Cobalt on a tear

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 03 Apr 2017   Posted by admin

Workers at the Kamoto underground mine in the Congo.                Image: Katanga Mining.

By Cameron Drummond

COBALT – one of the fastest rising commodities of 2017 – has attracted attention from a plethora of mining companies looking to take advantage of heightened demand for the strategic metal.
A key component in the production of lithium-ion batteries, cobalt flew ‘under the radar’ relative to commodity darling lithium in 2016.
However, in the past few months the spot price has more than doubled year-on-year, sparking a flurry of activity from opportunistic Australian mining juniors.
On 29 March, the London Metals Exchange (LME) cash price for cobalt was $US53,500 per tonne (t), representing a 122 per cent increase for the commodity in the last 12 months and a 57 per cent increase since the start of 2017.
Historically produced as a by-product from copper and nickel mines, previously uneconomic deposits of cobalt are now seen as attractive development options in Australia.
ASX-listed companies such as Ardea Resources, Clean TeQ Holdings, and Barra Resources have announced their interest in cobalt-bearing projects.

Unrest in the DRC

Global production for 2016 was estimated at 76,500t, according to figures from S&P Global Market Intelligence.
About 52 per cent comes from the Democratic Republic of Congo (DRC), which has about 10 million tonnes (mt) of reserves and resources.
In 2016, DRC’s Glencore-owned Mutanda copper mine alone accounted for one-third of annual global cobalt production (24,500t).
Earlier this year Glencore upped its stake in two of these mines, purchasing 31 per cent of Mutanda from Fleurette Group for $US534m to fully own the project, and adding 10.25 per cent to its share (now 86.33 per cent) of Katanga for $38m.
These acquisitions made have the Swiss-based miner the world’s largest cobalt producer over other major cobalt producers such as China Molybdenum and Lundin Mining, both of which have stakes in Congolese copper mines that produce large amounts of cobalt as a by-product.
Apart from demand, one factor driving investment into cobalt production in mineral-rich regions such as Canada and Australia is the volatile political situation in the DRC, where President Joseph Kabila has refused to step down with an approval rating of just 7.8 per cent.
Elections to be held in December last year were stalled until the end of 2017, and a report submitted to the United Nations by its DRC special representative Maman Sidikou in March outlined a high risk of politically motivated violence in the country.
Foundations for that claim lie in President Kabila’s popular opponent Moise Katumbi – a onetime governor of the Katanga Province – where it’s estimated 5 per cent of copper and nearly half the world’s cobalt supply originates from, according to The Economist.
If the President were to continue to resist attempts to relinquish power, Katanga – where Mr Katumbi is highly popular– would likely play a central role in any unrest.

Time for the juniors

While mining majors like Glencore currently harness a large proportion of the cobalt market, ballooning demand is driving junior explorers in Australia to search for viable nickel and copper projects with profitable amounts of the in-vogue base metal.
Australia is the second largest producer of cobalt, but currently accounts for just 6 per cent of global production with its 1.8mt of reserves and resources.
Enter newly-listed exploration company Ardea Resources, a recent spinoff of Heron Resources and owner of the Kalgoorlie Nickel Project (KNP) in the Goldfields region of WA.
The KNP has a contained resource of about 360,000t of cobalt, which the company says is the largest known deposit of the strategic metal in the developed world.
Ardea managing director Matt Painter said past efforts by previous owners of the KNP meant the company could accelerate the project’s development.
“We are extremely fortunate that a lot of the work has been done before, between Vale Inco and Heron – between them they spent $50m on various studies prior to us getting involved, so we really are standing on the shoulder of giants,” Mr Painter said.
“For a relatively small expenditure of about $1m we are able to put together a pre-feasibility study (PFS) on one of the world’s largest cobalt deposits and it’s coming together very nicely at the moment.”
Mr Painter said cobalt’s use in new energy storage technologies had brought the commodity to the fore in recent months.
“I think it’s a fascinating area and potentially a new focus for large parts of Australia, and is something that will be of focus for us moving forward into the future.”
Other cobalt focused explorers Archer Exploration, Barra Resources and Clean TeQ said that investigations into their own projects in South Australia, WA and NSW respectively were also underway.