Sunrise Cobalt

Recently I came across a tweet where the ASX mining twitter community was celebrating the cobalt price rally and listed maybe 6-8 ASX juniors which will capitalise on the rally. Astonishingly Sunrise was absent from the list. Sunrise was once the junior cobalt market darling though through the lack of marketing it seems to have dropped by the wayside at the moment so I thought I’d list some research to highlight why Sunrise matters when it comes to Cobalt.

The Sunrise deposit has one of the highest ratios of cobalt to nickel for a laterite globally (6:1 Ni:Co) and therefore Cobalt is a major feature in the economic viability. It accounts for 30-40% of the revenues.

Sunrise has a 90th percentile laterite Cobalt endowment. Ie. on a bell curve, it is on the far right tail. It has higher cobalt content than 90% of all surveyed laterites. See below left distribution of 117 known laterites, shown are the 50th and 90th percentiles at 0.04% and 0.1% Co respectively. Sam often shows Sunrise another way, as one of the highest Co:Ni ratio laterites (right).


Stated in the DFS below, Sunrise's two autoclaves are capable of 7000tpa of cobalt metal production @ 3.4Mtpa. Sam has stated that a 40% uplift to initial 2.5Mtpa is possible = 3.5Mtpa. This would place Sunrise comfortably in the top 5-10 producers of cobalt in the world. This is about 2M vehicles worth of cobalt requirements per annum @ NCM811, 50kWh.


Looking at the PEP stated figures for 2.5Mtpa, using some guesswork for the 3.5Mtpa upgrade scenario I confirm that these numbers are possible as highlighted in red. Note: this is just a sense check not confirmed by mine plan as higher throughput means ore from later years are brought forward resulting in faster grade depletion. So Co production between 4500-7000tpa is possible yrs2-11.


The 20m thick geothite zone (Ni 0.75% Co 0.17%) is the best ore. As seen in above table, grades vary substantially from years 1-25. The optimised mine plan biases the exceptional Ni & Co grades to the front years.  

Sunrise has some flexibility in terms of selecting from stockpiles of higher Cobalt content ores versus higher Nickel % ores depending on Price of the day however based on the PEP figures the Ni & Co grades seem to coexist geospatially. Plotting Ni/Co throughput there is a decent R2 correlation, though some outliers exist for flexibility.


The global Mineral Resource Estimate places the ore body at 0.6% Ni and 0.1% Co. As you can see, the global MRE is inferior to all but one of the 25 year’s mill feed, and yes this is year 25. Unsurprisingly we plan to mine the cream of the deposit, but its the degree of variability which is exceptional. This is why mill feed is critical when evaluating a projects viability, you cannot simply look at the global MRE. This also points to the ore variability of Sunrise, its actually a major feature, as it means you can feed exceptional grades at the front payback years. The grades of a deposit like ARLs for example appears to be relatively consistent as shown below. This is an estimate of what their DFS feed grades will look like based on recently stated prod figures and MRE. Note: this is not supported by a published mine plan as of yet.


Exploration activities are ongoing to try and improve upon resource size and mill feed optionality with Sunrise East and Hylea which both appear to offer excellent Cobalt grades 0.2%+. It’s the high grade pockets well above MRE that you want!

Ultimately SRL has as very large, proven resource and excellent global grades.


Of surveyed laterites, SRL has a relatively dense endowment of mineralised ore. SRL laterite is 4 x 2km ~8km2 and has ~170Mt of ore. Tighter mine footprint, less trucking etc...


Sunrise will produce a battery grade product with exceptionally low impurities due to the preferential loading of Ni/Co through the IX circuit. This is a key technological differentiator compared to counter current decantation. The project was founded on this key hydrometallurgy IX technology. For batteries, the next primary source of Ni/Co demand, the product specifications are very high for battery quality and hence the economic success for all downstream partners.

 
Cobalt Industry
Cobalt supply is predominantly as a by-product of copper production (60%), with other sources being from nickel laterites (15%), nickel/copper sulphides (11%) and other cobalt ores (13%).Canaccord estimate a further 100ktpa Co coming into the market between 2020 and 2030,
• Indonesia HPAL @36ktpa Co by 2030
• Congo Cu-biproduct @42ktpa Co by 2030
• Australia Co
• others.
Of note is how little Cobalt Indonesia HPAL is forecasted to bring into the market despite all the fearmongering. Below list of the 10 or so HPAL projects coming online, though they will only produce about 1 Cobalt per 12 Nickels


SRL will produce 1 Cobalt per 4 Nickel. Another reason why Sunrise is important, its high Co output compensates for the lack of cobalt by-products from the mining industry. Think about this for a second.. This industry needs to feed minimum 8:1 Ni:Co (NCM) precursor + all the other sources of industrial Co demand which is about 50% of cobalt demand (see below)..

BUT cobalt is a byproduct, with very inelastic supply response. An exception is the swing producers of artisanal cobalt miners in Congo which was instrumental in tanking the Co price in 2018 when it was a ~120ktpa market. However, this is supply is being increasingly regulated in DRC "the Enterprise Générale du Cobalt (EGC) stated that they would become the sole purchaser of ASM mined cobalt to provide precise regulation to the market."


Price forecasts
Benchmark see Cobalt demand at 400ktpa by 2030.
Cannacord see Cobalt supply at 240ktpa by 2030.
What is crazy is there is a 160ktpa gap by 2030 between the two independent supply/demand forecasts as shown below.


Benchmark see cobalt market being large, 400ktpa @ 2030. Currently they have a long term Co price of $60k/t which is quite modest compared to their demand forecast. It should be noted they expect Ni:Co longterm value ratio of 3:1.



Canaccord on the other hand see a smaller market, but a tighter market and long term see Co price at $88k/t ($40/lb).


SRL price used to be correlated with Cobalt but there has been a disconnect for 15 months now.


Cobalt in battery chemistry
A quick note about Cobalt in ternary batteries. DYOR though I have satisfied myself that all the major battery manufacturers have committed to cobalt, though as a specialty offering they are looking into cobalt-free versions in the labs. This includes CATL, LG Chem, Samsung SDI, SK Innovation, Panasonic. CATL state Co-free by 2024, SK say 2030, LG/Samsung are looking into it as is Panasonic. For example CATLs recently posted roadmap below. Also well summarised in this LGES/Samsung/SDI article

“in a statement, LG Energy Solution said that although iron-phosphate batteries are cheap, they have disadvantages in terms of weight, energy density and range. Instead, it is working on alternative low-cost batteries that do not require expensive materials such as cobalt.”
https://www.korea-certification.com/en/lg-and-samsung-develop-ev-batteries-without-cobalt/

Note how Co-free is framed as a competitor to LFP (Not NCM!). LFP has its own issues such as range, charge rates, cold weather performance and recyclability. Co-free could assist here.


The reason Cobalt free batteries are not mainstream is thermal runaway, lattice stability and operating performance.

A tweet I posted the other day summarised my thesis:
"I subscribe to a bottom-up / customer focused demand model for cathode metals.. Question is: will EV buyers demand their battery doesn’t catch fire? and insurance premiums are manageable? Yes. Therefore cobalt has a bright future"

Look no further than the consistent battery fires and recalls that have cost the OEMs a lot of $. The customer will demand a stable / reliable product imo.

Lastly on chemistries, Cannacord estimates about 50% of batteries will contain Cobalt. They use a 40M vehicle per year by 2030 framework. I think this is an okay, perhaps slightly conservative estimate which many analysts I have come across appear to agree with.