Cobalt stocks guide: Here’s everything you need to know
Cobalt was the battery metal market darling in early 2018, hitting a record $US95,000 ($133,877) a tonne before starting its steep descent.
After hitting a bottom of $US29,000 a tonne in February 2019, wiping off very close to 70 per cent of its value, things are starting to look up again and the price is again on a northward trajectory.
Despite the falling price, the outlook for cobalt didn’t change — commentators still forecast strong growth in demand and a tightening in supply.
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.
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 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.
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.
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.
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 then reportedly slashed workforce numbers at the 27,000 tonne-a-year Mutanda mine, also in the DRC, amid rising production costs and an “uncertain political climate”.
The Mutanda and Katanga mines together were expected to contribute around 50,000 tonnes of mined supply in 2019, CRU senior analyst George Heppel said.
That’s about 30 per cent of global cobalt supply, and more than 40 per cent of DRC production.
“Given the expected reduction in output from Mutanda (as well as the halting of shipments from Katanga), we expect to see about 15,000 tonnes less output from the DRC in the first half of 2019,” Mr Heppel said.
The cobalt market was impacted in 2018 because of a widespread push by battery and car makers to reduce the amount of cobalt needed in batteries. This was because it was so high cost and hard to come by.
American car giant Tesla and Japanese electronics company Panasonic were the first to say they wanted to eventually stop using cobalt in their batteries altogether.
This sent ripples through the market, but battery metal price analyst Benchmark Mineral Intelligence weighed in saying that despite these bold promises, it expects the use of cobalt in lithium-ion batteries to triple by 2026.
“While efforts are being made to reduce cobalt dependency, the order of magnitude of electric vehicle (EV) growth sales will far outweigh this,” Benchmark Mineral Intelligence said.
In September 2018, the number of EVs sold throughout the world passed 4 million — and sales are increasing at an exponential rate, say researchers at Bloomberg New Energy Finance.
This is a drop in the bucket compared to recent worldwide car sales of about 88 million cars and light vehicles.
“We need to remember there are not many electric vehicles out there yet,” S&P Global Platts analyst Marcel Goldenberg said.
“Electric vehicles are the driver. That’s where the disruption is coming from, and that’s where you will see raw material demand coming from.”
But that could soon change. 2019 marks the start of an expected EV ramp-up for the world’s biggest carmakers.
For example, Volkswagen Group — which owns Audi, Bentley, Bugatti, Lamborghini, Porsche, SEAT, Škoda and Volkswagen — says it plans to spend more than $68.5 billion in the coming five years on EVs, autonomous driving, new mobility services and digitalisation.
Electric car makers are focusing on two battery technologies: nickel-cobalt-aluminium (NCA) which has been favoured by Tesla and nickel-manganese-cobalt (NMC or NCM).
The NMC chemistry is much more popular among Tesla’s rivals.
NMC batteries will account for about 70 per cent of the total lithium-ion battery market by 2026, Benchmark predicts.
Benchmark predicts Tesla will not be able to further reduce the use of cobalt in its NCA technology.
“There is little room left for Tesla to manoeuvre and further reduce the cobalt in its cells.
“Any new technology that could usurp NCA or NCM is on a 10-year horizon [and] cobalt’s use in lithium-ion batteries is here to stay.”
Materials technology company Umicore also believes cobalt could be tough to replace in batteries, with substitutes possibly leading to reduced performance.
“There isn’t a better element than nickel to increase energy density, and there isn’t a better element than cobalt to make the stuff stable,” Umicore chief Marc Grynberg said.
At least 10 per cent cobalt is needed in batteries for safety and longevity reasons.
Cobalt has a higher density – the measure of how much energy a battery can store – than most other battery metals.
There are over 120 small cap explorers that have exposure to cobalt, but not too many in production.
Here’s a list of ASX stocks with exposure to cobalt:
Swipe or scroll to reveal the full table.
Panoramic Resources (ASX:PAN) restarted production at its Savannah nickel, copper and cobalt mine in Western Australia late in 2018.
The project was mothballed in mid-2016 following the decline of the nickel price.
At full production the mine will supply 10,800 tonnes of nickel, 6100 tonnes of copper, and 800 tonnes of cobalt each year over an initial mine life of eight years.
Meanwhile, others are getting closer to production.
Australian Mines (ASX:AUZ) plans to start building its Sconi battery metals project in Queensland this year, with the first nickel-cobalt exports to Korean offtake partner SK Innovations’ European EV battery plant slated for 2022.
Following a 2-year construction period — followed by a 2-year ramp up — the $1 billion processing plant will produce 9,898 tonnes of cobalt sulphate and 70,894 tonnes of nickel sulphate each year.
Clean TeQ (ASX:CLQ) is aiming for first production in 2021 at its advanced Sunrise nickel-cobalt project in New South Wales. The project is fully permitted and development ready.
At full production, Sunrise would deliver 19,620 tonnes of nickel and 4,420 tonnes of cobalt each year for the first 10 years.
Clancy Exploration (ASX:CLZ) has acquired an initial 20 per cent stake in Atlas Managem S.A.R.L, which holds three Moroccan licences adjacent to the famous Bou Azzer cobalt mine.
The company can acquire up to a 100 per cent of Atlas in stages.
In the latter part of 2018, Carnavale Resources (ASX:CAV) repositioned itself as a battery metals player, picking up some promising projects that are highly prospective for nickel, cobalt and tin.
The company has a nearly 15 million tonne resource containing 110,000 tonnes of nickel and 7200 tonnes of cobalt at its Grey Dam project.
Carnavale is evaluating the potential for a shallow, low strip ratio open pit at Grey Dam.
CuDeco (ASX:CDU) is primarily a copper producer, but with its self-imposed suspension of operations at its flagship Rocklands mine in Queensland it is now looking for other ways to make money.
One of the things the miner is looking at is monetising the cobalt at its project. The company has partnered up with Cobalt Blue Holdings (ASX:COB) to assess the potential of using Cobalt Blue’s processing tech to recover cobalt from the tailings of the Rocklands mine.
Cobalt Blue is also a partner in the Thackaringa cobalt project in New South Wales with Broken Hill Prospecting (ASX:BPL).
The project hosts a resource of 111 million tonnes at 889 parts per million (0.09 per cent) cobalt-equivalent for 79,500 tonnes of contained cobalt.
Delecta (ASX:DLC), meanwhile, is an unusual entrant to the cobalt sector. The company started out as a sex toy seller.
But now it has acquired a cobalt and copper mine in Nevada, US that hosts high grades of up to 3.5 per cent cobalt and 36.7 per cent copper.
In general, anything over 2 per cent cobalt and 1.5 per cent copper is high grade.
The mine, which sits next to projects held by Aussie small cap explorers New World Cobalt (ASX:NWC) and Tyranna Resources (ASX:TYX), was a small-scale producer between 1917 and 1921.
Jervois Mining (ASX:JRV) is merging with eCobalt Solutions and M2 Cobalt to establish itself as a bigger cobalt player with greater scale, liquidity and diversification.
The tie-up will give Jervois a pipeline of cobalt projects in Australia, East Africa and the US.
Tiger Resources (ASX:TGS) is already a copper producer, but it wants to produce cobalt as well from its Kipoi mine in the DRC.
The company plans to build a water treatment plant so it can treat water and recover the cobalt from the mine.