COBALT risen from obscurity as an unloved niche metal to become a key, global demand-driven commodity, with an anticipated compound annual growth rate of at least 30% which shows no signs of abating.
CobaltCorazon MiningAustralia
The underlying thematic is well known and well understood – and valid; driven by a looming paradigm shift to new battery technologies as a mainstream energy and power source, cobalt, which is a core component of next generation lithium-ion batteries, has been thrust in to the limelight.
Cobalt demand has risen sharply, creating pressure on global supply inventories, which has resulted in a corresponding sharp increase in the price of cobalt.
The statistics paint a compelling picture of the rise and rise of cobalt.
The LME price of cobalt has increased by more than 100% in the past the 12 months, from US$24,000 per tonne in July 2016 to almost US$60,000 per tonne. Cobalt demand is anticipated to grow at a similar rate over the next five years, with commodity research house CRU forecasting total global annual demand to rise from current levels of around 60,000 tonnes to approximately 130,000t by 2020.
In a practical context, it is estimated that the Tesla S electric vehicle requires approximately 21kg of cobalt and that more than 38kg of cobalt goes into every Chevrolet Bolt electric vehicle – if the vehicles of the future are to be electric or hybrid powered, then the world needs more cobalt.
But with current global supply constrained and weighted strongly toward Africa, and the Democratic Republic of Congo specifically, where does the next generation of cobalt production comes from?
Corazon Mining (ASX: CZN) managing director Brett Smith (below, left) believes he may have at least part of the answer to this question in the company’s Mt Gilmore cobalt project in northern News South Wales.
The Cobalt Ridge deposit within the Mt Gilmore project is Corazon’s initial core focus. “Cobalt Ridge is one of the highest grade cobalt deposits to be defined to date, and the clear point of difference with many other cobalt plays is that Cobalt Ridge is a pure-play cobalt dominate sulphide deposit – it is not a re-birthed nickel laterite deposit or copper project,” Smith says.
“In addition, the metallurgy appears straight forward and the processing options include simple, cheap, industry standard flotation, and, importantly, outside of Cobalt Ridge, the project looks to have considerably more potential than the mineralised trend defined by drilling to date.”
The above points resonate strongly when assessing the development potential of any mineral asset, but are particularly relevant for Corazon and Mt Gilmore.
Grade and scope are always key determinants of a project’s value and work in Mt Gilmore’s favour, as does the potentially low cost and straight forward processing pathway. Add in the fact that at present around 50% of global cobalt production comes from a by-product of nickel operations, with only 6% of production currently coming from primary cobalt operations, and it is easy to see how Mt Gilmore distinguishes itself in any peer analysis – and is shaping as bona fide development asset for Corazon.
The company acquired Mt Gilmore in June 2016, and has moved at pace to advance the project. Corazon owns a 51% interest in the project and has an exclusive right to earn up to 80%. It is located 35km from the major centre of Grafton in north-eastern NSW over an area of 375sq.km, and has been subject to previous successful cobalt exploration, which returned assay results from drilling of up to 3.38% cobalt – as well as copper and gold exploration.
But it has been Corazon’s focused and targeted adoption of modern exploration techniques that has unlocked the true cobalt potential at Mt Gilmore.
The company completed its maiden 18 hole-2,331m drill program at Mt Gilmore in late 2016, targeting the Cobalt Ridge deposit. Drilling successfully validated the extent of cobalt-copper-gold mineralisation and confirmed the presence of multiple zones of cobalt sulphide mineralisation over a strike length of at least 300m, and from near-surface to a depth of 150m. Mineralisation remains open along strike to the west and at depth.
Average cobalt grades from this drilling were between 0.23% and 0.65% cobalt, with a best individual 1m assay of 2.79% cobalt and multiple higher grade zones of up to 1.48% cobalt.
“We were delighted with the results of our initial drilling at Mt Gilmore,” Smith says. “The final assay results confirmed Cobalt Ridge as a unique, high-grade, cobalt sulphide-dominant deposit, and these have been followed up with a first stage metallurgical test work program in the first quarter of this year, which has also delivered excellent results.”
The highlights of the metallurgical test work make for impressive reading. Simple flotation testing yielded a cobalt recovery of 92.2% (89% copper and 75.5% gold) in a total concentrate with 11.1% mass recovery, and produced a cobalt concentrate of 7.38% cobalt (1.29% copper and 4.1 g/t gold).
These are outstanding first pass results and the company expects to achieve even higher grades following optimisation, with initial gravity concentration test work results indicating that a higher grade cobalt concentrate, of 12.2%, may be produced from just 1.31% of the initial feed mass.
This potentially translates to significantly reduced downstream equipment size and reagent consumption, which would markedly improve the CAPEX and OPEX of any future mining operation at Mt Gilmore.
More recently, Corazon has discovered new zones of cobalt mineralisation at Cobalt Ridge, which will be subjected to drilling in the company’s next phase of drilling, planned for the third quarter this year.
The new cobalt zones were identified from a soil sampling program which has successfully defined extensions to Cobalt Ridge, to a strike length of 450m which is anticipated to continue under cover. The maiden drill program has tested only 200m of this strike, which highlights the potential exploration upside within the project area.
The supply-side dynamics of the cobalt sector warrants further discussion and helps underpin the sense of ‘right-time, right-commodity’ opportunity facing Corazon.
Understanding that there will likely be an ongoing period of tightness in global cobalt supply and demand, it is worth noting who is responsible for the bulk of global production. It is estimated that around 50%-60% of the world’s cobalt is currently sourced from the Democratic Republic of Congo (with the majority of its output destined for China), which has a history of supply side disruptions and significant sovereign risk.
Large new-technology battery and vehicle companies are particularly mindful of the need for clean supply chains for their component parts, influenced in part by branding and reputational issues and customer expectations, and as such are increasingly seeking new and sustainable sources of cobalt supply.
At a more basic level though, as their commercial operations ramp-up over coming years, so too will their demand for cobalt.
So, with the making of a significant, high grade development asset under foot, and once-in-a-life-time demand forces driving the cobalt market, what does the future hold for Corazon at Mt Gilmore?
“We believe the project has the opportunity to supply a quality cobalt product that will be in high demand in the growing global rechargeable lithium-ion battery sector,” Smith says.
“Over the next 12 months, the company’s targets are to define a resource of significant scale at Cobalt Ridge and conduct detailed mining and processing studies that will define a development pathway for the project.
“Our goal is to have the project development-ready to coincide with what we see will be major future demand growth from the global new-battery technology industry.”
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Corazon Mining – at a glanceHEAD OFFICE: Level 1, 329 Hay Street, Subiaco, Western Australia 6008 Telephone: +61 (8) 6142 6366 Email: [email protected] Web: www.corazon.com.au DIRECTORS: Brett Smith, Clive Jones, Adrian Byass, Jonathan Downes QUOTED SHARES ON ISSUE: 899.4 million MARKET CAP (at 2c per share): A$17.9 million MAJOR SHAREHOLDERS: Crescent Nominees Ltd (11.4%), board and management (3.5%)
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HEAD OFFICE: Level 1, 329 Hay Street, Subiaco, Western Australia 6008
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