Resource World Magazine

52 www.resourceworld.com a u g u s t / s e p t e m b e r 2 0 1 6 E nergy-related metals, specifically lithium, have been attracting mar- ket attention in recent months as the lithium-ion battery market expands due to developments in the electric vehicle and sta- tionary storage markets. The specialty metal cobalt is also critical for the production of lithium-ion batteries. In fact, 50% of the world's cobalt demand is for its use in rechargeable batteries. Cobalt is facing the same demand pressures as lithium but has different supply charac- teristics. Cobalt is primarily a by-product of copper and nickel mining and, as the price of these metals has declined, a number of mines have been idled resulting in reduced cobalt production at a time when demand for cobalt is growing rapidly. Market ana- lyst company, CRU, and other sources are calling for cobalt to enter a deficit position later this year. The cobalt market has had compound annual growth of approximately 5-6% for the past two decades and in 2015 grew by 5.4%, more than double recent global GDP growth of 2.4% for the same period. Market growth has been driven primarily from the demand for cobalt in chemicals used to make lithium-ion rechargeable bat- teries needed to power portable electronic devices, electric vehicles and stationary storage cells. Battery chemical demand increased nearly 12% in 2015 and now accounts for approximately half of the world's annual cobalt production. Double digit growth of cobalt used in rechargeable batteries is expected to continue for the foreseeable future. Supporting the positive outlook for cobalt, Tesla Motors made automotive his- tory on March 31, 2016 with the launch of its Model 3 electric vehicle, receiving US $325 million in deposits for 325,000 preorders of these cars in the first week (now ~400,000 orders). If these orders are converted into annual sales, production of the Tesla Model 3 would be comparable to the top selling vehicles in North America. Mainstream interest in electric vehicles has been validated by thousands of people lin- ing up to make a US $1,000 down payment for a car that will only be available in late 2017. The market for cobalt last year totaled ~110,000 tonnes. Knowledgeable analysts are projecting a supply deficit of ~1,600 tonnes in 2016 due to increased demand. This excludes 6,500 tonnes of annual pro- duction recently shuttered as a result of the closure of Katanga (Congo), Mopani (Zambia), Queensland Nickel (Australia) and Votorantim (Brazil). There are also rumors that Minara, Koniambo and Goro could potentially be shut down as well (~7,000 tonnes of cobalt production). These mines are being shuttered due to the low primary nickel and copper metal prices – not because of cobalt, which is produced as a by-product. Future risks to cobalt supply are further exacerbated by geographic concentration of supply and 65% of mine production currently sourced from the DRC, as noted above, a politically unstable country, and 52% of refinery production in China, a country with policy risk. These risks were recently addressed in the Assessment of Critical Minerals report to the U.S. Congress that identified cobalt as a criti- cal mineral on a list that "have a supply chain that is vulnerable to disruption, and that serve an essential function in the manufacture of a product, the absence of which would cause significant economic or security consequences". The Report to Congress is at: https://www.whitehouse. gov/sites/default/files/microsites/ostp/ NSTC/csmsc_assessment_of_critical_min- erals_report_2016-03-16_final.pdf China Moly's recent acquisition of the Tenke Mine in DRC has the potential to further concentrate cobalt refining. n Troy N Nazarewicz, CIM, CPIR, is Investor Relations Manager at Fortune Minerals Limited. the Idaho Cobalt project mill and concentrator pads, tailings waste storage facility and water management ponds' earthworks. photo courtesy Formation metals Inc. miNiNg Cobalt: a critical commodity by Troy Nazarewicz

• Cover