In early 2018, cobalt prices peaked above $US90,000/t (~$US43/lb) and numerous ASX explorers were jumping on the battery metal bandwagon.

When prices started falling, these stocks, realising they had jumped the gun instead, moved onto more palatable metals like gold.

Cobalt – used to stop batteries blowing up — quickly became very unpopular.

A  rebound in late 2019 when miner Glencore mothballed the largest cobalt mine in the world was short-lived, and prices soon fell back to close to a 10-month lows in June 2020 amid the COVID crisis.

Since then, things have looked a lot healthier as the EV sector starts to ramp up. For real this time.

Benchmark Mineral Intelligence says cobalt sulphate prices increased by ~3.2 per cent in December to hit a YTD (year to date) high.

The sulphate price today is around $US19/lb: far higher than March lows of $US12/lb, but still pretty low in historic terms.

And yet as the EV sector ramps up in the coming years Benchmark is forecasting the cobalt market to move into structural deficit.

When demand exceeds supply, prices go up.

The major players know this.

Recently, China Molybdenum paid $US550m for a 95 per cent stake in the Kisanfu copper-cobalt project in the DRC.

Owner Freeport had previously tried to offload the Kiansfu operation to China Moly for $50m in 2016, who didn’t want it at the time.

“China Moly’s decision to acquire the mine, which had been available at less than 10 per cent of its current value only three years ago, is a sign of a new trajectory for the cobalt industry and its long-term place in the battery supply chain,” Benchmark says.

Another bullish signal: the cobalt supply chain is transitioning away from single-year agreements towards multi-year contracts, designed to provide battery makers with security of supply.

Miner Glencore has now signed long term deals with Umicore, Samsung, SK, Gem, and at the moment is also in deals with Tesla and BMW.

All are on a long dated basis.

“If you go back 18 months to 24 months ago major cobalt producers wouldn’t sign any deals over one year,” Cobalt Blue (ASX:COB) chief exec Joe Kaderavek.

“What’s happening today is the recovering cobalt price is creating anxiety.

“These suppliers are taking multiyear deals so they can plan for future production.”

Cobalt Blue, one of the last remaining pure play cobalt explorers on the ASX, is planning pilot plant production for Q1 this year.

A pilot plant is smaller version of the real thing, designed to test whether the process works in the real world.

It’s guys like COB – who did the hard yards during the battery metals winter of 2018-2020 – which will be first in line to reap the benefits of a surging EV market.

Other advanced cobalt players include Australian Mines (ASX:AUZ), Clean Teq (ASX:CLQ), Jervois (ASX:JRV), and a handful of others. But that’s about it.

COB, AUZ, CLQ and JRV share price charts


“I think most cobalt projects have been on hold for at least the last 18 months to two years,” Kaderavek says.

“In that time period we’ve done a heck of a lot of work.”

COB says it is currently working with 15 global partners who have expressed interest in receiving cobalt samples, including big players like LG International, Mitsubishi Corporation and Sojitz Corporation.

“We are getting is lot of commercial buyers – battery makers, trading houses, and mining companies putting their hand up for product,” Kaderavek says.

“The production forecasts that battery makers are seeing suggests 5x increase of EVs being sold in 2022 compared to 2020.

“One of our key European commercial partners has indicated there is now an active scarcity of cobalt for their requirements over the next three to four years.”

Cobalt Blue’s internal numbers suggest that excess global cobalt inventories – a key reason prices have been kept low — will be used up in 2021.

“In about 12 months there will be a big pick-up in the cobalt price,” Kaderavek says.

“2022 onwards is going to be very, very exciting.

“You don’t have to believe me on that – there will be more and more of this narrative coming out over the next six months.”

Industry players are predicting a long term average cobalt price of between $US25/lb and $30/lb. Cobalt Blue’s Broken Hill operation is expected to have an AISC of about $US12/lb.

That’s a decent profit margin even at today’s prices, and the “smart money” is taking notice.

Cobalt stocks like COB are starting to move in the right direction, once again.

“While that it is good, it really just gets us back to where we were at IPO,” Kaderavek says.

“At the moment the spot price of the metal is still lagging.

“But we are seeing some of the smarter money overseas reading the tea leaves and saying ‘this is coming. These valuations are really, really cheap’.”