Rise of Electric Cars Fuels Cobalt Market Surge

Advocates have long argued that environmentally friendly technologies could provide a boost to any economy. In the past few years, the rise of the electric car has proved them right. Not only is it creating wealth in the manufacturing sector, but it’s having spill-over effects in related industries. The need for cobalt in the manufacture of green car batteries has fueled staggering growth for First Cobalt Corp. (TSX.V: FCC) (OTCQB: FTSSF) (FTSSF Profile), with a share price increase of as much as 350 percent in a single year. Behind the showmanship of CEO Elon Musk, Tesla, Inc. (NASDAQ: TSLA) is becoming the leading brand name for electric vehicles, with a range of cars and trucks. Mining giant Glencore Plc (OTC: GLNCY) is riding the same wave as First Cobalt, providing a third of the world’s cobalt. eCobalt Solutions, Inc. (TSX: ECS) (OTC: ECSIF) is tackling the new environmental and ethical concerns this growth has raised, by focusing on ethically sourced cobalt for an ethically oriented market. Even the grandee of American motor companies, General Motors Company (NYSE: GM), is getting in on the act with plans to launch 18 new all-electric vehicles by 2023. The electric car industry is set for big growth.
The Rise of the Electric Car
Twenty years ago, the electric car seemed like little more than an environmentalist’s whim. But with the growing impact of pollution on the environment, governments and businesses have worked hard to make electric transport a reality. Now, the whim is bearing fruit. Electric cars are on the roads. Charging stations are becoming a more common companion to petroleum fueling stations. There are even apps tailor made to help drivers ensure their batteries stay charged.
It’s predicted that one in six cars sold will be electric by 2025. Both Britain and France have declared their aims to end sales of petrol and diesel cars by 2040. Simply put, the market is shifting away from traditional fuel sources and toward more environmentally friendly solutions.
Perhaps the biggest indicator of this shift is the interest taken by BMW. The German multinational has not only committed $250 million to battery research, it is striving to lock in contracts to ensure its entire battery supply chain for the next 10 years. It’s a huge commitment from the motoring giant, and a guarantee of ongoing growth for the industries behind those batteries, such as cobalt mining.
Creating a Sustainable Solution
One of the biggest problems with the rise in demand for cobalt is establishing a secure, sustainable, ethical source of the mineral. It’s a challenge that First Cobalt Corp. (TSX.V: FCC) (OTCQB: FTSSF) has risen to with its North American drilling strategy.
Nearly two-thirds of the world’s cobalt supply currently comes from the Democratic Republic of Congo (DRC). The exponential issue is that the DRC is plagued by violence and corruption. Few companies can keep their hands clean while working there, and recent political turmoil led to a 90 percent jump in the price of cobalt. Reliance on DRC cobalt creates insecurity for manufacturers and for nations whose automotive infrastructure will soon be reliant on electric vehicles as much as big oil. By providing cobalt from North America, First Cobalt is in a position to deliver cobalt more cheaply, securely and ethically, guaranteeing its place in the market.
First Cobalt has quickly established an impressive operation based in Canada. Through mergers with CobalTech (http://nnw.fm/5uNvx) and Cobalt One (http://nnw.fm/Ss3B6), it has gathered a large area of mining territory, as well as the tools and expertise to exploit it. Trent Mell, the president and CEO of First Cobalt, said of the mergers: “Over a very short period, we have created the largest cobalt exploration company in the world, controlling almost half of what we believe may be the most prospective cobalt district outside of the DRC. We intend to pursue an aggressive exploration program in 2018 while continuing to assess other growth opportunities.”
The company’s advantages extend to industrial processing facilities. It has the only cobalt extraction facility in North America that is permitted for producing battery materials, putting it in a unique position to become the leading domestic supplier.
Working with Technological Innovation
As it moves to cater to growing cobalt demand, First Cobalt announced a $7 million exploration program for 2018 (http://nnw.fm/sNR89). By combining existing data and fresh surveys, it will establish the potential of 13 mineralized sites with known historical production of cobalt and silver, with an eye to increasing its output. On Feb. 13, the company announced positive drill results from the historic Bellellen mine (http://nnw.fm/2hoUx) in Ontario’s renowned Cobalt Camp. The results confirm the presence of high-grade cobalt and nickel along the 300-meter-long Bellellen vein system south of the historic mine.
“First assays from Bellellen drilling confirm the grades found in muckpile material sampled in 2017 and support our view that we now have a third area of interest in the Cobalt Camp,” Mell stated in the press release. “The Bellellen structure has adequate strike length to remain a priority target. Our 2018 drill strategy is to test several new target areas to confirm the cobalt grades of known systems throughout the Camp and then focus on those of sufficient size to support large tonnage operations.”
It’s just one example of First Cobalt’s forward-looking approach, embracing innovation throughout its business. Over a hundred years of mining data have been combined using digital techniques to establish the likely locations of deposits (http://nnw.fm/6b9H0). Artificial intelligence is being considered to accelerate the discovery cycle and allow new deposits to reach exploitation sooner. As a member of the Mineral Exploration Research Centre (MERC) and Metal Earth Project, the company is conducting regional geophysical surveys to increase its understanding of Canada’s rich cobalt resources.
This focus on refinement, innovation and scientific rigor is visible at the company’s cobalt extraction refinery. Ore-sorting tests and metallurgical studies are being used to ensure the plant’s capabilities. The refinery has been located with room to expand into a larger refinery complex so that the company is not at risk of being limited by its original facilities.
Securing Future Extraction
The potential of First Cobalt’s future is reflected in the confidence shown by investors. The company has recently secured $30 million dollars in financing.
This has allowed the company to acquire strategic mining claims (http://nnw.fm/pe0NZ) around its original territory, including a recent acquisition near the Silver Banner mine as well as ensure they are well positioned for their 26,500-meter 2018 drill program. Mell said of the purchase: “This area of North Cobalt is of particular interest as some of the more significant past-producing cobalt mines are nearby, including the Silver Banner mine where we reported high grade cobalt samples.” Such purchases have made First Cobalt the largest land owner in the Cobalt Camp, dominating Canadian cobalt production.
The result has been a surge in the company’s fortunes. Its share price increased by as much as 350 percent during 2017, and its market cap is now close to $200 million. This makes it the largest cobalt exploration company in the world by market cap. It’s a status that has drawn the company international attention, and an interview with Mell featured prominently in a recent Guardian article on the cobalt industry.
First Cobalt’s ambition extends beyond the Canadian mining regions, as it anticipates additional discovery from places outside the DRC, such as British Columbia, Idaho, Ontario and possibly Chile. This insulates the company from the risks inherent in working in the DRC, giving it a significant advantage over established competitors. As liberal environmentalists encourage ethical supply chains and conservatives seek to boost home-grown industries, the company is placed to benefit from political maneuvers and purchasing decisions on both the right and the left.
The electric vehicle and cobalt industries are booming. First Cobalt is one of the companies best placed to profit off this boom, but it’s far from the only one.
Cobalt and Electric Cars: The Bigger Picture
The best recognized name in the electric car business is Tesla (NASDAQ: TSLA). The flamboyant showmanship of Elon Musk together with a commitment to innovative, sustainable technology have created a household name. With its range of cars and now a move into trucks, Tesla is forging the way for this young industry. Its continued growth, and the swell in electric technology it brings, will ensure that demand for cobalt continues to grow for the foreseeable future.
Mainstream car manufacturers are following Tesla’s lead. The Chevrolet division of General Motors (NYSE: GM) sold more than 23,000 Bolt EVs in 2017, giving it the third largest sales of electric cars. GM has announced plans to launch 18 new all-electric vehicles by 2023, allowing the company to cater to a wider range of customers as the electric car goes mainstream. Like other manufacturers such as Tesla and BMW, GM’s commitment to the market could help to drive up the profits of cobalt mining companies.
Among those companies is commodities manufacturer Glencore (OTC: GLNCY). Operating in over 50 countries, and with an annual revenue of $177.4 billion, it produces 28,300 metric tons of cobalt a year — around a third of the global supply. Though the company’s reliance on the DRC may cause it some challenges, the sheer scale of its operations will ensure deals with the large car companies as they move toward battery power.
Like First Cobalt, eCobalt Solutions (TSX: ECS) (OTC: ECSIF) is looking to provide cobalt free of the environmental and ethical concerns bound up in mining the DRC. Working through a wholly owned subsidiary, it has established the Idaho Cobalt Project, the only near-term, environmentally permitted primary cobalt project in the United States. This will cater to growing international demand for cobalt and for ethically sourced resources. By getting in on the ground floor of American cobalt production, it will have an edge of stability as the cost of production in the DRC fluctuates.
The market for electric vehicles is growing, and with it the demand for cobalt. As political strife and ethical concerns hit traditional sources, North American cobalt companies will be particularly well-placed to serve a vital market and support a greener future.
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