The future is blue
GEMC carves out a global niche in cobalt
Special to BNN.ca from Market One Media
A decade ago, Mitchell Smith came looking for cobalt, even though he didn’t yet know it.
“I was looking for a metal that was niche, underexposed and had importance and relevance in a forward-looking technology,” he says. “I wanted to develop a strategy around that metal and create a company to supply it to end users.”
As president & CEO of Global Energy Metals Corporation (TSXV: GEMC) Smith is doing just that. He saw the importance of cobalt in manufacturing rechargeable batteries in consumer electronics as well as the growing electric vehicle (EV) market, when others were focusing on additional materials used to manufacture batteries, including graphite and lithium. Better still, cobalt is an important component in cathodes for all three types of high-energy density batteries: Nickel-Cadmium (Ni-Cd), Nickel-Metal Hydride (Ni-MH) and Lithium ion (Li-ion).
Today, GEMC is acquiring and developing high-quality cobalt assets to provide investors with exposure to the surging demand for cobalt used in the rechargeable battery and energy storage market. Additionally, cobalt is an essential metal for products, including aerospace components, carbides, medical devices, tires and pigments.
The company is currently focusing on two promising properties. It owns a 100 per cent stake in The Werner Lake Cobalt Project, located 50 kilometres from Kenora, Ontario. GEMC also has a right to earn-in up to 75 per cent interest through direct project exploration and development spend on the Millennium Cobalt Project in Queensland, Australia.
Unlike most metals, however, cobalt is primarily extracted as a by-product from the mining of other metals, usually copper and nickel.
“Approximately 95 to 96 per cent of cobalt produced globally originates as a by-product of the copper and nickel market,” says Chris Berry, an advisor to GEMC and founder of House Mountain Partners, a U.S.-based institutional advisory firm focused on strategic commodities and supply chains.
Recent figures from Benchmark Mineral Intelligence note that the Democratic Republic of Congo (DRC) continues to dominate the global market, providing 64 per cent of mined supply. Glencore remains the region’s biggest cobalt player, deriving cobalt from its Mutanda mine in the DRC.
The DRC’s natural advantage is the richness of some of its cobalt deposits. The DRC’s disadvantage remains an unstable political climate and concerns about child labour.
“It’s not a market where you can easily ramp up cobalt supply, just because the market is demanding it,” says Smith. “You’re not going to produce more copper and nickel to get at the cobalt, unless the cobalt content is high enough to justify it.”
GEMC’s two current cobalt plays are both showing promising results in exploratory drilling.
“Recent drilling at Millennium in 2016 show peak cobalt results as high as 0.51 per cent,” says Smith. “GEMC is finalizing a resource report to confirm historic values at Werner Lake that showed grades in excess of 0.4 per cent cobalt. It’s considered one of the most advanced, near-term production primary cobalt projects in Canada.”
The price of cobalt rose from approximately US$10/lb in in late 2015 to about US$26 in the current market. Those numbers are driven primarily by demand from the EV market, goosed further by DRC supply constraints, mine production disruptions and concerns over future domestic stability.
In a recent report, Bloomberg New Energy Finance predicts that “EVs are on track to accelerate to 54% of new car sales by 2040.” Tumbling prices for lithium-ion batteries are key to that forecast — provided there’s a ready, reliable supply of cobalt and other metals.
“The demand story around metals like lithium and cobalt is entirely defensible in the current environment,” says Berry. “The recent pricing strength comes down to the pace of EV uptake and growth going forward. The question is, where will future supply of cobalt come from to satisfy this growth? Looking at an annual demand growth of seven per cent, demand for cobalt chemicals by 2025 will exceed today’s entire global production. Recycling and technological leaps minimizing cobalt use in batteries are threats to this growth thesis, but won’t likely handle all of the additional demand forecast by the rechargeable battery business.”
However, GEMC has been doing much more than securing plays of ethically-sourced cobalt. It’s already staking a claim along the EV battery supply chain. The resource company has been working with New Tigers Consulting Limited, a China-based company specializing in forging business relationships between foreign and Chinese-owned companies.
“In order to secure long-term sustainable supplies for its ambitious economic development strategy, the Government of China has empowered and encouraged a number of domestic state-owned and private companies to actively pursue mining deals throughout the world,” says Wei Qian, managing director of New Tigers Consulting. “This includes the securing of a long-term supply of cobalt, which is extremely important to China’s expanding battery metals market. Global Energy Metals is recognized as having a role in securing this supply through their cobalt project acquisition strategy.”
One such solid partnership was established in March, when GEMC signed a long-term strategic cooperation agreement with Beijing Easpring Material Technology Co., a leading battery manufacturing company in China, to jointly invest in and develop cobalt projects.
“Part of really understanding the cobalt market, whether you’re an investor or aspiring cobalt miner, is that one of the most important things is developing relationships along the cobalt supply chain,” says Berry. “Aside from having superior assets in sound geopolitical jurisdictions, the first way you compete is by developing relationships downstream. If you can prove to an end user that you can produce a product they will be able to use in their existing supply chain, that’s how you build a sustainable cobalt development or producing company.”
GEMC continues to forge deep relationships across the global cobalt supply chain. The company’s management team includes resource experts such as Erin Chutter, executive chairperson, Paul Sarjeant, vice president of projects and director, and Ian Spence, an international exploration expert, in charge of Australasia Acquisitions. Advisors to the company include battery metals experts Berry and Jon Hykawy, president of Stormcrow Capital.
“There’s been a lot of recent interest in cobalt,” says Smith. “But we’ve been leading this charge for a decade. We understand the fundamentals of cobalt and we’ve cut straight through the supply chain to find out exactly what cobalt end users are looking for, so that we can supply it to them. Whether on our own or in partnership with other companies, our end game is to be a leader in acquiring stable sources of cobalt for a future economy that will thrive on portable electric power.”