It may be cold in the Northwest Territories, but for Fortune Minerals Ltd., its Nico project about 160 kilometres outside Yellowknife is starting to generate some heat.
The London, Ont.-based mine developer's prized asset is a cobalt, gold, bismuth and copper project – with the emphasis on cobalt.
Who wants cobalt? Lots of people, apparently. Already deployed in the batteries of billions of smartphones, demand is growing because of the ever-expanding use of cobalt in lithium ion batteries for electric vehicles.
"There's a transformative evolution in auto manufacturing," says geologist Robin Goad, Fortune's chief executive officer. "This transformation is happening because of better, more efficient batteries, which use cobalt," he adds.
Fortune is in a good position – literally – because of its location in Canada. Most of the world's cobalt now comes from the Democratic Republic of the Congo, which as Mr. Goad notes, has been scarred by war and political upheaval for decades. Most of its refining, meanwhile, is done in China.
Fortune's NICO project, based on a deposit at the NWT site discovered in 1996, is one of the few potential new primary sources of cobalt outside of Congo or China.
"Responsible sourcing has become an issue in cobalt mining," Mr. Goad says.
Legislation in the United States and Europe insists on strict policies ensuring that certain minerals – tantalum, tin, gold and tungsten – come from an ethical source, not from mining operations that are found to finance violent militia groups or employ child labour, for example.
Amnesty International has called for cobalt to be added to the list of minerals, though next steps are uncertain as the Trump administration in the U.S. has sought to water down or eliminate mining regulations.
In addition, a group called the Responsible Business Alliance, which includes most of the major electronics manufacturers, strongly encourages its members to ensure their supply chains use responsibly sourced minerals.
Mr. Goad notes that NICO is working under a settled land claim with the support of the Tlicho First Nation government, as well as the federal, territorial and Saskatchewan governments.
It's also important to note, he says, that while most of the world's cobalt is mined as a byproduct of copper and nickel mining, NICO is primarily a cobalt project with gold and bismuth production as byproducts.
"When cobalt is a byproduct, the primary metals dictate the production. The world needs new sources of supply that are not from Congo or China and are independent of nickel and copper mining," Mr. Goad says.
About 30 per cent of NICO's revenue is expected to come from the 1.1 million ounces of gold in mineral reserves, the company projects. NICO also contains one of the world's largest deposits of bismuth, with 12 per cent of global reserves. Bismuth is an environmentally friendly metal that is used in anti-corrosion coatings – and in Pepto-Bismol.
NICO's primary promise is cobalt, though. "The cobalt market has grown at a compounded annual rate of approximately 6 per cent over the last 20 years," Mr. Goad says.
In December, the capital markets unit of Bank of Montreal predicted that cobalt prices are likely to rise significantly in the next two years. It forecast that cobalt will peak at more than $40 (U.S.) a pound, up from recent levels in the mid-$30's, and BMO does not rule out the possibility that cobalt prices could double from current levels in 2019.
As recently as the 1990s, only 1 per cent of cobalt was used in rechargeable batteries, according to a report by Metal Bulletin. That has already risen to 55 per cent of world cobalt consumption, according to Hamburg-based research company Statista.
According to the London-based research firm CRU, global mine production of cobalt was 117,00 tonnes in 2016. Exane BNP Paribas forecasts a market of 239,831 tonnes by 2025; Fortune Minerals' feasibility study four years ago projects its NWT mine could produce 1,615 tonnes of cobalt annually, with a new study boosting that estimate to as much as 2,000 tonnes a year.
More cobalt is going to be needed because it's expected that by 2025, electric vehicles will make up as much as 25 per cent of the world's car and truck sales, up from about 4 per cent today, according to research by Goldman Sachs.
There are already 25 battery megafactories either announced or under construction around the world; Tesla's facility in Nevada alone requires 7,000 tonnes a year of cobalt, Mr. Goad says.
Another manufacturer, Volkswagen, has announced that it will offer 80 electric vehicle models by 2025, and China is driving the adoption of electric fleets with heavy investment and incentives, as well as penalties for those who purchase and buy cars powered by internal combustion engines instead of battery power.
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