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LOS ANGELES, July 10, 2019 /PRNewswire/ -- One of the world's leading electric vehicle (EV) manufacturers, Tesla has issued a warning about a potential global shortage of battery minerals on the horizon (1). The question on many industry watchers mind is in what time frame? It seems the answer is a bit murky.
Regardless of the possible timing for a shortage, cobalt and battery mineral companies are moving rapidly to develop new sources of cobalt, palladium, and lithium including Katanga Mining Limited (OTCPK: KATFF) (TSX: KAT), Fortune Minerals Limited (OTCQB: FTMDF) (TSX: FT), and eCobalt Solutions (OTCQX: ECSIF) (TSX: ECS).
Emerging miner 21C Metals (CSE: BULL) (OTCQB: DCNNF) is one of the few companies on track to help offset the situation that is being driven by the growth in the EV market. 21C recently acquired interest in the East Bull property - a palladium prospect with a 43-101 compliant resource estimate of 11.1m tonnes of ore grading at 1.46 grams per ton of palladium equivalent. Its core asset is the Tisova copper and cobalt project located on the border of the Czech Republic and Germany. Mining experts believe the in the historic Tisova Property has potential to produce significant amounts of copper and cobalt.
Why Tesla is Sounding the Alarm
The comments about a potential shortage in battery minerals vital to the fast growing EV market are based on what the spokesperson described as underinvestment in the mining sector. That is according to sources at a closed-door mining conference in Washington, DC earlier this year.
Two unnamed sources present at the event later told Reuters news service that Sarah Maryssael, the Tesla global supply manager for battery metals had forecasted "looming supply challenges for the metal components used to make EV batteries." (2) These are critical battery minerals that include lithium, nickel, copper, and cobalt.
The report went on to explain that Ms. Maryssael had said that prices for some of these key metals could increase - even exponentially - as a direct result of the supply constraints the industry is facing.
In a series of releases that resulted from the meeting and reports of the comments, another Tesla spokesperson reported that Ms. Maryssael's comments were very industry-specific and that they referred to "a long-term expectation" as opposed to an immediate consequence of supply restraints. (3)
The question remains as to which version is more accurate.
The views expressed by Tesla's spokespersons do match up with previous projections made by other major manufacturers including BMW, Ford, and Toyota. These industry leaders have called for the automotive industry to begin investing directly in the battery metals mining supply chain in order to ensure an adequate supply for the next three to five-year period.
Along with the key metals that have been affected, the copper sector has suffered from a lack of investment as well. Producers are now working hard to develop existing mines and bring in new supplies to support the escalating demand created by the EV trend. It's now widely accepted that the fast-growing demand could create multiple problems in the very near future if the mining sector does not keep pace.
Averting the Obvious
Several mining companies have already spotted the trend in battery metals forecast by Tesla and are moving ahead of the curve. These are companies that are investing in the mining sector with specific focus on the much-needed battery minerals. Vancouver-based 21C Metals is an early mover now revealing its advances.
21C Metals (CSE: BULL) (OTCQB: DCNNF) kicked off 2019 by rebranding (the company was formerly named Declan Mining) and launching new projects that pair perfectly with its existing cobalt and copper interests. The company's East Bull property near Sudbury, Ontario in Canada is a perfect example. The property has been tested recently with permits are in place to begin palladium exploration. Previous drilling on the property resulted in a National Instrument 43-101 compliant resource estimate of 11.1m tonnes of ore grading at 1.46 grams per ton of palladium equivalent. All in, that equates to 523,000 ounces palladium equivalent.
Prior to its new initiative, the company's core asset was its Tisova copper and cobalt project on the border between the Czech Republic and Germany. Between 1959 and 1992, a total of 25,985 meters of surface drilling was completed, as well as a total of 14,299 meters of underground drilling on the site. Grades of 0.69 percent cobalt, 17.1 percent copper, 3.7 g/t gold and 178 g/t silver have been recovered at Tisova. This indicated what the mining geologists have said is a large potential amount of production of copper and cobalt from the Tisova site.
The Real Outcome of Tesla's Warning
Whether short term or in the near future, the prospect of battery mineral shortages is having an effect on company's outlook and approach to this market. Already, many companies, including Tesla, were aiming to cut down on their use of cobalt due to the unethical mining practices in places like the DRC, which is the source for almost 60% of the world's cobalt. The Democratic Republic of Congo is notorious for its widespread abusive child labor practices.
Sources attending the conference with Tesla's spokesmen report that Ms. Maryssael claims Tesla will focus more on nickel to use less cobalt in battery cathodes. (4)
"Some extraction techniques - especially those using child labor - have made its use deeply unpopular across the battery industry, especially with Musk," Reuters quoted.(5)
Not surprisingly Ford is also reported to be reducing its use of cobalt to lower its dependency on the metal. At this point, Ford does not have any offtake agreements for cobalt that would allow it to buy cobalt directly from producers.
Regardless of the outcome of the conference, the key takeaway appears to be the underlying issues facing the EV industry driven by the mining sector. Both will need to take some serious action to avert any near or long-term shortages of battery metals.
Companies that can add new responsible sources of battery metals including cobalt, lithium, palladium and copper could see a major increase in market share in the battery metals space including:
Katanga Mining Limited (OTCPK: KATFF) (TSX: KAT)
Katanga Mining Limited, through its subsidiary, Kamoto Copper Company SA, engages in the copper and cobalt mining and related activities in the Democratic Republic of Congo. Katanga increased its copper cathode production to 57,175 tons in the first quarter of this year, compared with the 49,770 tons produced in the fourth quarter of 2018. The company is based in Whitehorse, Canada. Katanga Mining Limited is a subsidiary of Glencore International AG.
Fortune Minerals Limited (OTCQB: FTMDF) (TSX: FT)
Fortune Minerals Limited explores for and develops specialty metals, base metals, and precious metals in Canada. It primarily holds 100% interest in the NICO gold-cobalt-bismuth-copper project located in the Northwest Territories. Fortune Minerals announced recently that it could potentially defer the construction of its downstream refinery, after recent tests have confirmed that it could achieve good gold recoveries from its cobalt and bismuth concentrates at the proposed Nico mine site.
eCobalt Solutions (OTCQX: ECSIF) (TSX: ECS)
eCobalt Solutions Inc. engages in the exploration and development of mineral properties in Canada, the United States, and Mexico. Australian cobalt developer Jervois Mining announced it would buy out Canada-based Ecobalt Solutions Inc, for C$57.6 million ($43.29 million), to expand its geographical footprint into the United States in April 2019.
For a more on cobalt, palladium and the advances taking place in battery metals space, you can view the report at USA News Group: http://usanewsgroup.com/2019/03/11/cobalt-and-palladium-why-two-little-metals-are-so-valuable-in-the-push-to-develop-renewable-energy/
Sources:
(1) https://www.reuters.com/article/usa-lithium-electric-tesla-exclusive-int/exclusive-tesla-expects-global-shortage-of-electric-vehicle-battery-minerals-sources-idUSKCN1S81QI
(2) https://www.reuters.com/article/usa-lithium-electric-tesla-exclusive-int/exclusive-tesla-expects-global-shortage-of-electric-vehicle-battery-minerals-sources-idUSKCN1S81QI
(3) https://electrek.co/2019/05/02/tesla-shortage-battery-minerals-nickle-copper-lithium/
(4) https://www.reuters.com/article/usa-lithium-electric-tesla-exclusive-int/exclusive-tesla-expects-global-shortage-of-electric-vehicle-battery-minerals-sources-idUSKCN1S81QI
(5) https://www.reuters.com/article/usa-lithium-electric-tesla-exclusive-int/exclusive-tesla-expects-global-shortage-of-electric-vehicle-battery-minerals-sources-idUSKCN1S81QI
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