cobalt

The New Year is now a little over a week old and the inauguration of the 45^th President of the United States is just around the corner.  And while some are still dwelling on 2016 (we offered our post mortem at the end of the year), the time has come to look at what’s in store.

One of the key buzzwords, particularly if you’re looking for an issue that transcends party lines these days is “infrastructure” – an area where broad consensus on the need for significant overhaul exists.  What is often overlooked, however, is that our infrastructure today comprises of far more than just bridges, roads, and tunnels.  As our very own Daniel McGroarty outlines in a brand new piece for Investor’s Business Daily,

“[t]oday, our infrastructure extends to the national power grid — currently a patchwork of lines, nodes and often antique switching towers we rely on to move energy to where we need it — to the internet itself, which has a physicality we easily overlook in this Age of the Cloud and Wireless. These systems, marvels that they are, come closer to tin-can-and-string contraptions than the modern version we would build if we began the work today. 

Threats against our infrastructure are as diverse as they are real, and dealing with them will require a comprehensive approach.  Securing access to Copper, Graphite, Cobalt, Manganese, and Rhenium may not be the first things that come to mind when we think critical infrastructure protection – but they, and many other tech metals and minerals, have to be on our shopping list if we’re serious about a 21^st Century infrastructure that is competitive and can withstand threats from the outside and within.

As followers of ARPN are aware, we are subject to a significant degree of import-dependence for the above referenced materials, as well as for many others.  With there being more to infrastructure than “cement trucks and Jersey Barriers”, it’s time for an approach conducive to unleashing our arguably vast domestic mineral potential.

Explains McGroarty:

“It means getting over the pernicious mindset that 2017 America lives in a postindustrial age, a time when Americans are all ‘symbolic analysts,’ tapping away at keyboards, creating wealth from ones-and-zeros, live-blogging streaming video and the like, no longer dependent of transforming real raw materials into things. That messy business has been off-shored to other places, happy to sell us what we need.” 

This leaves us at the mercy of the rest of the world — and needlessly so. Concludes McGroarty:

“Word is that the new infrastructure bill will exceed $1 trillion. Shoring up our infrastructure — broadly understood — is essential, and not just for jobs and GDP, but for the stuff modern dreams are made of — everything from the gadgets we use to occupy our time to the high-performance materials that power the weapons platforms that keep us safe.

If we approach the Great Infrastructure Debate in this spirit, we could do even more than rebuild our roads, bridges and tunnels. We could build the foundation for a new American Century.”

It’s Cobalt’s use in battery technology, however, that increasingly affords the metal “critical mineral” status.

A co-product of Nickel, the relevance to batteries of which we recently discussed, Cobalt is not only indispensible to the technology that powers electric vehicles and, increasingly, every aspect of our lives, from gadgets to household items to industrial applications – its supply is also fraught with challenges.

Says ARPN expert and Benchmark Mineral’s Managing Director Simon Moores:

“I think cobalt is the most critical of the battery raw materials, (…) I don’t think it’s necessarily the most important. I think that’s actually lithium. But cobalt, really, because 66 per cent comes from the DRC (Democratic Republic of Congo), then you’ve basically got a very lopsided industry from the supply perspective.”

Indeed, while China is the leading consumer of Cobalt, and supplies 62 percent of global refined Cobalt, most of the world’s Cobalt is mined in the DRC.  Roughly 93 percent of the Cobalt refined in China originates in the DRC, which, at 3,400,000 metric tons, is also home to the world’s largest Cobalt reserves.   In the United States, a Nickel-Copper mine in Michigan recently ramped up production of Cobalt-bearing nickel concentrate, but our domestic manufacturers remain import dependent for 75% of the Cobalt they consume.

Meanwhile, scrutiny of mining operations in the DRC is growing. A recent Washington Post feature outlines the conditions, which in some cases include child labor, and poor environmental standards.  Not surprisingly, battery makers and makers of consumer electronics and electric vehicles using these batteries, find themselves increasingly pressured to track where their Cobalt comes from, but the supply chain often remains murky.   While currently not a conflict mineral under the “Dodd-Frank Act,” a 2010 U.S. law requiring American companies to “attempt to verify that any tin, tungsten, tantalum and gold they use is obtained from mines free of militia control in the Congo region,” calls to add Cobalt to the metals covered by Dodd-Frank are getting louder.  

Moores argues that this growing “corporate social responsibility” (CSR) problem may likely lead to battery makers turning to Cobalt sourced outside the Congo.  Should that happen, it would be the equivalent of a two-thirds reduction in supply, at a time when clean-tech cobalt demand alone is set to spike.