Car Makers Look to Lock Up Cobalt Supplies From Responsible Sources

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Jul 02, 2019, 09:45 ET

LOS ANGELES, July 2, 2019 /PRNewswire/ -- USA News Group –– Automakers have been among the first to seek ethical supplies of cobalt and now are going as far as to claim they will by only buy from producers who offering proven responsible sources. BMW, among others, are leading the charge.

Mining and mineral companies focused on cobalt and palladium resources critical to EV battery production are already moving to increase supplies of these vital minerals including Freeport-McMoRan (NYSE: FCX), Glencore (OTCPK: GLCNF) (OTCPK: GLNCY) and China Molybdenum (OTCPK: CMCLF). These established mining leaders all have a stake in the development of battery metals.

Vancouver-based 21C Metals (CSE: BULL) (OTCQB: DCNNF) is one of the few junior companies aggressively addressing the situation facing 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 and the Tisova copper and cobalt project located on the border of the Czech Republic and Germany. Geologists believe the in the historic Tisova Property will product significant amounts of copper and cobalt.

BMW Says It Will Use Cobalt from Australia and Morocco Exclusively

One of the leaders in the efforts to move to ethically sources supplies of cobalt is BMW. Some time ago the German automaker announced that it was setting set up a project aimed at making sure the cobalt bought by the company will only be sourced from responsible sources.

Initially BMW claimed the pilot involves blockchain technology and that the company is "open" to working with other partners from the automotive industry. That has since shifted slightly as a BMW official recently stated that the leading brand will buy its cobalt exclusively from Australia and Morocco. Not a big pivot for an automaker, but it does cut to the heart of the cobalt issue.

Cobalt and several other materials, including palladium, are needed for battery manufacturing. The largest reserve of cobalt by far is located in the Democratic Republic of Congo or DRC, which has been cited for numerous human rights violations over its mining practices. The demand for EVs and hybrids has fueled a major boom in that African country.

The problem with cobalt is that it is often mined in small, artisanal settings. This makes both the source of extraction and the method used very difficult to track with an accurate and honest chain of custody. So, the BMW program using blockchain could offer a significant solution. The company's pilot project was implemented in the DRC, but they have yet to release any results or suggest any success.

Sourcing Cobalt and Palladium from Responsible Sources

Several automakers and other large users of lithium, cobalt and battery metals have joined in the move towards responsible sourcing. Apple, a leading user of lithium batteries for hi-tech devices, is already onboard with responsible sourcing. It appears that the trend is setting a new group of battery metal producers in motion. A clear example is junior miner 21C Metals out of Canada.

21C Metals shifted into high gear in 2019 looking to rebrand (the company was formerly named Declan Mining) and develop all new projects that pair perfectly with its existing cobalt / copper interests.

Its East Bull property near Sudbury, Ontario in Canada fits the bill perfectly. The property has been tested recently and all permits are in place to begin exploring for palladium. Drilling previously conducted 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. That equates to 523,000 ounces palladium equivalent.

The Company's core asset prior to the acquisition of the East Bull was its copper and cobalt project, located on the border of 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. 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.

Palladium currently trades at roughly $1519.00 US per ounce. Cobalt, which has seen lower than expected pricing of late, trades at around $15.65 per pound.

Pressure to Source Responsibly Rising

Wherever BMW and automakers source critical supplies of cobalt, there is growing pressure to find responsible sources. BMW Board member Andreas Wendt, who is charge of the company's procurement is reported as saying that BMW wants to make sure that the cobalt they purchase is guaranteed not to use child labor in the production process. This means a change in suppliers might be on the horizon for BMW. According to the news source Reuters, a spokesperson for Glencore, which mines for cobalt, has disclosed that BMW has agreed to buy its cobalt from the Australian Murrin mine. In addition, a cobalt source in the African country of Morocco is reportedly under consideration.

These new sources are expected to be adopted into the automaker's next generation of batteries. That could come online as early as next year. It appears that the pressure has real world consequences as well: BMW was reacting during a briefing that coincides with an announcement by the London Metal Exchange that it is launching an initiative that would potentially delist brands that can't prove responsible sourcing of resources by 2022.

Companies that can prove responsible sources of battery metals including cobalt, could see a major increase in market share in the battery metals space including:

Freeport-McMoRan (NYSE: FCX)

Freeport-McMoRan Inc. engages in the mining of mineral properties in the United States, Indonesia, Peru, and Chile. It primarily explores for copper concentrate, copper cathode, copper rod, gold, molybdenum, silver, and other metals, as well as oil and gas. The company declared a cash dividend of $0.05 per share payable on May 1, 2019 to holders of record as of April 15, 2019 for its common stock.

Glencore (OTCPK: GLCNF) (OTCPK:GLNCY)

Glencore plc Metals and Minerals segment is involved in smelting, refining, mining, processing, and storing zinc, copper, lead, alumina, aluminum, ferroalloys, nickel, cobalt, and iron ore. The company recently signed an integration agreement pursuant to which the Agua Rica project would be developed and operated using the existing infrastructure and facilities of Minera Alumbrera Limited in the Catamarca Province of Argentina. Glencore plc was founded in 1974 and is headquartered in Baar, Switzerland.

China Molybdenum (OTCPK: CMCLF)

China Molybdenum Co., Ltd., together with its subsidiaries, engages in the mining and processing, smelting, deep processing, and scientific research of molybdenum, tungsten, copper, cobalt, niobium, phosphorus, and other base and precious metals in the China, Japan, Brazil, Switzerland, Singapore, Finland, Korea, and internationally. CMOC, has inked a stake transfer deal with BHR Newwood Investment Management, buying 100% interest in BHR DRC, which owns 24% in copper mine Tenke Fungurume Mining S.A. (TFM), located in Katanga Province in the Democratic Republic of the Congo.

For a more information on 21C Metals, you can view the report at USA News Group: https://usanewsgroup.com/2019/06/17/this-car-metal-keeps-hitting-new-records/

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