Big cobalt news today from a few days ago - Glencore is shutting down its largest copper/cobalt mine, Mutanda - which produced 27,000 tones of cobalt last year. At roughly 1/4 of the cobalt market this will have a huge effect on price. SEE ARTICLE PASTED BELOW

Cobalt is hugely complex, this is admitted by everyone, from Benchmark to miners to banks and Toyota. Aside from supply vulnerabilities such as that above, there's the enormous problem of geopolitical risk with China owning 8 of the 14 largest mines in Congo, and controlling 80% of the production. Japan, Korea and the US are obviously very worried about this, hence the Japanese cobalt seeking consortiums, and Bill Gates and others setting up companies to find new cobalt resources.

This is where I have always felt Mt thirsty has a powerful advantage. If Toyota and Honda or Sumitomo want to guarantee their cobalt they can get an off-take with the likes of AUZ or ARL. But these HPAL plants will take 10 years to bring on line, and cobalt is predicted to be in deficit between 2022 and 2025. So where do these players go to secure cobalt?

Mt Thirsty, at a fraction of the cost and complexity can be brought on line quickly. Who's been watching how fast AJM, or PLS built their lithium mines - in less than two years from DFS? They're broadly comparable in size and complexity to Mt Thirsty.

Mt Thirsty has a higher OPEX averaged out across its mine life than a billion dollar HPAL project like ARL's, but in the first 5 years (richest ore is shallow) it produces massively more cobalt and nickel than in subsequent years and would likely be very profitable. I suggest everyone does a spreadsheet and has a look themselves. Even at today's cobalt prices, Mt Thirsty is at break-even for the first 5 years.

My thesis is this - $200Mil CAPEX is a very cheap price for Sumitomo or similar to guarantee the cobalt they need for their refining. And they needn't drop it all at once. A farm-in agreement to advance the project - paying stage by stage - would give them the option of building the mine in a year or two from now. And if they decide not to in 2 years after DFS, and BFS, they've only lost a few million.

This project is a huge risk for sure. It's BOOM or BUST. But hey, at the stock's current price that's what you're paying for!

Solarbat

Glencore Plans to Shutter Giant Cobalt and Copper Mine in Congo

WILLIAM CLOWESAUGUST 06, 2019

Glencore Plc is planning to halt production at one of the world’s biggest cobalt mines after prices for the battery metal collapsed and costs at the project increased, according to a person familiar with the situation.

The announcement that Glencore will close its Mutanda mine in the Democratic Republic of Congo is expected to come as the company lays out an overhaul of its key African copper and cobalt business when it releases first-half results on Wednesday. It would be another setback for Glencore, which has been dogged by operational problems, legal challenges and a rift with Congo’s government over a new mining code.

Mutanda will stop producing at the end of this year and be put on so-called care and maintenance, according to the person who asked not to be identified as the plans haven’t been made public. It was already expected that the mine would produce half as much copper this year after it mined more complicated ores that raised costs.

The Financial Times earlier reported Glencore’s plans to shutter the mine.

“The mine is no longer economically viable over the long-term,” Glencore wrote in a letter to employees at the mine.

Future Profits

Even though African copper and cobalt is a small part of Glencore’s overall business, it’s considered a key source of future profits. The company ranks as the world’s top producer of cobalt and investors have hoped Glencore would ride the boom in electric cars and battery demand. Mutanda produced 27,300 tons of cobalt last year, more than half Glencore’s total output, and 199,000 tons of copper.

The decision to shutter the mine highlights how quickly cobalt has shifted from a prized asset to a headache. After quadrupling in two years, prices have collapsed to the lowest since 2016 as new supplies pour into the market.

With few hedging tools available, the plunge has left Glencore exposed. The company said last week that it’ll report a $350 million non-cash hit to its trading business from cobalt that’s been mined, but not yet sold.

Glencore is likely to also announce lower production from its key Katanga unit in the Congo. Glencore’s billionaire CEO Ivan Glasenberg has said Katanga hadn’t met expectations and a turnaround plan would be announced soon.

Katanga struggled with a series of setbacks over the past year. Dozens of illegal miners were killed in a landslide at the company’s vast open-pit mine in July. The company said in April it would likely miss output targets for copper and cobalt. It had to halt cobalt sales in November after detecting radiation in the ore.