Swelling global demand for cobalt at the hands of a burgeoning electric vehicle market has resulted in prices for metal with the atomic symbol Co essentially doubling since last November. It’s also resulted in miners and exploration companies double-timing it to identify cobalt resources in a bid to capitalize on what is expected to be a robust industry for the foreseeable future.
The potential supply shortfall is underscored by a slew of initiatives of major automakers to implement strategies to increase EV production now and going forward. While Tesla (NASDAQ:TSLA) is always in the headlines when it comes to EVs, it is by no means the only player and could represent only a small portion of the market with its few models considering Volkswagen plans to produce three million EVs annually by 2025, Volvo is phasing out fossil-fueled cars and going all-electric in 2019, Daimler planning 50 EV models by 2022 and so on and so on.
Understanding that cobalt is a primary component in the rechargeable batteries powering EVs, lends some color as to why analysts are forecasting the spike in demand of the metal generally produced as a byproduct of mining other metals like nickel and copper. The situation is exasperated by the fact that over 60 percent of the world’s cobalt supply comes from the Democratic Republic of Congo, an African country that has earned the ire of global human rights watchdog Amnesty International for sometimes failing to provide oversight and regulate violations of worker’s rights and child labor laws.
Amnesty alleges that as much as 20 percent of the cobalt mined in the DRC is mined by hand – and sometimes by children – and sold to local traders before making it into factories of major companies, including the likes of Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL), Renault and Chinese battery component giant Zhejiang Huayou Cobalt.
Amnesty recently said that nearly half of the 28 largest companies that use cobalt failed to demonstrate even minimal due diligence regarding the cobalt supply chain to ensure it is produced through good practices.
Against this backdrop, North American explorers are looking to domestic opportunities to address the cobalt market opportunity. From its headquarters in Toronto, First Cobalt (TSX-Venture:FCC)(OTCQB:FTSSF) is developing a major mining camp in Ontario by consolidating companies in a bid to build the largest pure-play cobalt exploration and development country in the world.
The company is currently in the process of completing mergers with CobalTech Mining (TSX-Venture:CSK) and Cobalt One (ASX listed: CO1), moves that will create a single firm controlling more than 10,000 hectares of prospective land, more than 50 historic mining operations, a mill and a permitted refinery facility in a camp about 30 km long near the town of Cobalt, Ontario
It’s anticipated that the mergers will be completed in approximately three weeks.
The property includes the former producing Keeley-Frontier mine, a high-grade mine that produced over 3.3 million pounds of cobalt and 19.1 million ounces of silver, as well as the Bellellen mine, Drummond mine, Silver Banner mine and many others.
First Cobalt is conducting an extensive sampling program at historic mining operations in the Cobalt Camp, namely testing so-called “muckpiles.”
Muckpiles, “waste” rock brought to surface during blasting as part of mine development,” provide valuable insight as to the distribution of cobalt, silver, nickel and copper on the property, as well as possibly result in cash for funding additional exploration efforts if assays are positive for metals.
In the case of the Cobalt Camp, historic miners would leave the rock on the surface if it was not deemed to contain high-grade silver. Recent grab samples from different muckpiles, have assayed high-grades of cobalt and other base metals. For instance, assays were reported up to 3.76% cobalt at Bellellen and 0.65% cobalt, 1.79% copper and 4,990 g/t silver at Drummond and 1.14% cobalt at the Silver Banner mine.
The company has begun the assessment, identifying 17 muckpile locations and using drones to survey them to estimate tonnage. Sampling will be done before the winter. Management says it is testing ore sorting technology on large representative samples to produce higher grade feed material to evaluate for processing.
First Cobalt plans to collect three one-tonne samples for testing initially.
"Success with this program could warrant reactivating the mill and potentially the refinery to produce refined battery materials and generate early cash flow," said Trent Mell, First Cobalt’s President and CEO, in a statement on November 14.
The sampling is expected to take up to three weeks, with subsequent sample preparation and analysis taking about six more. The program is directed towards compiling a National Instrument 43-101 Potential Resource report next year.
If the initial samples prove positive to economically recoverable metals, First Cobalt will be in a prime position given that muckpiles abound the more than 50 historic underground mines.
When it comes to producing much needed cobalt, there may not be an easier opportunity to generate near-term revenue than what First Cobalt has in its possession while it assesses other exploration possibilities across its expansive property.
