14/11/2016 - 15:06

Early moves in cobalt space

14/11/2016 - 15:06


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SPECIAL REPORT: Electric vehicles and other technology applications have driven investor interest in graphite and lithium, and cobalt might be next.

Early moves in cobalt space
Jono King says cobalt is garnering increased investor interest. Photo: Attila Csaszar

Electric vehicles and other technology applications have driven investor interest in graphite and lithium, and cobalt might be next.

Projected increases in demand for cobalt have prompted some local mining hopefuls to tip the start of a significant lift in the price of the metal.

Since a three-year low in February, cobalt, which is widely used in the production of batteries, moved from trading at around $21,700 per tonne to $28,300/t at the end of October, an increase of around 30 per cent.

It follows ongoing interest in another metal, lithium, also used in batteries, which has been driven by the projected take-up of electric cars.

Cobalt works hand in hand with lithium as a cathode, and about 42 per cent of the roughly 100,000t per annum global cobalt supply is used in batteries, compared with about 19 per cent in metal alloys.

The price rise and possible demand increase has led a handful of local juniors to make moves into cobalt.

Among them is West Perth-based Dragon Energy, which acquired the Tabac cobalt-gold project near Wiluna from Westview Resources in September.

That buy was paid for mostly in Dragon scrip, with 150 million ordinary shares issued to Westview at a value of about $3.3 million, plus a $50,000 cash payment, performance shares and a 2 per cent smelter royalty.

Another to move has been Tiger Resources, which in September fast tracked a study into the viability of cobalt production at the Kipoi copper project in Congo, and by Australia Mines, which bought two scandium-cobalt projects on Australia’s east coast.

Cobalt ‘fad’

Dragon Energy chief executive Jono King said interest in terms of metals with high tech applications had moved from graphite to lithium and now to cobalt, which was like the other side of the equation for batteries.

“Cobalt is sort of the fad metal of the moment,” Mr King told Business News.

“People are realising that though there is lithium everywhere there’s simply not cobalt everywhere.

“Cobalt is very limited in terms of the supply.”

Mr King said most cobalt was produced as a byproduct from nickel or copper, meaning the availability of cobalt was subject to the ebb and flow the prices of those commodities.

“The ability to ramp-up cobalt is just not there at present, we do see this as just the initial rise,” he said.

“That’s really the driver. There was also the realisation there were really not a lot of dedicated cobalt-oriented companies on the ASX.”

Dragon Energy has just completed two raisings – one a rights issue and one a placement – for a total of $2 million.

That was supported by local fund ARD Group and by brokers on the east coast.

The next move for Dragon will be granting of tenements and then drilling to prove-up the project, hopefully to begin before Christmas, Mr King said.

Also based in West Perth, Tiger Resources has dipped its toe into the cobalt space.

In September, Tiger revealed that contractor Mintrex had estimated it could produce around 1,000t of cobalt per annum at its Kipoi project in the Congo, with a capital cost of around $US22 million.

In October, Australian Mines inked deals to earn-in 75 per cent of the Sconi scandium-cobalt project in Queensland, and an option for up to 100 per cent of the Flemington scandium-cobalt project in NSW.

SRK Consulting was hired to conduct an immediate feasibility study on Sconi.

Australian Mines managing director Ben Bell told Business News scandium would be the principal focus of that project.

That metal is largely used as a steel alloy for cars and planes.

But he said cobalt would be co-processed with scandium.

“There’s obviously an increasing demand for cobalt,” Mr Bell told Business News.

“There’s an awareness of where cobalt is currently produced (Congo), so there’s a push towards more ethical sources.

“So that’s providing opportunities for non-African based companies to supply cobalt.

“Because the scandium and cobalt occur together, you’ve got to pull out one to get the other.”

Mr Bell said he hoped to be starting construction on the Sconi project in two years, while the Flemington project would be a further four years behind that.

In the interim, he’ll be working to secure offtake customers, he said.


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