High Voltage: Non-DRC cobalt projects in demand as prices hit 3-year highs

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Our High Voltage column wraps all the news driving ASX stocks with exposure to lithium, cobalt, graphite, nickel, rare earths, and vanadium.

In November, cobalt metal prices in Europe rose by 10.4% to punch through the $US30/lb mark for the first time since late 2018.

This late year rally is underpinned by strong demand side fundamentals, limited metal production in China, logistical bottlenecks, and a bullish outlook for battery sector demand heading into 2022, says Benchmark Mineral Intelligence.

Benchmark expects prices to rise steadily into the New Year, “with some market contacts indicating that they expect prices to break the $35/lb level before year-end”.

“Indeed, Benchmark sources have indicated that cobalt metal demand from the battery industry in Europe and Japan is set to increase substantially in 2022,” it says.

Cobalt customers diversifying away from the DRC

The landlocked Democratic Republic of Congo (DRC) is a global giant when it comes to cobalt production. According to the United States Geological Survey (USGS), the DRC produced 95,000 tonnes of cobalt in 2020, accounting for 68% of global output.

It’s where China – the world’s biggest consumer by far — gets ~90% of its supply.

But some high-profile supply agreements have shown that European consumers are committed to diversifying away from problematic Chinese and DRC supply chains, Benchmark says.

“To an extent, supply chain players have shown willingness to accept higher costs in order to ensure ESG targets are met, making products more appealing to global automakers,” it says.

That includes prospective Norwegian cell producer, FREYR, which signed a supply contract with Glencore for 1,500 tonnes of cobalt metal in the form of ‘cut cathode’, sourced from Glencore’s Nikkelverk refinery in Norway.

Nikkelverk uses concentrate from Canada and recycled material as feed.

“Generally, cobalt metal in the form of cut cathode has not been utilised by the battery industry for conversion into cobalt sulphate, due to extended dissolution times and therefore higher conversion costs than more conventional cobalt metal briquettes, broken cathode and hydroxide,” Benchmark says.

Where’s is the non-DRC cobalt coming from?

Cobalt supply is expected to be dominated by the DRC for the foreseeable future.

That underscores the importance of cobalt projects in ‘de risked’ tier 1 jurisdictions – like those owned by Jervois Mining (ASX:JRV), Australian Mines (ASX:AUZ), Sunrise Energy Metals (ASX:SRL) Queensland Pacific Metals (ASX:QPM), Cobalt Blue (ASX:COB), red hot IPO Kuniko (ASX:KNI) and Metals X’s (ASX:MLX) nickel-cobalt spin-out Nico Resources, which is gearing up to list in December or January.

NOW READ: Cobalt stocks guide: Here’s everything you need to know

Battery Metals Winners and Losers

Here’s how a basket of ASX stocks with exposure to lithium, cobalt, graphite, nickel, rare earths, and vanadium are performing>>>

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