Robust economics opens path for NA supply of battery metal Metal Tech News Weekly Edition – May 6, 2020
First Cobalt Corp. has taken a critical step toward its goal of supplying North American and European electric vehicle and lithium-ion battery manufacturers with 25,000 metric tons of battery grade cobalt sulfate per year.
With an initial investment of only US$56 million, First Cobalt's already established refinery in Ontario could be churning out enough cobalt for the batteries powering more than 500,000 EVs annually by 2022.
"This is an important milestone in our efforts to disrupt the existing cobalt supply chain," said First Cobalt Corp. President and CEO Trent Mell. "The study shows strong asset-level economics that position the refinery to be competitive globally and provide attractive investment returns."
Accessible by road and rail less than 500 miles north of Great Lakes manufacturing towns such as Detroit and Buffalo, this cobalt refinery would provide the first and only North American supply of this vital ingredient to the performance and safety of lithium-ion batteries.
Currently, China supplies roughly 79% of the world's refined cobalt sulfate, primarily from feedstocks shipped from mines in Africa. This means that the cobalt going into a battery powering an EV made in North America has traveled more than halfway around the world.
Benchmark Mineral Intelligence, a leading lithium-ion battery to EV supply chain analyst, forecasts that demand for the cobalt used in the batteries that power EVs will rocket from the roughly 20,000 metric tons in 2019 to more than 730,000 metric tons per year by 2040.
And First Cobalt is the only refinery outside of the Middle Kingdom slated for commissioning in the near term, according to a recent report by Benchmark.
"The outlook for electric vehicles and the push by automakers to develop shorter supply chains creates an excellent opportunity," said Mell. "With most of the world's cobalt refining capacity located in China, there is strong demand for a North American alternative."
First Cobalt has two advantages that gives it a major head start toward meeting North American demand – its ownership of a previously established refinery and a strategic partnership with Glencore plc, the world's largest cobalt producing mining company.
Permitted 1996, the 12-metric-ton-per day First Cobalt refinery produced cobalt carbonate, nickel carbonate and silver precipitate during intermittent operations that spanned nearly two decades.
"This is really what our competitive advantage is – we got something that is built; that is permitted up to a certain point; and operated off-and-on until about 2015," Mell said.
First Cobalt's feasibility study investigates the potential of expanding the refinery's capacity to 55-metric-tons-per day and upgrading the plant to convert cobalt products supplied by Glencore to the high-quality cobalt sulfate used in lithium-ion batteries.
"This refinery we have in Ontario, Canada could be reconceived to treat cobalt hydroxide that thus far has largely been shipped from Africa into China," Mell said during a May 4 webcast.
The US$56 million of initial capital would go into expanding the capacity and adding the facilities needed to further upgrade the cobalt to form and quality needed for lithium-ion batteries.
At an average price of US$25 per pound, the 11-year operation outlined in the feasibility study would generate an after-tax net present value (8% discount) of US$139 million, after-tax internal rate of return of 53%, and a payback period of only 1.8 years.
"We are very happy with the strong economic outcomes," said First Cobalt CFO Ryan Snyder.
While the study anticipates a rise in cobalt prices driven by enormous coming growth in EV markets, the financial officer points out that the refinery is profitable with current prices of US$16-$17/lb.
Glencore found the results encouraging and is eager to move ahead with helping First Cobalt establish the Canadian refinery.
"As the world transitions to a low-carbon economy, cobalt will play an essential role in the growth of mobility electrification," said Nico Paraskevas, head of copper and cobalt marketing at Glencore plc. "We look forward to working with First Cobalt to bring a sustainable source of cobalt to the North American market."
With the study showing robust economics of moving ahead with the refinery expansions and upgrades, First Cobalt is eager to take the next steps toward providing a North American alternative for this critical battery metal.
Among the next steps under consideration is ramping up the refinery under current permits and capacity.
In addition to the obvious advantage of bringing cobalt to market while permitting and procuring the equipment needed for the larger facility, firing up the plant early would provide a pilot run that could help refine the refinery flowsheet. This would add confidence that the cobalt leaving the refinery meets the needs of potential end users.
This question of ensuring the cobalt produced at the North American refinery meets specifications was on the mind of Sarah Maryssael, the global battery metals supply manager for Tesla, who asked about First Cobalt's plans to "accelerate the qualification process."
In response to Maryssael's question, Mell said First Cobalt is looking at ramping up the refinery to somewhere between five and 12 metric tons per day in order to provide enough product for companies like Tesla to test.
The current thinking is this initial phase of production at the refinery could be ready for commissioning by the end of this year. This would provide an initial stream of cobalt sulfate while the expansions and upgrades are being constructed, slated for completion by around the end of 2021.
Because First Cobalt would be getting cobalt hydroxide to feed the refinery from a single source, Glencore's operations in the Democratic Republic of Congo (DRC), the output from the plant is expected to remain consistent once the flowsheet is finalized.
"Our focus will now turn to working with Glencore, our strategic partner, on implementing a new, ethical and transparent supply chain," said Mell.