2019 hasn’t been a good year for cobalt.

After hitting a record $US95,000 ($138,081) a tonne in March 2018, the battery metal became a market darling and a drawcard for a lot of explorers.

But in 2019, the cobalt price wiped off nearly 74 per cent of its value to hit a three-year low of $US25,000.

The price has since recovered some ground but is well off its peak.

Despite the falling price, the outlook for cobalt didn’t change — commentators still forecast strong growth in demand and a tightening in supply.

And experts are predicting a cobalt price recovery in 2020.

In this guide we’ll explain the factors that have been driving ASX cobalt stocks and what could drive demand – and stock prices – into the future.

What is cobalt?

Cobalt, which has the periodic symbol Co, is a hard, lustrous, silver-grey metal.

It can be magnetised and alloyed with aluminium and nickel to make particularly powerful magnets, as catalysts for the petroleum and chemical industries, and as drying agents for paints and inks.

But its importance in stopping batteries from blowing up has seen its use in lithium-ion batteries increase significantly.

Cobalt demand by industry. Image courtesy of Taruga Minerals.
Cobalt demand by industry. Image courtesy of Taruga Minerals.

Cobalt is used to stabilise the chemistry in the cathode of a lithium-ion battery.

Batteries include an anode (positive) and a cathode (negative) and the electrical current flows between the two.

The typical electric vehicle (EV) battery requires up to 9kg of cobalt and a standard laptop requires around 30g of the mineral.

This rising demand for cobalt in batteries was a big contributor to the price getting as high as it did.

Mining and production

There is very little primary production of cobalt, with 98 per cent of supply coming from either copper or nickel mines.

The copper belt in the Democratic Republic of the Congo (DRC), Central African Republic and Zambia yields most of the cobalt mined worldwide.

The Bou Azzer mine in Morocco is currently one of the world’s only operating primary cobalt mines and has been in operation since the 1930s.

Cobalt has been declared a critical mineral by the EU. Globally, only around 100,000 tonnes is produced each year.

Infographic courtesy of Cobalt Institute
Infographic courtesy of Cobalt Institute.

How cobalt is mined has become a major consumer issue because of the use of child labour in countries like the DRC, which supplies nearly 60 per cent of the world’s cobalt.

Major players like Apple and Ford are putting pressure on suppliers to prove they only buy cobalt from ethical miners.

In 2017, the London Metal Exchange launched its own investigation into whether or not any of the cobalt it was trading came from unethical sources.

This responsible sourcing of cobalt further impacted an already tight market, with end users refusing to buy cobalt that is mined by hand in the DRC.

Other factors that have contributed to lower supply include Glencore’s problems at its operations in the DRC.

Other factors that have contributed to lower supply include Glencore’s problems at its operations in the DRC.

In early 2019, Glencore told investors that a wave of supply from its subsidiary Katanga would be deferred until at least 2020 because the DRC government wasn’t convinced by the miner’s plan to remove radioactivity from the cobalt.

Glencore also suspended production at its 27,000-tonne-a-year Mutanda mine in November 2019 for two years.

Mutanda is the world’s largest cobalt mine accounting for about 20 per cent of global supply.

Argonaut mining and energy research director Matthew Keane told a Perth conference in December 2019 that the closure of the Mutanda mine would support a continued recovery in cobalt.

Demand driving ASX cobalt stocks

More sectors are electrifying as batteries become cheaper, according to Bloomberg New Energy Finance (BNEF).

Battery prices, which were above $1,100 per kilowatt-hour (kWh) in 2010, have fallen 87 per cent to $156/kWh on average in 2019.

By 2023, average prices will be close to $100/kWh, according to BNEF.

$100/kWh is important – this is the price commonly thought to be the point where EVs will start to reach price parity with internal combustion engine (ICE) vehicles.

And while some of the major carmakers want to cut back or eliminate their use of cobalt in batteries, Benchmark Minerals Intelligence estimates battery makers will need 152,000t each year of cobalt by 2024 — up from just 75,000t in 2019.

“Whilst the market is currently in oversupply, Benchmark Minerals expects the supply of cobalt raw materials, particularly cobalt hydroxide, to tighten in 2020 and stockpiles that have accumulated over the last 18 months begin to reduce,” it says.

“The closure of Mutanda has been a key factor in bringing the market deficit forward, which could see sustained price rises from H2 2020 as demand from the electric vehicle and energy storage markets continues to grow.”

Investing in ASX cobalt stocks

Here are some of the ASX small cap explorers that have exposure to cobalt.

Panoramic Resources (ASX:PAN) is being taken over by Independence Group (ASX:IGO) largely because of its Savannah nickel, copper and cobalt mine in Western Australia.

The project was mothballed in mid-2016 following the decline of the nickel price but was brought back online in late 2018.

At full production the mine will supply 10,800 tonnes of nickel, 6,100 tonnes of copper, and 800 tonnes of cobalt each year over an initial mine life of eight years.

Meanwhile, others are advancing towards production.

Australian Mines (ASX:AUZ) is working on securing an offtake partner and funding for its Sconi battery metals project in Queensland after a deal with Korea’s SK Innovations’ fell over.

The project is estimated to produce around 1.4 million tonnes of nickel sulphate and 209,000 tonnes of cobalt sulphate over its 30+ year mine life.

Australian Mines says that is sufficient cobalt and nickel to produce the equivalent of at least 3 million to 6 million electric vehicle battery packs.

Clean TeQ (ASX:CLQ) is on the hunt for a partner for its advanced Sunrise nickel-cobalt project in New South Wales. The project is fully permitted and development ready.

The company said recent strong metal price movements had prompted increasing interest from battery and car makers looking to identify and secure long-term sourcing options for battery-grade nickel and cobalt sulphate.

Clean TeQ’s goal is to have a 50 per cent partner signed on in the first half of 2020 to pave the way for a final investment decision in mid-2020.

Carnavale Resources (ASX:CAV) is working to expand the resources at its Grey Dam nickel and cobalt project in Western Australia.

The project hosts a nearly 15 million tonne resource containing 110,000 tonnes of nickel and 7200 tonnes of cobalt.

Partners in the Thackaringa cobalt project in New South Wales, Cobalt Blue Holdings (ASX:COB) and Broken Hill Prospecting (ASX:BPL), finally put their differences aside to reach an agreement that gives Cobalt Blue full ownership of the Thackaringa project.

Cobalt Blue has started building a pilot plant that it aims to commission in mid-2020 followed by the processing of a 4,000-tonne sample.

New World Resources (ASX:NWC) originally went all in on cobalt as it was taking off and started out as New World Cobalt.

However, it has since changed its name to reflect its expansion into other minerals such as copper, gold and zinc, though it did hang onto some of its cobalt projects.

New World fully owns the Colson and Elkhorn cobalt projects in Idaho.

The projects are located on a 60km‐long belt that hosts the “largest, high‐grade cobalt resources in the Western World”, according to New World.

Fellow explorer Jervois Mining (ASX:JRV) also has projects in the Idaho cobalt belt following its merger with eCobalt Solutions and M2 Cobalt.

Following completion of the eCobalt Solutions merger, Jervois immediately started working on an updated bankable feasibility study and an initial 1,820m diamond drilling program.

The BFS is slated for completion in March 2020.

Tyranna Resources (ASX:TYX), meanwhile, owns the Goodsprings cobalt and base metals project located about 50km southwest of Las Vegas, Nevada in the US.

The company is currently waiting on government approval to start drilling.