Battery metals is a fast-evolving sector in mining, with enormous potential for growth. An entire day was spent discussing the potential of the African battery metals market at February 2019’s Mining Indaba, in South Africa. But, despite growing interest in battery metals from investors, it’s a sector that sparks plenty of debate.
Below, we share several thought-provoking opinions on Zambia’s role as a metal battery supplier.
Are we close to solving our energy storage problems?
The answer is “yes”, and batteries are a major part of this – but there is a multitude of Energy Storage Systems options too, said Jack Bedder, Director of Roskill Consultancy Group. “Over the years, a wide variety of chemistries has been explored, each of which have unique properties that render them more or less-suited to specific applications. Changes in the relative cost-competitiveness of different technologies has had a significant impact on their commercialisation and market share.”
When it comes to consumer electronics like laptops and smartphones, lithium-ion batteries have market dominance. Lithium-ion also dominates the Electric Vehicle (EV) market. Cobalt is a vital ingredient in the manufacturing of lithium-ion batteries, which has led to soaring demand.
For cobalt-rich countries like Zambia and the Democratic Republic of Congo (DRC), herein lies one of the biggest challenges, and an equally large source of potential.
How does cobalt supply compare to demand?
Global demand for cobalt has tripled since 2011 in the battery sector alone, according to industry analyst Benchmark Mineral Intelligence. Demand is expected to reach around 190,000 metric tons by 2026 – more than a fourfold increase since 2017. Prices shot up from an average of US$18 per pound in 2011, to over US$30 towards the end of 2017.
“It’s an interesting time,” said Colin Hamilton, Managing Director of Commodities Research BMO Capital Markets. “In metals mining we are not used to markets growing at the pace that we are currently seeing across battery metals, which puts pressure on supply and how to fund the projects.”
Rigid supply is a challenge. Because cobalt is produced mainly as a by-product of copper and nickel mining, production depends completely on the economics of mining these two metals. In Zambia and DRC, cobalt is predominantly a by-product of copper.
This creates a frustrating situation: rising demand alone is not enough to boost cobalt mining.
DRC accounts for over 70 percent of the world’s cobalt supply, but political instability and the controversial 2018 mining code have only deterred investment. In contrast, Zambia – regarded as one of the most stable countries on the continent – does not offer the equally high grades or potential for cobalt found in DRC.
Bedder explained: “End-users, especially electronics and automotive firms, are becoming increasingly interested in the provenance of their raw material inputs and are exploring ways of how to secure access to supply. But it remains to be seen which countries and projects will attract investment and issues related to governance and regulation. Few non-Chinese companies have, thus far, had the risk appetite to invest in DRC cobalt assets.”
Are higher royalties a glass half-full or a glass half-empty scenario?
Capturing more value from its raw materials seems to be a Zambian government priority. “Royalties have been increased in Zambia,” said Bedder. “Some metals have been impacted more than others. Some will call it resource nationalism. The Zambia Chamber of Mines (ZCM) went as far as to say that tax changes would make Zambia ‘uninvestable’. However, several people in Zambia’s mining industry describe this as one step in a long-term plan to increase beneficiation in the country. Currently Zambia exports mainly unprocessed copper and cobalt and buys back finished products. If funds from higher royalties are re-invested into the sector, perhaps more beneficiation will take place domestically.”
As the EV market drives demand for cobalt, it creates incredible potential for producers like Zambia. Capturing the most value possible is central to that. “Rather than just mine and export, it’d be better for Zambia to refine too,” says Bedder. “And better yet, to build batteries and car parts – or even cars.”
The EV Revolution
Ford Motor’s senior manager for energy storage strategy Ted Miller expects cobalt supply to keep pace with demand for rechargeable batteries, but there will be challenges in the next three to five years. “I fully anticipate we’re going to keep a lot of pressure on cobalt production,” he said at this year’s Mining Indaba.
“One of the things we’re not used to in our industry is driving a commodities market and at this point cobalt is really driven by battery production. Now that battery production is going to be dominated by automotive, that puts us in an awkward position.”
Rather than just mine and export cobalt, it’d be better for Zambia to refine too. And better yet, to build batteries and car parts – or even cars.
The multibillion-dollar question
When The Verge asked Caspar Rawles, analyst at Benchmark Mineral Intelligence, what the future of the cobalt market is, he responded, “That’s the multibillion-dollar question.”
Over 50 percent of demand for cobalt now comes from the battery sector, he said, which is turning the industry on its head. And the demand for cobalt created by Electric Vehicles isn’t going to slow down anytime soon.
We can expect a “paradigm shift in the world’s energy generation, storage and consumption to cleaner more sustainable technologies”, said Michael Cronwright, principal consultant for critical metals at minerals exploration and evaluation consultancy firm, The MSA Group. This, along with forecasted increases in demand for energy overall, is what drives exploration in commodities like nickel, lithium, vanadium, graphite, tin, rare-earth elements – and, of course, cobalt.
EVs in the mainstream market
“A significant portion of major automotive manufacturers have developed and announced plans for EVs,” Cronwright points out, with automotive companies like Tesla and Chevrolet popularising both EVs and hybrid EVs. Volvo recently announced plans to completely replace its product offering from internal combustion engine vehicles to EVs. Initiatives like the 2017 EV30@30 Campaign are aiming for EVs to gain a 30 percent share of new vehicle sales. Minimising reliance on fossil fuels is being added to more government agendas every year.
The world could have as many as 125 million electric vehicles by 2030, predicts the International Energy Agency. The lithium-ion batteries that power those vehicles have five times the energy density of lead batteries. They also require around 15 kilograms of cobalt and 63 kilograms of nickel – for one car battery.
Are cobalt batteries here to stay?
Tesla is set on producing a zero-cobalt battery, but experts believe this would come at a high cost.
“Tesla uses a formulation called NCA (nickel, cobalt, aluminium) that is already very low-cobalt,” says Rawles. “Over the last six years, Tesla and Panasonic have reduced cobalt dependency by about 60 percent already. That’s already very low. We think it’s going to be difficult for them to go much lower because you run into engineering problems.”
Cobalt is the safe element in the cathode, he explained. Reducing cobalt means reducing the life cycle of the cell. “The current market standard for electric vehicles is an eight-year warranty to retain 80 percent of the original capacity of the battery. You need to be sure your battery can do that. To replace it under warranty is way more expensive than the theoretical savings you gain from less cobalt.”
There are safety implications as well. Less cobalt requires more nickel, which makes cells susceptible to overheating. “I think it’s very challenging from an engineering standpoint to solve these problems, so I think the current NCA technology is going to be dominant for the next 10 years,” said Rawles.
Ford wants to collaborate at all stages of the battery metals supply chain in an effort to lower its dependency on the metal, said Miller. There are no plans to participate in mining, but this could be re-evaluated in future.
Is more mineral exploration necessary?
Capital is being funnelled towards identifying new battery metals projects. But until the gulf between supply and demand from the green energy sector shrinks, prices will continue to soar. Cobalt’s price has increased by approximately 120 percent since January 2019. With so much of the world’s cobalt coming from DRC, more and more exploration companies are looking elsewhere on the continent.
Zambia’s Minister of Mining, Richard Musukwa, said that Anglo American Plc and Rio Tinto Group are seeing promising results from exploration. But, naturally, the worldwide shortage of exploration capital affects Zambia. Without more exploration, we risk reaching a crisis in the global pipeline for projects. On the other hand, just one successful venture can create significant opportunities.
“There are so few new discoveries these days that to have a potential deposit that can illustrate the size and scale of a large scale operation is quite exceptional,” said Brett Richards, CEO of Midnight Sun, which has a land package in excess of 500 square kilometres near Kansanshi mine where it’s been discovering copper and cobalt since 2015.
Bedder is optimistic too. “Africa has a big role to play in the lithium-ion battery and electric vehicle story,” he said. “Chambishi remains the only producer of refined cobalt, but there are several projects under development in Zambia.”
Africa has a major role to play in the lithium-ion battery and electric vehicle story.
The Mining Indaba’s media partner, Global Business Reports, has its own predictions, saying: “Around the globe the mining industry is experiencing a lift, and Zambia is no different. If the country can attract a fresh round of investment to boost existing projects and unearth new ones, the boundless opportunities in this overall stable environment will inevitably drive the country back to its rightful place as a leader among Africa’s top mining destinations.”