the metal, cobalt demand could rise to almost 300,000 tonnes in 2030, the International Energy Agency – which represents 29 major oil consuming nations – said in a report last week.

“Cobalt prices have nearly tripled in the past two years. This is exacerbated by stockpiling activities at different levels along the supply chain and traders taking speculative positions,” the IEA said.

Last year global refined cobalt production was around 105,000 tonnes, according to Robin Goad, CEO of Canada-based Fortune Minerals which is developing a mine in the nation’s northwest.

Goad said it typically takes a mining project in Canada over a decade to start production after a deposit is first identified.

Its Nico cobalt-gold-bismuth project, which is projected to derive 65 per cent of revenues from cobalt, was discovered in 1996.

With some C$125 million (US$96.5 million) spent on its development so far, if commercialised, Nico’s feasibility studies from 2014 show that it could be one of the world’s cheapest cobalt projects on an operating cost basis, according to Goad.

But because of the estimated high capital investment requirement of C$589 million – including a refinery – Fortune is seeking a partner to contribute most of the equity capital to lower the project’s interest expense.

Previously, power shortages and insufficient transport infrastructure in Congo had not stopped Henan province-based China Molybdenum from agreeing to a US$2.65 billion deal in 2016 for a 56 per cent stake in Tenke Fungurume Mining, which controls one of the world’s largest resources of copper and cobalt.

“China has gone further than any other country to secure the raw materials it needs to power its new energy vehicles, including acquisition of mines,” said Fortune’s investor relations manager Troy Nazarewicz. “By increasing its control over cobalt supply, it is effectively controlling the lithium-ion battery industry to become the world’s electric vehicle production centre.”

GEM, a Shenzhen-based battery producer and recycler, struck a deal in March this year to buy a third of the cobalt output from projects owned by international commodities major Glencore over the next three years.

In the lithium sector, Sichuan province-based Tianqi Lithium’s agreement last month to buy a 23.8 per cent stake in Chile’s Sociedad Quimica y Minera for US$4 billion could see its global share of the metal’s output rise to 18 per cent from 13 per cent, said David Merriman, deputy manager of battery and technology materials division at London-based Roskill Information Services.

The deal, if completed, will see it gain substantial influence over two major projects in Western Australia and Chile that together supplied 46 per cent of the world’s lithium in “lithium carbonate equivalent” terms last year, according to a GF Securities report.

Some 53 per cent of global cobalt consumption was in rechargeable batteries last year, while 16 per cent was used in metal alloys to make them strong and wear-resistant, according to cobalt products trader Darton Commodities.

Cobalt and nickel are typically the two most valuable materials in an electric vehicle battery.

As many as 777,000 electric and plug-in hybrid cars were sold in mainland China – the world’s largest market – last year, 53 per cent more than in 2016. Beijing is targeting new-energy vehicles to account for a fifth of all car sales by 2025, up from 3.1 per cent last year.

Roe said battery metals’ demand and prices are hard to predict because of quick and unpredictable technological advances in battery chemistry.

“This is a frontier market, where a lot of the supply chain still needs to settle down,” Roe said. “A lot of the technology and assumptions change quickly … in this environment forecasts and pricing change quickly.”

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Sienna Resources (TSXV: SIE) announced that it has started an extended sampling and geophysical program on the Slättberg nickel-copper cobalt project, located 25 kilometres northwest of Falun, Sweden.

In a press release, the Vancouver-based company explained that the historic mining camp hosts cobalt-nickel-copper rich massive sulfide mineralization. Therefore, its engineers will be taking samples of stream sediments, soil and glacial till in the areas where magnetic anomalies have been identified with the idea of determining the location of high priority drill targets.

"We are working on areas that historically showed some of the highest anomalies on the property and we look forward to using this data to refine the next phase of drilling," Jason Gigliotti, President of Sienna, said in the media statement.

Slättberg occupies approximately 12,733 contiguous acres and is home to at least 16 historic mines, with operations dating back to the late 1800s. According to Sienna, these mines are positioned along an east-west trend of massive sulfide occurrences developed in and around a similarly oriented body of leptite.