Cobalt Blue (COB) - Automotive Partners Now Testing Products

Cobalt Blue Holdings Limited is a cobalt development and energy storage company with a focus on bringing the Broken Hill Cobalt Project into production. The Broken Hill project is located in New South Wales, Australia. The company also seeks to identify and develop other green energy opportunities to expand its strategic cobalt portfolio, which includes battery technologies. 

Matt Gordon caught up with Joel Crane, Investor Relations/Commercial Manager, Cobalt Blue Holdings. Joel has spent the majority of his career specialising in commodity and economic market analysis. His well-earned industry reputation comes from his ability to translate complex issues into concise conclusions.

Joel’s extensive career portfolio includes 12 years working in top-tier global financial institutions (Morgan Stanley, Deutsche Bank) covering all major metals and bulk commodities - including the key battery raw materials. Before joining Cobalt Blue, he worked with Rio Tinto as  Senior Manager for 5 years in Singapore and Melbourne, leading teams within the internal market Analysis group.

In the past, he has also worked as a commodities analyst with two major international investment banks. 

Company Overview

Cobalt Blue Holdings seeks to invest in energy storage technologies that complement the production of cobalt in commercialising batteries and associated energy storage technologies. The company was founded in 2016 and is headquartered in Australia. It is listed on the Australian Stock Exchange (ASX: COB), and the OTC Markets (OTCQX: CBBHF).

Cobalt Blue Holdings is a development company building a cobalt mine and refinery at the Broken Hill Cobalt Project in Western New South Wales. 

The company’s CEO, Joe Kaderavek, and Executive Manager, Dr. Andew Tong recently had a meeting with the Australian Minister of Trade’s team, along with the US Department of Commerce, the Commerce Secretary in Washington DC. Notably, the United States and Australia have entered into formal negotiations where the US is looking to use some of Australia’s trade, export, and loan facilities to help Australian critical minerals projects. In essence, the US is making money available for overseas projects that it deems to be of great importance. This meeting was also attended by 2 producers, namely Iluka Resources and Lynas Rare Earths. 

Cobalt Blue’s project was recognized as one of critical importance in Australia and also the battery market. This is due to the company’s inclination to provide ethically-sourced cobalt to battery makers, which is in short supply globally. The company plans to send its end product to numerous places across the world, including the US. 

In 2021, the company was focused on building and running a pilot plant. During this time, the company took all the core samples from the past drilling programs, crushing and milling it into a concentrate. The concentrate was then put through a refinery to develop the end product, which is ready to be sent directly to battery manufacturers across the world. 

The concentrate is an MHP (Mixed Hydroxide Precipitate) which contains cobalt with a limited quantity of nickel. Additionally, the company also has the resources to develop cobalt sulphate that can be directly used in batteries. It has sent these 2 finished products to 30 commercial partners around the world in countries including Japan, Korea, India, and Europe. 

The company is currently in the process of dismantling the pilot plant and upscaling it into a demonstration plant. This process involves the company moving the concentrate circuit out to a site that is located 23km from the Broken Hill township where the pilot plant was originally built. Last week, Cobalt Blue issued an ASX announcement, sharing pictures and the video of the first blast. At present, the company is directly working on the resource, creating an 80m box cut that will intersect the ore body at a 40m depth. 

The company is taking actual ore from the asset, crushing it, and turning it into a concentrate on site. Following this, the concentrate is taken to the upscaled refinery at Broken Hill, where it is made into MHP and cobalt sulphate which is then sent to global commercial partners for larger scale qualification purposes. 

Partnership Considerations

Cobalt Blue is currently looking for a major partner to fund its project. One of the strategies used here was to avoid signing an offtake agreement that does not have any value placed on it. This makes the project slightly more challenging to approach for a major partner. 

The company is looking to enter a JV (Joint Venture) arrangement or a payment line that would provide a part of the offtake or a prepayment for the offtake instead of a promissory agreement. It is looking to approach a major partner such as a battery maker or a European carmaker for a potential partnership. 

It is important to note that the company has already promised 30% of its offtake for five years. It is currently working with different strategies, eventually hoping to gain a number of customers. The company has about 3,500t of its products on the market which will be available to the rest of the world. 

Ethical Mining

According to Cobalt Blue, the availability of ethically-sourced cobalt in the market is limited. This is because most of the cobalt sold as concentrate is sent to China or is blended with unethical material, making it hard to trace the material’s origin. In order to remedy this, the company is skipping all the intermediate steps and is directly approaching other battery makers and automotive manufacturers. 

Nickel-Cobalt vs. LFP Batteries

From a macro perspective, the battery market is growing at a rapid pace. Given the global shift toward greener energy, the demand for batteries will continue to grow, whether it's EVs (Electric vehicles) or stationary batteries. In the past 2 years, data has shown that some of the nickel and cobalt batteries have lost market share to LFP (Lithium Ferrous Phosphate) batteries. 

Since batteries contain a lot of iron, there are 2 major trade-offs, namely energy density, and cost which work in the favour of LFP batteries. This is because of the volatility of lithium, which is used on both ends of the battery. Nickel and cobalt prices are variable and often come with ethical considerations when it comes to determining the material source. 

A lot of battery users may not be affected by the aspects of energy density. This is because smaller vehicles, especially in urban places with high population density do not require a large range. In China, a number of automakers are choosing smaller, less energy-efficient batteries for vehicles as they are cheaper. Currently, LFP batteries are more cost-efficient than nickel-cobalt batteries. However, LFP batteries have peaked from a technological evolution point of view. At the same time, nickel and cobalt batteries tend to have improvements in energy density and costs in 18-24 month cycles. 

LFP currently makes up 24% of the battery market. Based on a number of research houses including banks and battery experts, it is expected that the market share will plateau at about 23%-24%. As the technology improves, it is expected that nickel and cobalt batteries will come back into play. 

Supply Shortages

Due to the pandemic, any company that is reliant on the supply chain has faced delays in the past 2 years. This has led companies to seek more security in supply. In the case of cobalt, companies are looking to secure offtake agreements in order to develop an in-house supply chain. 

OEMs (Original Equipment Manufacturers) are now working towards changing strategies. For instance, a lot of the major auto companies around the world have hired resource analysts as part of the procurement teams. This way, the companies can better understand the market and ensure supply security from both a volume and an ethical perspective. 

The supply chain shortages have slowed production for most EV makers around the world. This is mainly due to lack of a particular material, or the challenges of running operations in China due to the ongoing Covid zero policy. 

In fact, the Tesla factory in Shanghai is expected to be majorly affected by the shutdowns. These factors have led to demand destruction which is caused by the production hindrances due to the lack of available material. These aspects are likely to impact markets, which in turn, would affect demand forecasts. Production issues have caused major forecasters to pull back on ambitious EV numbers for the next couple of years. 

Targets 2022 and Beyond

Cobalt Blue is looking to get to the market as early as possible. This is because, despite the challenges, the market is seeing exciting growth. Since the company has a major project status, it anticipates that securing funding wouldn’t be challenging. 

The Australian government has offered fantastic support via the Critical Minerals Initiative and in funds that are available either as grants or loan facilities. Furthermore, the US announcement to fund Australian projects will make it easier to secure capital. This will help the company stick to the defined timelines and finish the project development as early as possible. 

The company also has upcoming warrants that are due to expire in August 2022. Notably, a lot of these options have already been exercised in the past 2 months.

Cobalt Blue is currently working on the construction of its demonstration plant, which is expected to commence operations by May 2022. It plans to run a 6-7 week campaign, where it will try out different types of scheduling, along with a 24/7 operation. This will help the company test out different aspects of the demonstration plans. Following this, it is looking to send the finished product around the world for qualification. 

The remainder of the year will focus on the Feasibility Study which is currently under process. The company has 3 engineers and outside consultants engaged that will collect the data from the demonstration plant and include it in the final feasibility statement, which is expected by the end of 2022. 

At the same time, the company is also working towards attaining all the environmental permits and other permits that are required in order to finalise the project. By mid-2023, the company will be in a position to make an FID (Final Investment Decision), which along with sufficient funding in place would enable it to start construction by 2023 end and into 2024. 

Cobalt Blue has an arrangement with the University of Queensland, Australia where the latter would send the company material from the tailings dam. Once the demonstration plant work is complete, the material would be run through the processing plant. Here, the company will treat the material and run tests to check the feasibility of developing a product. Notably, tailings are widely available across Australia and are known to be rich in cobalt. The company is planning to run these tests alongside the Waste Streams Project which is scheduled to commence in mid-2022. 

ESG Considerations

In the past few years, the ESG (Environmental, Social, and Governance) aspect has taken priority over the security of supply. Cobalt Blue is looking to ensure that its mine site conforms to the best environmental standards. ESG remains a crucial component for the company. The company is working extensively to engage the community on the ESG front. Cobalt Blue considers sustainable operations from the purview of both the end-user and investors.

To find out more, go to the Cobalt Blue Holdings website