Cobalt consumers were served another stark reminder of the need for more significant amounts of secure metal supply last month following a fatal mine collapse and a warning from UK scientists on diminishing reserves.
At least 19 illegal miners were killed at a copper and cobalt mine operated by Katanga, a subsidiary of Glencore in the DRC (Democratic Republic of Congo) last Thursday. Despite dipping 5pc, Glencore said the incident at the mine, which is frequented by around 2,000 unauthorised artisanal miners daily, will have no impact on Katanga’s forecast 24,000ts of copper production this year.
However, the news serves as a grim reminder of the issues associated with the cobalt sector’s over-reliance on the DRC, one of the poorest and most politically unstable nations in the world. Companies with operations in the DRC are currently facing challenges in the areas of environment, health and safety, and human rights when cobalt is extracted through artisanal mining. This dangerous practice makes up around 15-20pc of Congolese cobalt production. There are also concerns around the use of child labour in the nation, while the cost of doing business has also increased thanks to a recent mining code change that saw royalty costs shoot up to 10pc.
With around 60pc of the world’s cobalt currently being sourced from the nation, such issues can have a significant impact on both prices and supply. For example, prices soared last October after Glencore abruptly halted sales of the metal from the country after discovering uranium at its key mine.
In response to the DRC’s ongoing volatility, leading car maker BMW even revealed plans in April to stop buying cobalt for its electric vehicles (EVs) from the Democratic Republic of Congo (DRC) in 2020/21. If more carmakers were to follow BMW in cutting off their ties to DRC’s cobalt market, then it raises the question of where supply is going to come from – especially if EV demand explodes as predicted.
This issue was highlighted once again last month by British scientists who warned that if EVs replace the UK’s 31.5m cars by 2050, as per government plans, it will require twice the current annual global cobalt supply. In a letter to the country’s Committee on Climate Change, the team of scientists said replacing the vehicles will require 207,900ts of cobalt as well as 264,600ts of lithium carbonate and 2,362,500s of copper.
Encouragingly, the last months have seen developed nations such as the US launch renewed efforts to increase domestic cobalt supply. For example, in May, US Senator Lisa Murkowski announced plans to introduce a Minerals Security act alongside fellow senator Joe Manchin. The bill would support the development of cobalt, lithium, graphite and other electric-vehicle supply chain minerals mines in the US. Meanwhile, last month saw US President Donald Trump and Canadian Prime Minister Justin Trudeau announce plans to develop a plan for US-Canada collaboration on critical minerals such as cobalt.
An ongoing move away from the DRC against a backdrop of growing cobalt demand and political recognition creates a strong backdrop for junior miners with cobalt assets in stable jurisdictions. One such example is Global Energy Metals (TSX-V:GEMC | OTC:GBLEF), which is currently preparing to build upon its strong UK shareholder base by co-listing in London. The firm is developing a diversified global portfolio of cobalt assets, including project stakes, projects and other supply sources.
The business’s flagship asset is the Millennium Project in the world-renowned Mt. Isa region of Queensland, Australia, where it just recently announced the acquisition of 100pc of it along with two prospective cobalt-copper assets making it one of the largest cobalt focused explorers in Queensland by land size. It is also developing two Nevada-based battery metal sites called the Lovelock Cobalt Mine and the Treasure Box Project. These are located just 150km east of Tesla’s Gigafactory. Finally, the business currently owns 70pc of the Werner Lake cobalt mine in Ontario Canada.
On last month’s developments, the company’s chief executive and director Mitchell Smith said: ‘It is tragic to learn of the deaths of so many artisanal miners in the DRC. Unfortunately, this tragedy highlights the delicate reality that nearly twelve million Congolese rely on artisanal mining as a way to find the means to escape poverty. Approximately a third of the cobalt supplied in 2018 was as a result of artisanal mining, some of which was done illegally, emphasising the need to establish responsible mining initiatives and support from all levels of the supply chain and governments. It also sets in motion the need for a diversified supply chain to break the nearly monopolistic supply of cobalt production from a fragile and unstable jurisdiction. Core to this is the need for capital investment and funding to allow for companies to advance projects in safe, top-tier mining jurisdictions like Global Energy Metals has in Australia, Canada and Nevada, that can supply critical metals, including cobalt, to feel the growing demands brought on by the electric vehicle and energy storage revolution underway.’
Author: Daniel Flynn
The Author does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.
The Author has been paid to produce this piece by the company or companies mentioned above.
Catalyst Information Services Ltd, the owner of MiningMaven.com, has been paid for the production of this piece by the company or companies mentioned above.
MiningMaven.com and Catalyst Information Services Ltd are not responsible for its content or accuracy and do not share the views of the author. News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance