About Cobalt

• Why is cobalt an essential element in lithium-ion batteries?
• Cobalt, Lithium-ion batteries and EVs
• Cobalt Supply
• EV Demand & Cobalt Production Growth
• Cobalt Demand

Cobalt is an essential element critical to many applications. It is most widely used in lithium-ion batteries found in electric vehicles (EVs), energy storage systems, and consumer electronics and superalloys. Cobalt is viewed as an important contributor to the field of renewable energy and sustainable development with both the U.S. and EU classifying cobalt as a strategic or critical raw material due to the important role it plays in the lithium-ion battery and strategic applications.

“Approximately 50% of the cobalt produced globally is found in rechargeable batteries”

Source: Cobalt Institute, 2018

Cobalt is used in the cathode of rechargeable lithium-ion batteries and, to a lesser degree, the anode of nickel metal hydride (NiMH) and nickel cadmium (NiCd) batteries. There are five main types of lithium-ion batteries, three of which have cobalt-based cathode chemistry. Of the total volume of active cathode materials produced in 2017, it is estimated that 78% was based on cobalt containing battery chemistry. Nickel manganese cobalt (NMC) batteries have now become the industry standard for use in EVs and plug-in electric vehicles (PHEVs) and demand for cobalt containing battery chemistries is expected to grow with accelerated adoption of the EV/PHEV vehicles over the coming years.

Why is cobalt an essential element in lithium-ion batteries?

Cobalt is critical to the performance, safety and longevity of rechargeable batteries. Cobalt’s unique properties are responsible for the thermal stabiity of lithium-ioin batteries and the integrity of the cathode, both of which are critical factors for safety and performance. Cobalt-containing lithium-ion batteries have high energy density, which means they are able to store large amounts of energy in a small area. This makes the batteries light-weight and helps EVs maximize driving range. Cobalt is also crucial in improving the longevity of lithium-ion batteries.

Cobalt - Benefits for Lithium-ion Batteries

• High Cycling Ability – Short recharge times preserves battery strength and lifespan. Cobalt allows batteries to complete charge and discharge cycles over an extended period of time due to cobalt’s tight molecular structure which provides for a hard wearing, wear-resistant, physical-chemical structure. In turn, cobalt offers low self-discharge and high discharge voltage within the battery.
• Provides Stability – Cobalt provides for high thermal stability within lithium-ion battery chemistries. With a melting point of 1,493 celsius, cobalt offers high heat capacity, which is critical to battery safety. Also, cobalt’s ability to alloy and impart strength at high temperatures and its ability to retain ferromagnetic properties at high temperatures, contribute to cobalt’s ability to provide stability within the rechargeable battery.

Cobalt, Lithium-ion batteries and EVs

The International Energy Agency (IEA) expects EVs to grow from approximately 1.7 million in 2018, to 140 million by 2030 and reach 900 million by 2050. Higher EV adoption rates are expected to be driven by lower battery costs (from $1,000/kWh in 2008 to approx.$268/kWh in 2015 according to IEA) and higher productivity. The Paris Declaration on Electro-Mobility and Climate Change committed to working toward the goal of having 100 million EVs by 2030, with cumulative country targets pointing to significant increases in EV adoption globally.

According to Darton Commodities, this could require in excess of 4x current annual production volume of cobalt, assuming conservative estimates of approximately 4kg of cobalt per vehicle (vs Tesla Model S which uses a 95kWh battery pack which contains 15kg of cobalt). The evolution of lithium-ion battery chemistry and its use of cobalt is of significant importance to this growth. Cobalt-containing battery chemistries are being used by major automakers, with the longer-life, more stable NMC battery being the most prevalent across EV and PHEV (plug-in hybrid EV) models.

Worldwide Electric Vehicle Sales

Cobalt Supply

Cobalt differs from other commodities as approximately 70% of global mined cobalt production comes from the DRC, a high-risk mining jurisdiction which lacks critical infrastructure. Additionally, only 1% of mined cobalt comes from primary cobalt mines, with the rest produced as a byproduct of copper and nickel mining, making cobalt supply highly dependent upon new copper or nickel projects.

“The supply-demand fundamentals look set to tighten materially in 2022-2025 when we expect EV adoption rates and cobalt demand growth to accelerate further. In our opinion, new supply projects need to be approved over the next 2-3 years to avoid a meaningful deficit.”

Source: UBS, 2017

Global Mined Cobalt Production - Global mined cobalt production was approximately 120ktpa in 2017, dominated by production from the DRC. Over the last five years, global mined cobalt production has grown from just under 100kt to the current level, or approximately 1% per annum growth.

Cobalt production is largely a by-product of nickel and copper mining however, due to the relatively small percent of total mine revenues derived from cobalt production, it is difficult to secure financing for projects based on cobalt prices alone, despite cobalt’s recent price appreciation and forecasted demand growth.

• 99% of global cobalt production is mined as a by-product of copper or nickel
• Global cobalt revenues represents ~ 6.7% of nickel miners total revenue and ~1.3% of copper miners total revenue

In 2018, cobalt supply from the DRC increased by 14.7% to reach 80,790 tonnes, representing 67% of global mined output (Darton, February 2018). Over the past several years, DRC’s cobalt industry has come under increased public scrutiny following numerous publications on human rights abuses with increasing stakeholder and public awareness of risks associated with cobalt sourced from the DRC. In particular, the lithium-ion battery supply chain has experienced growing pressure from the media, regulatory and legislative bodies, non-government organizations, and consumer groups, directed at responsible sourcing practices related to DRC mined cobalt.

EV Demand & Cobalt Production Growth

According to a December 2017 study by CRU Group, electric vehicles alone are forecasted to require 314,000 tonnes of cobalt by 2030, representing 314% of global 2017 supply. When all cobalt markets are added, such as metallurgical applications primarily driven by the superalloy and aerospace sectors, projected cobalt demand is estimated to reach up to 500,000 tonnes by 2030, or 368% of global 2018 mined cobalt production.

• Nickel 28 believes significant additional mine financing will be needed over the next 10-15 years to meet projected cobalt production demand.
• Existing production, mine expansion and new production will all require considerable new sources of capital including alternative, non-dilutive streaming and royalty financing, while the forecasted global cobalt supply deficit is expected to keep upward pressure on prices.

Cobalt Demand

In 2018, global cobalt demand exceeded 100,000 tonnes for the second year running, reaching an estimated 111,300 tonnes (Darton, 2019). This represents an 6.6% year-over-year increase, one of the highest annual cobalt demand growth rates recorded since 2010, and well above the annual growth average of 5.7% recorded over the previous five-year period. Mined cobalt production increased 12.4% to 135,850 tonnes in 2018, with approximately 72% of global cobalt production mined as a copper bypoduct, 26% as a nickel byproduct and the remaining 2% from primary cobalt mining.

According to Darton Commodities, demand for refined cobalt has grown at 5.2% compound annual growth rate (CAGR) from 2007 to 2016. Cobalt demand is forecasted to grow at 6.9% CAGR from 2016 to 2020 reaching 120ktpa by 2020 (Darton, 2018). Cobalt demand from the rechargeable battery segment, the largest and fastest growing end-use of cobalt, through increased adoption of EVs and personal electronics such as computers and mobile phones, is currently growing at 11.7% per annum.

As annual EV sales inceased by 55% in 2018, EV related cobalt consumption was up 53% from 2017, reaching 13,600 MT in 2018 (Darton, 2019). And, with 2.9 million EVs expected to be sold in 2019, Darton forecasts cobalt usage in EV batteries will increase by 56% over 2018 levels, with total EV related cobalt demand expected to reach over 21,000 MT.

“The battery sector is largest and fastest growing end use consumption of cobalt and is expected to account for 59% of all cobalt demand in 2020.”

Source: Darton Commodities, 2017

Cobalt Demand: Positive Outlook driven by Rechargeable Batteries

Cobalt applications can be subdivided into 2 categories: chemical and metallurgical.

• Chemical applications are dominated by the rechargeable battery segment (approx. 78% of chemical cobalt demand and approx. 50% of global cobalt demand). The rechargeable battery segment is the fastest growing segment benefiting from rising demand for EVs, energy storage systems and electronic devices. In 2008, rechargeable batteries accounted for just 27% of total cobalt use and in 2017 this number increased to 39%. Cobalt’s efficiency allows for power to be stored for longer periods, appealing to EV and consumer electronics manufacturers.
• Metallurgical cobalt is primarily used to produce high-temperature alloys, in particular, “superalloys” that have superior mechanical strength, heat resistance and resistance to corrosion. These materials are critical to the aerospace, defence and power generation sectors.

In addition to batteries and high-temperature alloys, cobalt is also used in magnets, carbides and diamond tools, polyester and ceramics. Nickel 28 believes cobalt is difficult to substitute and there is no end use which is structurally in decline.