Cobalt Blue progresses global cobalt sample program

Cobalt Blue Holdings Ltd (ASX:COB) (OTCMKTS:CBBHF) (FRA:COH) is making progress with its global cobalt sample program with a pilot plant to be built in Broken Hill by the end of this year. Samples will be produced from the plant utilising core from the company’s Broken Hill Cobalt Project with first samples expected by February 2021. Construction will be followed by a commissioning period with the company about to begin the local hiring of plant personnel. Samples will be produced with the aim of satisfying raw material standards for global battery makers. COB has cobalt sample partners from Japan, Korea, India, Europe and Australia representing a strong selection of cathode precursor/battery makers, cobalt trading houses and mining companies. In this Q&A with Proactive, chief executive officer Joe Kaderavek outlines the company’s plans and provides an outlook on the cobalt market. What can we expect from COB over the next 12 months? CEO: We recently announced that our Broken Hill-based Pilot Plant was under construction with commissioning expected to begin in January. The Pilot Plant will allow COB to produce varying specifications of cobalt products (including mixed hydroxides and sulphates) and represents a significant milestone for our business. Our commercial aim remains to make battery-ready cobalt sulphate from this facility on a scale sufficient to provide test samples (~10 kilograms) for global commercial partners. COB will then (February 2021) kick off our global cobalt sample program. After these production runs have been successfully completed, we will then upgrade the facility to a larger (continuous flow) Demonstration Plant that will treat 2,000-3,000 tonnes of ore and produce 2-3 tonnes of sample over the second half of 2021. Results from these operations will inform the Broken Hill Cobalt Project (BHCP) feasibility study. What is the Global Cobalt Sample Program? CEO: COB has 10 cobalt sample partners representing major cobalt consumers and trading houses across Japan, Korea, India, Europe and Australia. Commercial partners require multiple samples for acceptance testing, a process that can take 12 months for a new entrant to the market. Successful qualification as a supplier to either metallurgical cobalt customers or the battery industry will allow COB to begin project investment and production offtake discussions in earnest. Firm offtake arrangements will be required to secure debt funding for the BHCP. Cobalt is not a terminally traded metal (the LME cobalt market is too illiquid) so a new entrant will need to seek the firm offtake agreements to qualify for debt funding. Leaching circuit equipment for the Pilot Plant. What are the key milestones for your Broken Hill Cobalt Project? CEO: We remain on track for a feasibility study completion by mid-2022. The overall BHCP development timeline is shown in the figure below. Can you tell us about COB’s commercial partnerships? CEO: LG International came on as a shareholder two years ago and has remained a supporter of the BHCP. Subsequently, we have negotiated agreements with Mitsubishi Corporation and Sojitz Corporation. The strong interest in our sample program has led to a total of 10 partners committing to take sample/s and undoubtedly more will follow as we near production. The Pilot/Demonstration Plant operations will effectively prove up metallurgical processing (on a quasi-commercial scale), in turn underpinning a greater level of commercial interest. Our strategy is then to work with investment partner/s that will assist in financing the BHCP feasibility study. This reduces funding risk and removes the dependency on expensive and dilutive share placements. What are you seeing in the cobalt market? CEO: Automotive manufacturers have now committed over US$500 billion by 2025 towards Electric Vehicle (EV) production. This is underpinned by more than US$200 billion (150+ global facilities) in battery production investment. Together, this will support an automotive revolution and by 2025, 15% of vehicles sold will be EVs with that number nearing 50% by 2030. The industry, however, has a significant timing and capital mismatch problem. With the timing, design and engineering of new EV models takes up to seven years with a typical sales life of 7-9 years. Further, battery makers require around two years to qualify their battery packs into an EV model. This crude reasoning serves to illustrate a simple point. Battery makers are approaching COB to understand the scale and quality of the BHCP today, to begin product pre-qualification over the next 12 -18 months for battery configurations that will be produced to 2030-plus. For example, the proposed GM/LG Chem ‘Ultium’ (Nickel Cobalt Manganese Aluminium Oxide or NCMA) battery will not even be produced commercially until around 2025. Secondly, today’s metal market pricing is not providing enough incentive to develop new supply. Nominally the ratio of investment in battery raw materials (upstream) to battery production is about 1:10. There is nowhere near US$20 billion being spent on global cobalt or nickel mine development, with a typical timeframe to production of 8-10 years. This helps examine why EV manufacturers such as BMW and Tesla are signing multi-year nickel and cobalt supply deals today. As one of the largest (ex-Africa) greenfield cobalt projects, there is substantial global interest in the BHCP as a supplier to the EV industry, which will build as we continue to de-risk the project. There has been recent speculation concerning the future of cobalt in batteries - what are your views? CEO: The battery market is vast and no one technology dominates. With respect to the EV market, there are multiple segments where different lithium-ion battery chemistries will prevail. These include: (1) Small size & rideshare; (2) Mid/large size mass-market; (3) Luxury/premium; (4) Commercial; and (5) Heavy (semi-trailers, etc). Cobalt is a staple for most of these segments, except for small size vehicles (battery sizes typically below 25 kWh) which includes hybrids. By comparison, the mid/large-size vehicle mass-market uses cobalt-based batteries that average 60 kWh. That’s 12-15 kilograms of cobalt in every mid/large size vehicle. In terms of overall EV battery demand, it is estimated that non-cobalt batteries will maintain an approximate 15% market share by 2030. Therefore, cobalt is a key component in EV lithium-ion batteries, with non-cobalt based technologies, suitable for the mass market, unlikely to be commercialised in the foreseeable future. As an incoming large-scale ethical cobalt producer, our view is that the move to a cobalt-free EV battery places operating stability at risk and is based on slender economic benefits. We believe cobalt-free batteries are an aspirational goal only. Conclusion: CEO: Thanks, look forward to updating the market further.