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How to Invest in Cobalt in Australia (Updated 2023)
Australia is the world's third biggest producer of cobalt, and as companies look for ethical cobalt sources outside the DRC, the country's role will continue to grow.
Demand for cobalt has been trending upward in recent years, with analysts remaining bullish on the key raw material, which is used in electric vehicle (EV) batteries. Demand is soaring as the electronics industry comes to rely on cobalt, and its use will only increase as the world continues to digitise and electrify.
EV sales are on the rise, and these vehicles require lithium-ion batteries to run. Typically, around 9 kilograms of cobalt are used to manufacture each battery, although one battery alone can have as much as 20 kilograms. As long as demand for EVs continues to go up, so too will demand for cobalt — and the EV boom has only just begun.
Cobalt is also key in several different alloys with a variety of uses, including in gas turbine engines and magnets. Particularly tough cobalt alloys, such as tungsten carbide and chromium-cobalt, can be used to cut and drill steel.
So, where should keen investors look for exposure to this promising metal? The Democratic Republic of Congo (DRC) has long been the top producer of cobalt worldwide; according to the US Geological Survey, it accounted for about 130,000 tonnes — or about 70 percent — of cobalt production in 2022.
However, the DRC’s mining industry is known for unsustainable mining practices and unchecked labour abuses, including child labour. The country cannot maintain its current level of production indefinitely, and many conscious investors are seeking more ethical alternatives.
Australia is one such alternative. Australia contains about 18 percent of global cobalt reserves, but is currently responsible for only about 3 percent of global cobalt output. Between the country’s sustainable mining practices and its de-risked ventures, Australia is a great pick for shrewd investors interested in the cobalt mining industry.
What is cobalt?
Cobalt has been used since antiquity for its bright blue colouration, but the metal was only officially discovered in 1742 by Swedish chemist Georg Brandt.
Up until 1874, European mineral deposits were the primary sites of cobalt production. That year, Europe was overtaken by New Caledonia, and in 1905 Canadian deposits pulled ahead. Since around 1920, the DRC has been a major global producer of cobalt, and its cobalt-mining legacy has continued to this day. Another contemporary cobalt behemoth, China, has only made its mark as a leading producer within the last couple of decades.
In the early 20th century, cobalt’s primary application began shifting away from cosmetic purposes and toward technological pursuits. For example, in 1930, cobalt alloys containing a mixture of cobalt, aluminium, nickel and iron were first used to make high-powered permanent magnets. Other alloys were soon discovered to have varied uses for building electrical equipment and electronic devices.
Cobalt is mainly found in compounds, such as cobalt arsenide, cobalt sulpharsenide and hydrated arsenate, and it is predominantly used for alloy production. Generally, cobalt does not come from cobalt mines — in fact, 98 percent of global cobalt is a by-product from nickel and copper mines. Copper mines account for about 60 percent of global cobalt output, and nickel mines around 38 percent.
Does Australia have a lot of cobalt?
According to Australia’s 2020 list of critical minerals projects, there are 68 cobalt-focused projects across Australia.
The largest is Glencore’s (LSE:GLEN,OTC Pink:GLCNF) Murrin Murrin nickel-cobalt mine, which launched in 1998 and is located in the Northeastern Goldfields region of Western Australia. Murrin Murrin uses conventional open-pit mining for its resource extraction, and it processes and refines cobalt ore on site.
The mine produces an impressive 50 percent of the country’s cobalt. In 2022, Murrin Murrin produced about 35,700 tonnes of nickel, alongside 3,000 tonnes of cobalt by-product.
In 2022 overall, Glencore produced a total of around 43,800 tonnes of cobalt between all of its operations, including those in the DRC. In addition to production, the company also processes and recycles cobalt-containing materials.
Another notable cobalt project in the country is the Broken Hill project, a new mining endeavour owned by Cobalt Blue Holdings (ASX:COB,OTC Pink:CBBHF). This project is unique for its emphasis on cobalt production — cobalt will be directly produced on-site, rather than extracted as a by-product of nickel.
Broken Hill is planned to begin production in 2026, and is anticipated to have an output of around 4,000 tonnes of cobalt annually over a 20 year mine lifespan. The project is also expected to have annual sulphur output of 300,000 tonnes, which will hike up its value.
Broken Hill’s cobalt production process will include concentration, leaching, calcining and product recovery. Importantly, Broken Hill will both produce and refine its cobalt — a welcome change from sending the raw material to another country, most often China, for refinement. This practice will reduce the unethical labour practices along the chain of production.
Many other top cobalt-producing companies have active sites in Australia, including Panoramic Resources (ASX:PAN,OTC Pink:PANRF) and Australian Mines (ASX:AUZ,OTCQB:AMSLF). These companies are top nickel miners and strong producers of cobalt as a by-product.
What's the outlook for cobalt in Australia?
The Australian government is enthusiastic about the country’s move toward mining critical minerals, establishing a Critical Minerals Facilitation Office in January 2020 as part of a push for its burgeoning minerals sector.
Currently, Australia is the third biggest producer of cobalt worldwide at 5,900 tonnes in 2022. According to the Australian Government’s Critical Minerals Strategy 2023-2030, demand for cobalt could rise by 20 times by 2040.
Moreover, despite the fact that Australia is the third largest cobalt producer worldwide, it has the second largest reserves of cobalt. This means that the country has the potential to scale up its production slowly and sustainably, situating itself as a major world player.
Between the exploding EV market and the continued trend toward electronics sales and digitisation, cobalt will likely remain a hot commodity in the mining world for years to come. Investors should be paying close attention to cobalt production, and particularly to cobalt mining in Australia, where strong cobalt output, new mining ventures and sustainable extraction practices are setting the country up for long-term success.
This is an updated version of an article first published by the Investing News Network in 2021.
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Securities Disclosure: I, Matthew Flood, hold no direct investment interest in any company mentioned in this article.
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