Lithium-ion Batteries – The Cobalt Cliff Is Upon Us – by John Peterson (InvestorIntel.com – April 8, 2016)

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I had a very enlightening conversation on Wednesday morning with the experts at Darton Commodities Limited, a U.K.-based metals trader that specializes in cobalt and serves as an intermediary between cobalt producers and European users. A couple days before the call, Darton sent me a copy of their 42 page “2015-2016 Cobalt Market Review.” It was one of the most impressive and data rich industry overviews I’ve ever seen.

Our wide ranging hour and a half conversation confirmed my developing thesis that cobalt is an immense supply chain risk that lithium-ion battery manufacturers and users have blithely dismissed in a headlong rush to build production capacity for markets that may not develop, or may develop more slowly than anyone anticipates. It left me more convinced than ever that my initial risk assessments were understated.

The Cobalt Cliff is upon us and there is no reasonable probability that the battery industry will have the muscle to outbid other essential industries that must have cobalt to make far more valuable products.

While the statistics embedded in the “Cobalt” page on Darton’s website are a bit dated, the page provides a solid summary overview of the sources and uses of cobalt.

Sources of Cobalt

“Cobalt is not found as a native metal but in nickel-bearing laterites or nickel and copper sulphide deposits. This means that cobalt is usually produced as a by-product of nickel and copper mining activities. Of current production sources, approximately 64% of cobalt production is copper related, 33% is nickel related and only 3% is produced by primary cobalt operations.

The main reserves are found in the southern part of the Democratic Republic of Congo (DRC), an area which currently holds close to half of the world’s cobalt reserves. Australia, Cuba, Zambia, New Caledonia, Canada, Russia, Madagascar and Brazil hold much of the balance of global cobalt reserves.

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