Green Energy

The electric car story continues to gather momentum, with even major oil companies scrambling to join the coming green energy revolution.

Royal Dutch Shell has just announced a partnership with leading automotive companies to install super-fast chargers on European highways.

But as ever more companies sign up to the bright, shiny electric vehicle (EV) future, there is rising concern about the heart of darkness in this new technology: You can’t power an EV without a lithium-ion battery and, for now at least, you can’t make a battery without using cobalt.

And most of the world’s cobalt comes from the Democratic Republic of Congo (DRC), a country racked by political instability, legal opacity and, at its darkest, child labour in its mines.

This concentration of supply risk, both in terms of physical units and ethical sourcing, isn’t going away any time soon and could even worsen.

The dark side

The DRC accounted for 66,000 tonnes of global mined cobalt production of 123,000 tonnes last year, according to the US Geological Survey.

That’s the official sector. There is also an artisanal stream of production, some of it using child labour and some of it controlled by insurgent militias.

Quite how much cobalt this grey sector generates is the main “known unknown” in any analysis of world production.

But it is an undisputed fact that it has been seeping into the official supply chain for years.

Speaking at a London Metal Exchange (LME) seminar in October, Tony Southgate, head of cobalt marketing at Eurasian Resources Group, warned that “it’s almost inevitable (…) there are mobile phones in this room” containing cobalt from child labour in the DRC.

The issue has moved to the top of the LME’s own agenda after complaints that one of its registered brands, produced by China’s Yantai Cash Industrial, could include metal sourced from the dark side of the DRC cobalt sector.

The LME has written to producers asking for assurances on ethical and socially responsible minerals sourcing, while Yantai told the Financial Times that it is conducting its own due diligence exercise.

Legal opacity

Child labour is only one of multiple problems posed by the DRC to the emergence of an efficient raw materials chain for commodities used in batteries.

The legal and financial framework around the country’s mining sector is both opaque and tinged with political interference.

A recent study by US advocacy group The Carter Center described state mining company Gecamines as operating a “parallel state” and concluded that $US750 million ($943 million) from DRC’s copper mine privatisation process cannot be tracked reliably.

Such allegations are vehemently denied by the DRC government, but legal controversy is never too far away in the DRC mining sector.

Glencore, one of the leading operators in the country, has been sucked into a controversy surrounding the role of Israeli billionaire Dan Gertler in the acquisition of assets now operated by its Katanga Mining subsidiary.

Another operator, Groupe Forrest, is in legal dispute with Gecamines after the latter blocked access to its production site this year and awarded mining rights to another entity, Bloomberg reported.

This particular three-way court tussle is having a direct market impact because production at the site has been halted, taking about 5,000 tonnes of cobalt out of the supply equation this year.

The future is (DRC) cobalt

Frankly, if the rest of the world could, it would happily not source any cobalt from the DRC.

And the likes of Tesla and Apple are trying to do just that, working with potential future producers in Canada and the United States to create their own cobalt supply chains.

There is no shortage of junior miner contestants in this ethical cobalt beauty contest, but right now the DRC is the dominant producer. And it’s going to remain so for the foreseeable future.

Six of the top 10 cobalt-producing assets last year were located in the DRC, according to S&P Global Market Intelligence.

In 2022 the number will rise to nine out of the top 10, it forecasts. (“Cobalt – Supercharged as supply chain risk increases”)

Quite simply, unless someone works out how to engineer cobalt out of the lithium-ion battery, the world is going to need a lot more cobalt and it’s still going to get most of it from the DRC.

Dangerous dependency

This is a dangerously concentrated dependency, leaving a whole supply chain beholden to the political, legal and ethical uncertainties surrounding the DRC’s mining sector.

The only comparison, S&P Global suggests, is a similar concentration of platinum production in South Africa.

When that country was roiled by a wave of industrial action in 2014, it translated into a 20 per cent dent in global supply that year. At least there were above-ground platinum stocks to fill the supply gap.

Whether there would be sufficient inventory of cobalt to buffer the market against serious disruption in the DRC is a very moot point.

The arrival of automotive companies to this dysfunctional market could in theory be a game-changer if they stimulate more supply and force a collective industry move to responsible sourcing.

A template already exists in a programme aimed at improving transparency in the tin-tantalum-tungsten mining sector of central Africa, including particularly challenging operating environments such as Kivu Province in the DRC.

Right now, however, a company such as Volkswagen is still at the early stage of simply trying to secure enough units to deliver on its electrification promise.

Attempts to lock in future supply at prices below current levels have not yet yielded any tangible results.

VW and other automakers are learning, to quote Rebecca Gordon, head of technology metals at CRU, “the value of cobalt in the ground”.

Investing at the mine site would be one way of simultaneously ensuring supply in outright tonnage terms and in socially acceptable terms.

Most car companies are still understandably wary of getting involved at such an upstream part of a supply chain.

But if they don’t, they will remain exposed to whatever happens in the heart of darkness that is the DRC.

With all eyes on the electric vehicle (EV) market boom, heavy scrutiny is emerging regarding the ethics of current cobalt supplies. We’ve analyzed every aspect of the EV boom, and our biggest alarm comes from a Cobalt shortage and the lack of ethical companies, EV makers buy from.

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Our due diligence indicates the following company: Cruz Cobalt Corp. (OTC: BKTPF / TSX.V: CUZ), a junior resource company strategically positioned with NINE Cobalt properties, in politically stable, ethical, and environmentally responsible North American mining jurisdictions.

The first true crisis in the electric vehicles market has begun to alarm both consumers and manufacturers alike—the cobalt supply.

With 65% of the world’s cobalt coming from the Democratic Republic of Congo (DRC), stability and ethics in the cobalt market is always going to be in question. [1]

In just one year, the price of cobalt has increased nearly 230%.

Currently, one metric ton of cobalt has recently hit as high as US$68,000, whereas this time last year, cobalt was only going for $29,7500. [2]

Cobalt is critical to the makeup of most new lithium batteries—see infographic.

And now the lithium-Ion battery market is expected to surpass $53 billion by 2024—Hence, it’s not surprising that the demand for the metal just keeps on rising.

Incentive to produce cobalt is higher than they’ve been in 10 years—resulting in some producers cutting corners, and harrowing reports of child labor.

So now, along with the positive feeling that comes with shifting towards more electric vehicles being on the road, the market is slowly experiencing the horrors of the cobalt market that’s supplying the batteries in new EVs.

The backlash is still just brewing, but when it becomes more well known, it’s not going to be pretty.

DESPERATE CALLS FOR ETHICAL COBALT

According to Amnesty International’s Time to Recharge report, almost 30 major downstream companies have been flagged by the NGO as not taking adequate action to comply with international standards on cobalt mining.

Causing most of the alarm are the implications of child labor in the sector.

Cobalt refiners are now demanding proof from suppliers showing their raw materials aren’t produced with child labor.

But as cobalt suppliers are scrutinized for their ethical standards, the demand from car manufacturers isn’t slowing down.

Both BMW and Volkswagen have voiced their intentions to secure more and more cobalt for their EVs.

In Volkswagen’s case, the automaker won’t let their desperation to secure cobalt impact their standards, having already walked away from deals that didn’t meet their expectations of supply, cost, capacity, expansion, sustainability, and transparency.

Now that BMW has announced a $237 million investment into a new battery prototype center in Munich, competition for the limited supply of ethically acceptable cobalt just got even more fierce. [3]

The biggest benefactors of this cobalt demand boom are obviously the cobalt miners.

Active cobalt players had a fantastic 2017, continuing the upward climb seen over the last few years. Among our surveyed group, our three leading selections saw year-to-date increases of 690.17%, 158.97%, and 108.50% respectively—and up 762%, 197.86%, and 129.55% Year-Over-Year.

NOTE: Some of the world’s leading cobalt producers have operations on the ground in the DRC, which could affect their future successes, if they’re unable to prove the ethical sourcing of their supplies.

Through our research, the cobalt space has room for many more winners, potentially: Cruz Cobalt Corp. (OTC: BKTPF / TSX.V: CUZ)

— but in order to get a better grasp of the potential, we need to look at the best performers of 2017.

After we sampled a group of earlier-established cobalt players, we noticed a trend—All of these companies have had cobalt as a primary focus during this remarkable run for the metal.

Katanga Mining Limited – 690% gain – hit their stride on their DRC mining operations, including the Kamoto Underground Mine, and the KOV Open Pit Mine when cobalt prices took off.

eCobalt Solutions – 158.97% gain – made big strides on their Idaho Cobalt Project as a near-term, environmentally-permitted primary cobalt project in the US when the cobalt run began.

Fortune Minerals Limited – 108.50% – high cobalt demand led to examination of feasibility for 20-30% production increase on upcoming NICO Cobalt-Gold-Bismuth-Copper Project in Canada.

Across all three, that’s an average gain of nearly 320%.

Much BIGGER Gains to Come for Cobalt Miners with Provably ETHICAL Supplies

As the technology demand for cobalt surges, major players such as Tesla and others in the battery sector are going to put more pressure on producers to assure their supplies were produced ethically.

Oliver Zipse, board member of BMW has stated the sourcing of cobalt as “the most important question” his company must address before producing their own battery cells.

“For all these elements, we have a detailed strategy for the future that secures our volume need as well as the origin and the type of production, so that we can obtain it in good conscience,” Zipse told Bloomberg.

BMW, Volkswagen, Ford, Honda, Apple… Pretty much EVERY major producer of lithium batteries and electric vehicles are vowing to address the ethical source of cobalt.

Therefore, we believe that companies with ZERO ethical complications will receive favorable treatment from Big Battery.

That is why we believe we’ve found one company destined for big gains, as they develop ethically-stable, environmentally responsible cobalt: Cruz Cobalt Corp.

Cruz Cobalt Corp. Has Secured Nine North American Cobalt Projects

Taking no risks in dealing with the blowback from the darker side of the cobalt market, Cruz Cobalt (OTC: BKTPF / TSX.V: CUZ)

has very wisely secured what looks to be a very promising portfolio of ethically compliant cobalt projects.

There are many compelling reasons to look at Cruz Cobalt as a standout in the junior cobalt space—NINE to be exact.

Cruz Cobalt strategically acquired 7 cobalt projects in Canada (BC and Ontario), one in Idaho, USA, and another in Montana, USA—all of which are very mining-friendly jurisdictions, with NO mining issues regarding child labor whatsoever.

And they’re not inactively sitting on them.

On its four Ontario cobalt prospects Cruz recently engaged airborne surveys, which amassed additional data to uncovered new cobalt targets. In total, the four prospects cover 8,725 acres, all of which are near the city of Cobalt, Ontario.

Cruz has already mobilized crews and commenced work programs on the Idaho Star Cobalt Prospect in Idaho, and on the Chicken Hawk Cobalt Prospect in Montana—both of which are 100%-owned by Cruz.

The company’s War Eagle Cobalt Prospect in British Columbia spans 4,935 acres, and covers a past producing mine. Cruz will be starting operations on the project in the very near future.

Cruz President James Nelson has said of his company’s strategy: “Cruz employed early mover advantage as Cruz has been able to acquire, what we feel is one of the best collections of high-grade cobalt prospects in North America before the majority of the recent cobalt entrants were in the space.”

With NINE historically high-grade cobalt projects in four different safe, mining-friendly North American jurisdictions with NO ethical issues, we believe that Cruz is destined to be rewarded for their early mover status in the cobalt space.

The Cobalt Space Has Produced Multiple Stocks with Significant Returns in the Last Year 

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FOR COMPARISON TO OTHERS:
Cruz Cobalt Corp. – OTC: BKTPF // TSX.V: CUZ

Market Cap: $15 million
Cruz Cobalt is a junior Canadian exploration company exploring for high-grade cobalt projects in politically stable, environmentally responsible and ethical mining jurisdictions. Headquartered in Vancouver, Canada, Cruz holds interests in 9 projects in North America, including 7 projects in Canada, one project in Idaho, USA, and another in Montana, USA.

Larger Cobalt Mining Companies That Are A Worthwhile Study

These stocks represent some of the early leaders who have already experienced a major lift from the meteoric rise in the cobalt market. We don’t believe you’ll see them receive the same kind of market appreciation in 2018 that our feature company could produce, but they are solid examples of just how much profit the cobalt market is already yielding.

eCobalt Solutions
OTC: ECSIF // TSX: ECS
Market Cap: $135 million
eCobalt Solutions is a Canadian mineral exploration and development company with interests in Canada, USA and Mexico. Its primary asset is the Idaho Cobalt project, located in Lemhi County, Idaho, producing battery-grade cobalt salts.

Katanga Mining Limited
OTC: KATFF // TSX: KAT
Market Cap: $1.8 billion
Katanga Mining engages in copper and cobalt mining in the Democratic Republic of Congo. Based out of Whitehorse, Canada, Katanga Mining Limited is a subsidiary of Glencore International AG, and is involved in the operation of multiple producing mines in the DRC.

Fortune Minerals Limited
OTC: FTMDF // TSX.V: FT
Market Cap: $62.9 million
Founded in 1988 and headquartered in London, Canada, Fortune Minerals explores for and develops gold, cobalt, bismuth, copper, silver, lead, and zinc deposits in Canada. The company explores for It primarily holds 100% interest in the NICO gold-cobalt-bismuth-copper project located in the Northwest Territories.

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Timing is everything. Successful junior mining companies tend to receive a market boost when they have early mover status. Quietly accruing a portfolio shows foresight before the market wakes up to the potential in an blossoming sector.

Cruz Cobalt has potentially set itself up for big success in 2018, as it continues to grow a very respectable cobalt portfolio while the market wasn’t paying attention. There’s a good chance the market will start to pay attention as the company rolls out crews on each asset, solidifying a year of steady news flow to bring more eyes to the story.

We like active juniors, and Cruz is gearing up to be quite active in the future. But we also love the fact that the company has established itself as a pure-play cobalt company with 100% ethically compliant cobalt prospects.

We believe they’re ahead of the curve with the “Ethical Cobalt” side of things, having the foresight to start the process of securing ethical cobalt many months ahead of the backlash the sector is getting in the media.

This company shows all the signs of a future ethical cobalt producer, with a very intriguing portfolio of assets, and a very active year of news flow ahead. Here’s what stands out for us for Cruz Cobalt:

• Early mover status in the ethical cobalt space
• Nine intriguing properties with historically high-grade cobalt deposits
• Hedged across four different safe and stable mining-friendly jurisdictions
• NO risk of ethical blowback
• Fully cashed up and already commencing operations
• Significant news flow and opportunities ahead

The Cruz Cobalt team has put together a good looking cobalt portfolio with plenty of room for big gains ahead in the near future—all the pieces seem to be falling in place.

The cobalt boom is still in its early days, with the stability of DRC-based mining operations constantly in question. Disruptions, transparency issues, and a very dark narrative implying child labor in some mining operations in the region has battery manufacturers demanding ethical change… NOW.

The calls for cobalt supplies that align with the understandably high moral standards of consumers are only going to get louder in the days to come.

Early buyers in the EV market have a reputation of holding their products to high levels of accountability. So, look for possible large-scale injections of capital coming from cobalt buyers to move up the schedule for ethical cobalt production.

The lack of ethically compliant cobalt is currently quite dire, and the market will quickly move to solve the supply gap.

It’s our belief that early investors getting ahead of the real push to secure these safe cobalt supplies will experience the biggest gains.

Lithium News Group
Editorial Staff

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Sources

1. Reuters.com – https://www.reuters.com/article/volkswagen-cobalt/rpt-volkswagens-talks-with-cobalt-producers-end-without-deal-idUSL8N1NY2K1
2. Metalary.com – https://www.metalary.com/cobalt-price/
3. Business Insider – https://markets.businessinsider.com/news/stocks/Lithium-Ion-Battery-Market-Will-Achieve-9-CAGR-To-Surpass-53-Billion-By-2024-1008298400
4. Katanga Mining Limited – https://www.katangamining.com/
5. eCobalt Solutions – https://www.ecobalt.com/
6. Fortune Minerals Limited – https://www.fortuneminerals.com/
7. Cruz Cobalt Corp. – https://www.cruzcobaltcorp.com/

 

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The mining industry is very diverse and in recent years, technological advancements have raised demand for certain minerals like Lithium, which is now widely used in researchable batteries. Lithium-ion batteries are an efficient source of energy for rechargeable storage devices, capable of expanding battery durability, and are leading to an increasing power source for consumer electronics including hybrid and electric vehicles.

According to a research by Techsci Research, the global lithium-ion battery market is projected to grow at a CAGR of over 17% during 2016 – 2021. In terms of energy demand, it is expected to increase from 12928.4 Million Ton Oil Equivalent (MTOE) in 2014 to 17,000 MTOE by 2020.

Lithium cobalt oxide (LCO) battery type are expected to constitute a large share of the overall lithium ion battery market. A report by Markets and Markets indicates that the energy density of any LCO battery is very high, and the cost of manufacturing these batteries is fairly reasonable, owing to the use of graphite carbon and cobalt.

The market for lithium nickel manganese cobalt battery type is expected to grow at the highest rate between 2016 and 2022. As for the overall lithium ion battery market, the research projects that the market will be valued at USD 68.97 Billion, by 2022, growing at a CAGR of 16.6% between 2016 and 2022.