Cobalt Blue Holdings Ltd (ASX:COB) (OTCMKTS:CBBHF) (FRA:COH) chairman Rob Biancardi says the company is committed to developing the Broken Hill Cobalt Project (BHCP) as well as looking for commercial opportunities to deploy its proprietary processing technology in 2021.
In a letter to shareholders, he said: “[BHCP] remains one of the most advanced and unique cobalt projects in the world.
“Cobalt Blue believes the successful development of BHCP will position it globally as a low-cost, long-term supplier of ethically derived, battery-grade cobalt sulphate.”
Shares trend higher
With the company about to begin pilot plant operations in Broken Hill as part of a global cobalt sample program and strengthening cobalt markets, COB shares have been on an upward trend since mid-December.
From A$0.105 on December 15, shares have risen more than three-fold to A$0.355 on January 11, a new high of more than two years, and today have been up to A$0.34.
This also follows a strong year of results in 2020 which have laid the foundations for 2021 to be a key year.
The company finalised the purchase of 100% of the BHCP last year and successfully delivered a Scoping Report to the NSW Department of Planning, Industry and Environment (DPIE) as the first step towards achieving State Significant Development (SSD) approval.
Stronger project economics
It also delivered the BHCP Project Update 2020 (effectively an enhanced PFS level study), showcasing a longer project life with stronger economics.
The study confirmed a highly profitable, long-life, low capital intensity, large-scale cobalt mine/refinery and provided the executive team with the tools needed to progress detailed commercial discussions.
It produced an intermediate Mixed Hydroxide Product (MHP) containing 37% cobalt and 7% nickel and final (battery-ready) cobalt sulphate containing 20.8% cobalt.
The company was also awarded a A$2.4 million of Cooperative Research Centre (CRC) – Project Round 8 Funding from the Australian Government for applied research and development of the processing of cobalt-pyrite ore to generate battery ready cobalt sulphate over the next three years.
Pilot plant progress
Last year the company designed, sourced and received major equipment items for the upcoming Pilot Plant in Broken Hill, including the calcination of around seven tonnes of BHCP concentrate, from which feedstock for the plant will be produced.
Biancardi said: “The Pilot Plant is being finalised, and remains on-track for commissioning during February with first product shortly after.
“The Pilot Plant will supply both MHP and cobalt sulphate test samples for commercial partners.”
The sample program (ranging from 100 to 200 kilograms and from 2 to 3 tonnes for the later demonstration plant) is potentially one of the largest undertaken within the global cobalt market, where typical project test work normally ranges from 1-20 kilograms.
Biancardi said: “The facility will prove up the processing technology that COB has developed and de-risk the project for future investors.”
Instrumentation work at the pilot plant is expected to commence by mid-January.
Test samples for commercial partners
Biancardi said: “I am pleased to report that to date, over 15 partners have raised their hands to receive samples.
“Shipments of these test samples will begin in Q1 2021, with our aim that COB production satisfies raw material standards for global battery makers.
“Commercially, COB now has cobalt sample partners from Japan, Korea, India, Europe and Australia representing a strong selection of cathode precursor/battery makers, cobalt trading houses and mining companies.
“Investors can therefore anticipate robust commercial project discussions from this point.”
Pilot Plant progress showing the completion of structural steelwork with electrical works undergoing.
Demonstration plant planned
The Pilot Plant will be followed by a larger scale Demonstration Plant later in 2021.
Biancardi said: “This overall investment will inform the BHCP Feasibility Study.
“The resulting large-scale samples will also allow us to begin qualification of our cobalt products within the downstream battery industry.
“For a new supplier, this process can take over 12 months.”
Cobalt market outlook
In examining the macro, Biancardi said that the cobalt market was tightening from its COVID driven 2020 lows.
He said: “Cobalt sulphate pricing has improved from (cobalt equivalent) US$12/pound (April 2020) to over US$19/pound at time of drafting.
“Our corporate view is that the metal is well on track to retrace its long-term average price of US$25/pound in real terms.
“The BHCP, with an estimated ~US$12/pound (All In Sustaining Cost) which is in the lowest quartile of global production, makes a significant margin in such a normalised market environment.”
Electric vehicle subsidies
On the demand side, Electric Vehicle (EV) subsidies are occurring on an increasingly larger scale, targeting both EV purchase assistance and bailouts for incumbent auto manufacturers.
Europe, China and other major countries are mandating lower CO2 emissions and to date over 30 countries globally have legislated the elimination of Internal Combustion Engine vehicles.
Germany has increased subsidies to €9,000 for EVs (below €40,000 price); €5,000 for EVs (between €45,000 and €65,000), Plug In Hybrid Electric Vehicles (PHEVs) receive €6,750 (below €40,000) and €3,750 (price between €45,000 and €65,000).
In the UK, government grants (through dealers) are 35% of EV purchase price, up to £3,500, and 20% of the purchase price for BEV vans up to £8,000.
Notably, new cars and vans powered wholly by petrol and diesel will not be sold in the UK from 2030.
Finally, in California the Governor has announced the ban the sale of Internal Combustion Engine (ICE) vehicles from 2035, mandating that all new cars sold from that point will be emissions-free.
The company expects the cobalt implications of Biden’s Clean Energy Plan to become clearer during 2021.
Biancardi said: “The scope of the plan includes US$400 billion over 10 years targeting the creation of 10 million US jobs, and at present includes the targeted installation of 500,000 EV charging stations and will support an estimated 25 million EVs.
“Our plans reflect a strong belief that cobalt prices will continue to strengthen over the coming few years.
“We intend, with your support, to be well-positioned and ready at a time the cobalt market will require the development of a major new cobalt mine, in a low political risk jurisdiction with well-established infrastructure.”