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Q&A with Lara Smith, MD of Core Consultants

DRC ban on copper and cobalt concentrates exports, cobalt sources outside the DRC, and the shift to nickel-rich batteries.

Lara will take part in the cobalt session at the upcoming Battery Materials 2019, taking place in Shanghai from 10 - 12 April. 

Ahead of the conference, we did a Q&A with her to find out more the impact of the DRC's ban on low grade cobalt concentrates exports, cobalt supplies outside the DRC and the shift to nickel-rich batteries.

Just this week the news has come in that the DRC has banned exports of cobalt and copper concentrates. How can we expect the market to react to this?

If you are asking is whether there’s been any gains to cobalt due to this ban - the answer I’m afraid is a big no, at least not in the short term. Also from what I understand, the ban is only on exporting low grade concentrates. Intermediate products seems are still being exported and I’m getting quite a few offers for these materials.  

Unfortunately, at the moment we are in a supply glut and news of the DRC banning low grade concentrates is not going to lift the price. Even Chinese parent companies, with offtake agreements in place with their subsidiaries are refusing to take material so we are in a period of weaker demand and high inventory levels.  

It does help to some extent as recently there’s been an increase in unprocessed, low grade hydroxide, mainly from smaller and informal traders, although these volumes are starting to drop off as the price has come down radically in the last 2 months. In January traders of this material were still commanding around 90% payables for hydroxide. Now the payables have dropped below 60% which is indicative of simply too much material around. However I’m receiving requests from higher grade, processed material with cobalt content above 30%. Demand for lower grade, unprocessed hydroxide seems to have dried up. 

What are the most important sources of cobalt outside of the DRC, and in light of the political and logistical issues related to sourcing cobalt from the DRC, what is the likelihood that supply could be shifted away from the DRC?

There are three major copper basins in the world, these include: 

1) The Kodaro Udokan Basin which lies in Siberia. The major project is the Udokan Copper Project which has around 1.2bn tonnes of copper/cobalt resources at 2% copper and is still undeveloped. The contained copper is 26m tonnes. 

2) The Zechstein Basin which is in Northern Europe. The major project is the KHGGM deposit in Poland. The resources are around 2.5bn tonnes at 2% copper. There’s 50m tonnes of copper, of which 18m tonnes has already been mined out. 

3) Then there’s the Central African Copper Belt which goes through the DRC and Zambia. There are many many key projects in this region. Collectively the belt has around 5bn tonnes of resource, so it’s twice the size of Europe’s. The grade is the highest at 3.3% copper. Contained copper is estimated at 185m tonnes.
So, as you can see from the above, while cobalt projects outside of Africa have their place and can fill in some of the demand requirements, we see Africa as a mainstay for the foreseeable future. 

Our most recent white paper entitled, Why Global Battery Makers Will Continue to Depend on African Cobalt, delves a lot into this question about the possibility to move cobalt away from Africa, but it’s not that simple.  Unfortunately, as miners we can’t choose where the commodities are located, and murphy’s law, the best deposits are always in the worst locations. 

Essentially if one considers the cobalt/copper rations we find in Africa’s resources, not to mention the sheer size of the resource and the fact that many Chinese-based EV battery makers require cobalt with specs that are found predominantly in the DRC and Zambia,  then we understand that cobalt from Africa is unlikely to be usurped. 

Do you think it’s likely that cobalt will be replaced in battery chemistries, and if so, when will we start seeing this in the market?

As is the case with most technologies, I believe we will continue to see something called “efficiency of use” rather than a reformulation and total elimination of cobalt. We are already seeing these efficiencies come through. There’s talk about the 811 cathode now, which means that the ratio of Nickel: Cobalt: Manganese is applied in a ratio of 8:1:1. However this is still a while away from commercialisation and adoption. But if we consider that we started with cathodes of 1:1:1 and now we are using a lot of 5:3:2 and even 6:2:2, we can see how we’ve already gained efficiencies. 

When I majored in chemistry, a lot of the research projects were centred around developing processes for known compounds rather than formulating new compounds and materials. And a lot of chemistry and engineering so-called breakthroughs are centred on finding new processes, producing something cheaper, or faster, or with better yields or trying to achieve the same efficiencies with less waste or fewer raw materials and solvents. Afterall, to start with research and development, then the eventual commercialization, adoption and acceptance of an entirely new technology is a very costly and risky undertaking. So as scientists, one strives to get better and better at processing and perfecting existing technologies, before embarking on a complete reformulation. 

One tends to reformulate completely only when there is a dire economic need. For instance, in an issue of our Rare Earth Monthly Report, we discussed out terbium used to be central to rare earth permanent magnets. Today, permanent magnets have been reformulated and for the most part, terbium synthesized out of the new formulations. Why? Because supply was heavily constrained. And reliance on terbium was not economically sustainable. 

This is not the case with cobalt. With cobalt, there are ample reserves and as its usually mined as a by-product. According to IFRS accounting standards, one attributes costs to a co-product, but not by-products. So many DRC copper producers can still produce cobalt profitably if prices were to drop. 

Also, with respect to supply, in the past as cobalt was not significant from a revenue perspective among African copper producers. As such, mines tended to concentrate on extracting maximum yield from the copper. As the extra dollar spent on developing an optimal process to get a better copper yield was well worth the effort. So today, many of the copper producers on the copper belt have copper yields above 85% and many have yields well above 95%. Not so true for cobalt. 

Now with cobalt becoming more crucial to battery applications, especially as it’s not yet profitable to recycle lithium ion batteries and extract the copper that way, there is a real opportunity for copper producers to optimise their cobalt recovery process and achieve better yields. It stands to reason that developing a process to extract the marginal cobalt should be much cheaper than starting up a mining operation. And in the medium term, doing this should cater for our cobalt requirements. 

So, in summary, no I don’t believe there is enough economic incentive for there to be major efforts into R&D to fully synthesize cobalt out of the lithium-ion battery. 

This content is provided by Fastmarkets MB Events for informational purposes only, and it reflects the market and industry conditions and presenter’s opinions and affiliations available at the time of the presentation.