DRC’s Cobalt Scenario – Are Australian Miners Like ASX: COB Setting To Leap Forward?

Cobalt supply concerns amid Democratic Republic of Congo (DRC) political instability and ethical issues are providing impetus to Australian miners to tap into battery boom due to growing electric vehicle market. Cobalt as a pivotal raw material in electricity storage battery along with lithium is noticing a surge in demand. World’s two-third of cobalt comes from the Democratic Republic of Congo and the declaration of cobalt as a "Strategic Metal" by the government has raised supply concerns in the global market. The listing of cobalt as a strategic metal has given DRC the power to raise taxes and royalties up to 10% from single digit, which is making it difficult for global giant miners such as Glencore to produce cobalt in DRC provinces amid soaring prices and high cost. In the recent move, Glencore decided to terminate expatriate workers in Mutanda mine, which is believed to be the most massive cobalt operation in the world and one of the most valuable assets mine of Glencore as it has taken a pessimistic view on the development of Mutanda over uncertain political and increased cost environment in the DRC.

The DRC’s secretary-general of mining Joseph Ikoli said at a grand mining conference in South Africa that there would be no more debate on the code and cobalt will remain as a strategic metal under DRC code. Katanga mining (one of the major subsidiaries of Glencore) issued warning over sales of DRC cobalt under such a stringent environment when the unit was told to suspend a project to remove uranium from its cobalt supplies. The company was building a project to remove the traces of uranium from the DRC cobalt though Ion-Exchange method which was suspended by the DRC over technical issues in the methodology.

Looking at the challenges, other parts of the world seem to be looking for leveraging from the scenario. Given this, Australia has come under the radar by many in view of the mining capabilities.

How can Australian miners cash out the disruption in the supply chain?

Over the political uncertainty and ethical dark clouds on Democratic Republic of Congo (DRC), the miners are searching for other cobalt deposits located in different geopolitical areas as demand for the metal is at a surge due to blooming electric vehicle market.

Australian as the well-known source for cobalt deposit is luring the Australian miners such as Cobalt Blue Holdings Limited (ASX:COB) to tap in the market and cash out the opportunity. Due to the concerns over the DRC cobalt, the Asian battery makers are now building alliances with Australian miners to fulfil the disruption in the supply chain.

To cash in the opportunity, Cobalt Blue Holdings Limited (ASX:COB) and Broken Hill Prospecting Limited (ASX:BPL) have been in a joint venture to develop the Thackaringa Cobalt Project in New South Wales, Australia after commissioning of a high-resolution airborne electromagnetic survey of the project area, which indicated that Thackaringa project might contain cobalt bearing rocks.

As of now, COB has indicated about sending some dispute notices to BPL with regards to legal title ownership for COB on the Thackaringa tenement. Primarily, independent expert determination is being sought as COB claims to be having the entitlement under Joint titleholding for the project. It is noteworthy that the project contains three prospective zones - Big Hill, Pyrite Hill and Railway. The Big Hill and Pyrite Hill deposits extend over 1.2Km, and Railways deposit extends over 2.5Km. The Cobalt venture is evaluated to contain demonstrated reserves of 46.3 million tonnes of cobalt. Despite these challenges, COB is managing the JV while expert determination will help give a clear direction in terms of the future prospects.

Cobalt Blue Holding Limited has also signed a partnership with LG international, the investment arm of the South Korean battery maker to secure the funding and technical assistance needed in the project. Under this, COB agreed to issue a maximum of 14 million shares priced at AUD 1.10 a share to LG. This was done to raise $6 million of capital. Otherwise also, the updated mineral resource estimate seems to be favouring the group to some extent as per the latest drilling result.

Given the backdrop, COB is expected to benefit from the developments. The stock that has been at low levels is expected to see some bit of revival with resurging cobalt trends. COB’s stock was up 2.86% as at February 12, 2019.

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