Hi all,
Here’s hoping for another solid JRV week despite the noise in the market. One week closer to SMP BFS too.
@Waterboy03, just replying to your comment from the Nickel thread re: ‘Popularity of cobalt-free batteries continues to grow’, and the future of cobalt more generally. I gave this a lot of thought before buying in, so forgive the lengthy reply but this is the answer I’d arrived at.
Bryce talked about this issue in both of the Crux Investor interviews I watched. His short answer to the issue, as someone close to the action: they’ve been trying to replace cobalt for decades and it hasn’t happened yet (or words to that effect). I would add my own two cents to this to say that we will almost certainly see all sorts of new battery technologies come out in the next decade, but it’s one thing to create a new technology in a university lab or as a proof of concept, and another issue altogether to be able to bring it to large-scale commercialisation in an economic way (a good example of this challenge unfolding at present is ‘DLE’, Direct Lithium Extraction in the Li space; it gets a lot of buzz around certain stocks, i.e. LKE and VUL, but it’s commercially unproven and remains largely theoretical). That’s not to say cobalt-free batteries won’t appear, but there’s no indication they’ll become either the only or even the preferred battery of the future. The issue with cobalt is not its application, i.e. whether it is fit for purpose (clearly it is), but the security and ethics of supply. From here I’ll hand over to someone far more knowledgeable than I…
Rick Rule was asked in an interview (29 January 2021, link below) about the risks of cobalt being replaced in new-age batteries. His comments:
"I'm a cobalt bull. That being said, I wouldn't be so overweight cobalt to the extent that if technology made it obsolete it would change my decision as to what to have for breakfast. I had an interesting discussion some years ago with the chief procurement officer from a very large industrial company (I don't want to name the company) and he told me a very interesting thing: he said that demand for cobalt would basically go up to match security of supply. Which is to say the supply of cobalt is so uncertain because it comes from South Africa, Congo, Zambia, and Russia, that fabrication utilisation of cobalt is constrained because people are afraid to employ it in more industrial processes for fear that they won't be able to get at it. And he said the price could easily double or triple if the supply would triple. That is a very interesting statement! To the extent that the largest fabricators in the world understood that they had some security of supply in cobalt the utility of cobalt in various applications, not just merely batteries but also metallurgical applications is so extraordinary that the demand would in and of its own volition, increase. When people talk, as an example, of the lithium-ion battery, what they are really talking about is a copper, cobalt, nickel battery by weight. And that isn’t the only application.”
For the other applications, see the image below. Rick goes on to talk about “the continued electrification of the world” and how people erroneously think only of EV batteries, when in fact battery metals will pay a much larger role outside just automobiles in bringing electricity to the 1.2 billion people who currently do not have access to it. It’s a very interesting interview, worth a listen. The cobalt comments are right at the start, here’s the link: https://www.youtube.com/watch?v=Mza6wtaeqJc
But it’s the comment about “security of supply” that really stands out to me. It’s a rare mineral indeed where demand increases as supply increases (or at least, security of supply, to be more specific). This is the very mantra of Jervois’ ICO project: security of supply and traceability of the supply chain for OEM’s. The demand is already there, or growing (as partly demonstrated by the price chart @xxLiONxx has posted) but it will be interesting to see if/how the demand increases further once an ethical source of supply is operational… especially since it will be in the backyard of the US OEM’s, with a refinery operation in Europe already coupled to European and Japanese customers.
Jervois are currently a nickel-cobalt play but it’s not hard to see they’re establishing themselves as ‘A battery minerals company’ (per the website) so looking 5-10 years into the future I don’t see a company who is reliant on just one or two commodities, and that certainly reduces the downside should technologies advance to render cobalt less important in the battery.As a closing comment, a lot of commodities are getting hot press at the moment about supply ‘squeeze’ vs demand i.e. uranium, lithium, nickel. It’s probably a good thing for people still buying Jervois (me) that cobalt hasn’t really joined that conversation yet – but I think it will sooner or later.
Cheers,
mondy
(20min delay)
