Developing North American cobalt supply tests the industry’s mettle

Strides are being made to bolster North America’s battery ecosystem, but fully onshoring cobalt — one of the rarer metals used in lithium ion  batteries for electric vehicles — is likely to prove elusive, industry experts say.

Mines in the Democratic Republic of Congo (DRC) produce about 70 per cent of the world’s cobalt today, while China accounts for a similar percentage of the refining market, said Ying Lu, senior research analyst for cobalt at the UK-based research firm Wood Mackenzie.

“We don’t really see this DRC-China power axis [changing] anytime soon,” Lu said. This despite “signs of regionalization” in the North American and European cobalt industries, she said.

“The West is already aware of the supply security issues due to the high concentration in the cobalt market,” Lu said.

EVs are in their infancy but they’re the largest consumer of cobalt, accounting for about 37 per cent of the market, she said, and they will drive cobalt demand higher as adoption accelerates. Consumer electronics are a close second in demand, while the metal is also a key ingredient in superalloys used in aerospace.

‘BIG HILL TO CLIMB’

With demand far outstripping local supply, a fully self-sustaining North American cobalt industry is “a big hill to climb,” said Trent Mell, CEO of Electra Battery Materials Corp.

The Ontario-based mineral processor is constructing what will be North America’s only cobalt refinery. The plant, about 500 kilometres north of Toronto, had been scheduled to open in this spring, but is facing supply chain-related delays.

As it moves toward commissioning the site, Electra signed a deal last fall to supply battery-cell manufacturer LG Energy Solution with 7,000 tonnes of battery-grade cobalt over the next three years, enough to produce batteries for about 1.5 million EVs. Because Electra is the sole source of locally processed cobalt, many others in the supply chain are hoping to tap into its output, Mell said. The company “could sell it all tomorrow.”

But while refining will be local, most of the raw material will be from overseas. Shipments from the DRC will make up Electra’s “baseload,” Mell said.

“I think most of us, [automakers] included, acknowledge that the DRC is going to continue to play a pretty big role. Having said that, … there is a keen motivation that that’s not 100 per cent of our needs.”

Electra is also developing a mine in Idaho — the Iron Creek project — and working on partnerships with North America’s limited number of cobalt producers to add supply streams from North American sources.

PROMISING PROSPECTS FOR MINES

Canada has no primary cobalt mines today, said Mitchell Smith, CEO of Vancouver-based Global Energy Metals Corp., and a member of the Battery Metals Association of Canada board of directors. But exploration opportunities exist for mines with cobalt as the primary target and others that would produce the metal as a byproduct, he said.

Canada already has a strong foothold in cobalt, with the metal produced as a byproduct at mines in and around Sudbury, Ont., Smith said.

According to Natural Resources Canada, the country’s mines produced nearly 5,000 tons (4,500 tonnes) of cobalt in 2021, essentially all of that coming from mines looking primarily for nickel. Canadian production accounts for about two per cent of the roughly 220,000-ton (200,000-tonne) global cobalt market, Lu said.

Despite the short-term challenges in developing new sources, Smith expects the recent trend toward localizing the battery supply chain to extend to cobalt.

“Having material from North America or Europe being able to be processed in relatively close proximity, especially given the auto industry is really that main driver behind cobalt demand, … is going to be very important,” he said.

BUT WHAT ABOUT THE UNITED STATES

Mell and Lu see cobalt deposits in Idaho as having high potential.

Electra’s Iron Creek project remains in the early stage of development, but Mell said the company is seeing traction to advance work in the state from U.S. government departments such as defense and energy.

Australia-based Jervois Mining, meantime, began commissioning its Idaho Cobalt Operations (ICO) mine in October. Once open, ICO will be the only cobalt mine in the United States, Jervois says.

Yet concentrate produced at the mine “must currently be sent outside the country,” Jervois said, because the United States has no refineries.

Mell said Electra’s soon-to-open Ontario refinery would require modifications to process the type of cobalt from ICO.

Battery recycling also could eventually produce large streams of cobalt, Lu said, but the research analyst estimates that North America “won’t see volumes coming from that sector until 2030 or so,” as the initial wave of EV batteries must first reach the end of their lives.

LEGISLATION RAISES HOPE

While Mell is skeptical about the prospects for a self-sustaining North American cobalt industry, he said the recent passing of the Inflation Reduction Act (IRA) in the United States will provide added encouragement for the supply chain.

Electra is still waiting for clarity on how the US $7,500 EV tax credit will be enacted. The “foreign entities of concern” clause within the legislation will mean vehicles containing battery materials from countries such as China or Russia will not qualify for the credit, Mell said.

“A pound of material and your credit goes to zero, so if you’re an emerging or an established automaker trying to grow market share in the EV world, with China accounting for about 80 per cent of refined cathode materials, that’s a huge risk to your business plan.”

Likewise, Smith of Global Energy Metals Corp, expects the IRA to spur much-needed investment throughout the battery supply chain. Onshoring the supply chain, he said, will require capital from both private and public actors.

“There needs to be a real push for these projects to be developed. Not only does that take industry, but that takes support from the government as well.”