No cobalt, no Tesla? – by Sebastien Gandon (Tech – January 1, 2016)

The battery industry currently uses 42 percent of global cobalt production, a critical metal for Lithium-ion cells. The remaining 58 percent is used in diverse industrial and military applications (super alloys, catalysts, magnets, pigments…) that rely exclusively on the material.

Approximately 97 percent of the world’s supply of cobalt comes as a by-product of nickel or copper (mostly out of Africa). Freeport-McMoRan Inc. and Lundin agreed to sell to Chinese players their respective stakes in the Tenke Fungurume mine, one of the largest known cobalt sources, in the Democratic Republic of the Congo.

Tesla has stated that the cobalt it needs will be sourced exclusively in North America, but the math doesn’t seem to add up. Is Tesla doomed? Not necessarily…

The Tenke Fungurume mine is one of the world’s largest known cobalt resources. The concessions are located in the Katanga province in the southeast region of the Democratic Republic of the Congo (DRC). Freeport-McMoRan Inc. (NYSE:FCX) holds a 56 percent interest, Lundin Mining (OTCPK:LUNMF) holds an indirect 24 percent equity interest and Gécamines, the Congolese state mining company, holds a 20 percent carried interest.

In May, 2016, China Molybdenum acquired Freeport’s 56 percent controlling interest in the mine for US$2.65 billion, the largest investment ever in the country. Lundin Mining was left with three options: allow the China Moly deal to proceed, supplant the offer by exercising a right to first offer or sell its own stake to China Moly (or a third party, for that matter).

In November, and after several extensions, Lundin Mining finally announced it was selling its 24 percent stake to an affiliate of Chinese private-equity firm BHR Partners for US$1.14 billion. Freeport’s sale to China Moly was expected to be completed before year’s end, whilst Lundin plans to close its sale in early 2017.

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