Last Wednesday, I gave a presentation to the Berkeley Energy and Resources Collaborative (BERC) on strategic metals for batteries. There has been rapid growth in lithium-ion battery demand, for handheld electronics, electric vehicles and potentially battery storage to level out swings in renewable electricity generation. Tesla has built its battery giga-factory in Nevada, with big promises of economics of scale. These developments have stimulated prices of two of the critical battery ingredients – lithium and cobalt. Cobalt has been in the headlines due the concentration of supply from the Democratic Republic of Congo (DRC), ethical issues from child labour in artisanal mines and the opacity of the supply chain.
How and where is cobalt mined and refined?
Cobalt is almost exclusively mined as a by-product of copper and nickel mining. The richest sources are sedimentary deposits are on the DRC side of the African Copper Belt. There, ores are usually leached to recover copper metal and cobalt as a hydroxide powder. Most cobalt recovered from nickel comes from weathered, laterite deposits, which are found in Australia, Cuba, Madagascar and New Caledonia.
Glencore, one of the world's largest metals mining and trading companies, and Chinese interests have both been making major moves to increase their DRC cobalt reserves. Glencore recently increased its stakes in DRC copper-cobalt mines by buying up the interests of the controversial Israeli billionaire, Dan Gertler. Chinese interests have agreed to acquire the Tenke mine from Freeport McMoRan and Lundin Mining.
Glencore outlines its cobalt mining reserves in its 2016 resources and reserves statement. More than 90% of its cobalt reserves are in Central Africa, with much of the rest in its Murrin Murrin nickel laterite mine. In comparison, the Tenke mine reserves are estimated to contain 510,000 t Co (Lundin, 2017).
In 2016, Glencore produced 28,300 t of cobalt, 24,500 t from its African copper mines, and 3,800 t from its nickel operations in Australia and Canada. The Cobalt Development Institute (2016) reported global refined cobalt production of about 48,000 t in the first half of 2016, a rate of about 100,000 t per year. On that basis, Glencore supplied over a quarter of the world's mined cobalt last year. That's good news for Glencore shareholders as cobalt prices have doubled in the last year. Glencore's production is due to increase later in 2017 as it brings its refurbished Katanga operation back into production.
Extraction of nickel and cobalt from laterites is complex and relatively expensive, and several projects were approved for construction when nickel prices were far higher than today. This has resulted in financial pain for owners. For example, one producer, Sherritt International has faced multi-billion dollar write downs on its Ambatovy laterite project in Madagascar. Don't expect any significant increases in cobalt production from nickel laterite operations for a long time.
Cobalt Development Institute estimates that half the world's cobalt refining is done in China, with much of that sourced from mines in the DRC. With the Chinese acquisition of the Freeport refinery in Finland, Chinese refining control will be further extended.
Artisanal mining and ethical concerns
There has been much concern by NGOs about artisanal mining of cobalt in the DRC, due child labour, dangerous mining practices and environmental damage. CRU, a leading metals intelligence company, estimates 10% of the world's mined cobalt production may come from artisanal sources, and that much of the product is refined in China. Recently, Apple suspended one of its battery suppliers due to concerns of unethically sourced cobalt in its supply chain. After all, who wants to be associated with harm to kids in mines in Africa? On the other hand, artisanal mining can be a much needed source of income for many poor people in Africa.
How does this relate to Li-ion batteries?
Cobalt is one of the key materials used in the battery cathodes. There are various cathode chemistries containing different levels of cobalt. To date, the most common has been lithium cobalt oxide (LCO), which contains 7% Li and 60% Co by weight. Other cobalt containing cathodes include lithium nickel manganese cobalt oxide (NMC) which contains between 12% and 20% Co, and lithium nickel cobalt aluminium (NCA) which contains 9% Co. The Tesla giga-factory is designed to produce NCA cathodes (Pillot, 2016). Other chemistries contain no cobalt at all, e.g. lithium iron phosphate (LFP) and lithium manganese oxide (LMO). Some alternative chemistries have the advantage of being less flammable than LCO, an important consideration for consumers given the notorious Samsung Galaxy Note problems. High cobalt prices and supply chain risks may also stimulate greater efforts in battery recycling and substitution. Researchers and battery manufacturers will continue to innovate to make safer, cheaper and more efficient batteries.
High cobalt prices will also stimulate new mines, some in more stable places like Australia and USA. However, such mines would need consistently higher cobalt prices to justify the capital investment, and cobalt has a history of price volatility - in 2008 it topped US$45/lb only to fall to around $10/lb in early 2016. In the meantime, Glencore and the Chinese will control cobalt mining and refining. Hopes for more ethical and sustainable cobalt supply will rest on greater transparency in supply chains, consumers taking a greater interest in where the ingredients for their gadgets and green cars come from, and cooperation between governments, mining companies and NGOs to ensure safe and responsible mining practices.
Glencore Annual Report, 2016
http://www.lundinmining.com/s/Reserves.asp, Accessed 6 Mar 2017
Christophe Pillot, Avicenne Energy, The Rechargeable Battery Market and Main Trends 2015-2025, IMLB 2016
Cobalt Development Institute, Cobalt News, 2016