EDITOR: | June 30th, 2020 | 1 Comment

Tesla’s decision to source cobalt from Glencore raises concerns in the investment community about all electric vehicles

| June 30, 2020 | 1 Comment
image_pdfimage_print

As we move towards electrification of the global transport fleet one of the biggest concerns is the sourcing of cobalt. That is because approximately 70% of the world’s cobalt production comes from the Democratic Republic of Congo (DRC) – A country rampant with issues such as corruption, child labor and exploitation.

The recent Telsa’s decision to source cobalt from Glencore, along with others (BMW, Samsung SDI, SK Innovation, GEM Co, and Umicore) is very concerning. It means that all these companies are totally reliant on the DRC (excluding BMW who has secured Glencore’s Australian cobalt from Murrin Murrin) for cobalt. Furthermore it means that Glencore has locked in sales of about 82% of its current cobalt production, leaving very little available cobalt supply in the market.

The bigger question is: ‘When will car and battery manufacturers and western governments start to support western cobalt miners?’ Until they do that the electrification of the transport sector will be heavily reliant on the DRC and China, which represents a huge risk to the supply chain.

There are several good quality cobalt options without resorting to the DRC and China. Yes they will need financing and support, but in the long run some investment now is better than total disruption later. For investors it would also be wise to support the non-DRC cobalt miners. Firstly they are generally very cheap right now, and secondly if they can make it to production they will have multiple battery and car manufacturers lining up to secure a safe supply of cobalt. They may even pay a premium for safe cobalt supply.

The following cobalt miners do NOT source cobalt from the DRC and are worth serious investor consideration.

Producers (and country source of cobalt)

  • Sumitomo Metal Mining Co. (TYO: 5713 | OTC: SMMYY) – Sources from Philippines and Madagascar.
  • MMC Norilsk Nickel PJSC (LSX: MNOD | OTC: NILSY) – Sources from Russia.
  • Vale SA (NYSE: VALE) – Sources from Canada.
  • Sherritt International Corporation (TSX: S | OTC: SHERF) – Sources from Cuba and Madagascar.
  • Conic Metals Corp. (TSXV: NKL) – Sources from Papua New Guinea.
  • Korea Resources Corporation – Sources from Madagascar.

Juniors and potentially the next cobalt producers

  • Aeon Metals Limited (ASX: AML)
  • Ardea Resources Limited (ASX: ARL | OTC: ARRRF)
  • Australian Mines Limited (ASX: AUZ | OTCQB: AMSLF)
  • Bankers Cobalt Corp. (TSXV: BANC | OTCQB: NDENF)
  • Blackstone Minerals Limited (ASX: BSX | OTC: BLSTF)
  • BlueBird Battery Metals Inc. (TSXV: BATT | OTC: BBBMF)
  • Brixton Metals Corporation (TSXV: BBB | OTCQB: BBBXF)
  • Canada Nickel Company Inc. (TSXV: CNC)
  • Canada Silver Cobalt Works Inc. (TSXV: CCW | OTCQB: CCWOF)
  • Cassini Resources Limited (ASX: CZI) – To be acquired by OZ Minerals Ltd. (ASX: OZL | OTC: OZMLF)
  • CBLT Inc. (TSXV: CBLT)
  • Clean TeQ Holdings Limited (ASX: CLQ | TSX: CLQ | OTCQX: CTEQF)
  • Cobalt Blue Holdings Limited (ASX: COB | OTC: CBBHF)
  • First Cobalt Corp. (TSXV: FCC | OTCQB: FTSSF)
  • Fortune Minerals Limited (TSX: FT | OTCQB: FTMDF)
  • Fuse Cobalt Inc. (TSXV: FUSE | OTCQB: FUSEF)
  • GME Resources Limited (ASX: GME)
  • Havilah Resources Limited (ASX: HAV)
  • Jervois Mining Limited (ASX: JRV | TSXV: JRV | OTCQB: JRVMF)
  • Leading Edge Materials Corp. (TSXV: LEM | OTCQB: LEMIF)
  • Power Group Projects Corp. (TSXV: PGP)
  • Talon Metals Corp. (TSX: TLO) – Located in the USA

All of the above junior cobalt miners are located either in the safe jurisdictions of Canada or Australia and are featured on the InvestorChannel watchlist.

If the world wants to see a safe cobalt supply, free from the corrupt DRC issues, then the above junior cobalt miners will need to be supported. Together they can solve the problem of +70% reliance on DRC cobalt. The support that is needed is start up project funding (start up CapEx). USA, Europe, and other western governments can step in and offer low rate long term debt funding, just as what Japan did to support the start up of rare earths miner Lynas Corporation. Until this happens we will continue to be at the mercy of the DRC and Chinese supply chain.

“Cobalt is a key critical material needed in lithium-ion batteries used to make electric vehicles (EVs) – The Tesla Model 3 is by far the world’s best selling electric car”

Closing remarks

Demand for cobalt is set increase about fourfold over the 2020s decade based on my model forecast (assumes EV market share reaches 36% by 2030). This will most likely lead to severe cobalt deficits. New cobalt supply is extremely hard to bring on quickly, especially given most cobalt is produced as a by-product of copper and nickel production.

Cobalt is on the US list of critical materials for a good reason. It is needed in aerospace, jet engines (and military applications), and is a key component in lithium-ion batteries (essential for EVs and consumer electronics). Yes the EV related battery industry is reducing the cobalt per battery; however the better quality NMC, NCA, and NMCA batteries all require cobalt to keep the battery safe. Not enough cobalt and you get thermal runway (aka fire).

Just as what happened with uranium this year, and is likely to happen soon with rare earths; the US and Europe need to act now to develop a safe cobalt supply chain. If they don’t act soon then the West will be totally at the mercy of the DRC/China supply chain, which makes the West very vulnerable should trade war issues, cobalt shortages, or other supply chain issues continue as I would expect will be the case. The latest concern is that Glencore is now facing a Swiss corruption investigation related to its DRC activities. What would happen to cobalt supply if Glencore was halted in dealings with the DRC?

The world’s leading Li-ion battery supply chain expert Simon Moores (Benchmark Mineral Intelligence) appeared before the US Senate again last week warning that the US domestic supply chain build out is far too slow and that the US risks being left behind.

Let’s hope that the West finally wakes up before it is too late.


Matthew Bohlsen

Editor:

Matthew Bohlsen is a Senior Editor for InvestorIntel.com. With a Graduate Diploma in Applied Finance and Investment, and a Graduate Diploma in Financial Planning. He ... <Read more about Matthew Bohlsen>


Copyright © 2020 InvestorIntel Corp. All rights reserved. More & Disclaimer »


Comments

  • Rare Earths Investor

    “…the US and Europe need to act now to develop a safe cobalt supply chain. If they don’t act soon then the West will be totally at the mercy of the DRC/China supply chain…”

    I enjoy reading your articles which provide lots of descriptive information on the metals sector. However, IMHO, like the narrative out there presently, while you ask very relevant resource/trade-based questions, unfortunately, the storyline generally neglects the very real political issues that will impact such critical metals decisions over the next 12 – 24 months. For me, the bottom line is if the US does not lead (actionably) this decoupling of ROW and China re., critical metals value chain dominance, then it is highly unlikely to happen. Further, such national decisions will be ‘controlled’ by political dogma and environmental fundamentalism (focused within US, EU and AUS, etc., borders); perceived strategic needs will be secondary. As investors, we, therefore, need to consider how such political moves may play out in terms of which of the probably very few critical metals companies, might be ‘favored’ by certain political entities. Bottom-up study of companies is important to investor decision making, however, neglect of macro down political analysis may be very ill advised.

    Again, as usual JMHO GLTA.

    July 1, 2020 - 11:59 AM

Leave a Reply

Your email address will not be published. Required fields are marked *