COB STARS ALLIGNING
John Peterson wrote a great article summarising the likely content of Cobalt in Lithium batteries (leading up to 2025) on March 1. 2018:
https://seekingalpha.com/article/41...distort-nickel-cobalt-demand-forecasts?page=5
This filled in some gaps regarding Cobalt demand in the next 7 years - Brief article summary: There’ll be a move to batteries with lower cobalt and higher nickel. The
NMC-622 battery has just started to be produced commercially and is the most likely dominant low-cobalt lithium battery by 2025 due to its greater stability and safety. The
NMC-811 battery’s a very low cobalt battery option, but has been technically difficult to keep stable and is therefore not yet in production.
See below Co estimates based on UBS model.
View attachment 1007524
The Cobalt market was 104 kt in 2017 and about 9kt of this was EVs. In the conservative (and less likely) scenario whereby technological challenges are overcome and NMC-811 batteries become the dominant battery – the world will need more than 88kt extra cobalt supply by 2025.
The more likely scenario is that the NMC-622 battery will be dominant and more than 174kt additional Cobalt supply will be required by 2025! COB will add about 4kt to this. Clean Teq another 3.2kt…..others?
Glencore’s Katanga mine in the DRC is the largest Cobalt mine in the world and has just had a 5 billion dollar processisng plant built. It will add 11kt cobalt this year and 36kt cobalt from 2019. Will there be a near term (2018-20) drop in cobalt price? Not likely – Such is the anticipated future demand imbalance, that if increased Cobalt supply causes the price to dip from current levels, expect stockpiling from the likes of apple, VW, BYD and others to provide strong price support.
Q: Will more Cobalt mines fire up in the DRC in the next 10 years? A: No
Why?
Summary of the new DRC Mining Code passed last week
* It dissolves the 10 year exemption for existing licence holders against new mining code laws. Existing miners were meant to be protected from mining code changes for 10 years. This has shocked the likes of Glencore.
* Cobalt Smelter royalties increased by 5 times from 2% to 10%.
* The introduction of a 50% super profit tax on commodities that have risen more than 25% above price used in mine feasibility studies. NB – Cobalt has risen well over 100% in the n last year and therefore this tax will apply to pretty much all Cobalt mines in operation.
As if to pour fuel on the fire, last month, the chief executive of state-owned Gecamines SA said the
Congo might re-nationalize the country's natural resources amid booming prices!
Miners will pass on the higher costs, resulting in a higher Cobalt price for consumers. Also, future mining investment in the Congo has been irreparably damaged. Watch as investors move from the DRC to predictable countries like Australia (the world's second largest source of Co).
Broken Hill looks set to be a future Cobalt pyrite hotspot and COB’s intellectual property could play a huge role in the company’s already bright future.
COB’s Processing
HPAL is the acid leach process required for Nickel Cobalt laterite deposits (majority of Oz deposits). It’s complicated and expensive to set up. Most HPALs cost well over 1 billion to set up (see Vale’s Goro which blew out to$4.3bil). COB is a copper pyrite deposit and has an estimated capex of only US $350m (450 AU) for their unique and proven pyrolysis setup which has elemental Sulfur credit as an end-product credit (rather than sulfuric acid waste).
The COB Capex also includes a refinery. Refined Copper Sulfate samples will achieve 80% cobalt price by weight (compared to 20% for Cobalt concentrate in most of the worlds cobalt mines) – This downstream processing provides huge value-adding advantages compared to peers - similar to my favourite Lithium play - KDR.
Exciting times
COB management are currently in Japan and Korea meeting with battery producers and leaving large volume samples of successfully processed finished product for testing.
The Congo mining code was in my opinion a HUGE de-risking event for COB. With its low CAPEX, low OPEX, potential for >0.4% Co to process and battery-ready end product, I am very much looking forward to the PFS in June, which will crystalise the project in the Insto’s minds.
COB is the most obvious choice in the mining space to become a multi-bagger IMO. Congats to those that get in under $1 - won’t be long before today’s price is a memory.
