This could turn out to be a big game-changer for small companies short on money to develop deposits of the sought-after minerals used in electric vehicle batteries says Reuters.
Two cobalt companies, eCobalt Solutions, a Vancouver, British Columbia-based company, and London, Ontario-based Fortune Minerals, are already in talks with over a dozen groups, including car and battery makers, on financing their projects, their chief executives told Reuters.
the single largest use for cobalt and the primary driver of the market.
Downstream investment potentials
Looking downstream past the manufacturers of electric vehicles and the batteries that power them is a new area of investment for many groups, but one with a great potential – providing a monetary lifeline to the mining companies, especially with equity funding still being a bit tight following a five-year downturn from weak metal prices.
“We anticipate additional transactions in the coming months and years. It is a function of demand-supply imbalance,” said John Kanellitsas, President and Vice Chairman of Lithium Americas Corp, which raised nearly $300 million this year for a project in Argentina.
The Canadian financial deals follow in the footsteps of Australian lithium miners, who secured investments from mainly Chinese automakers and battery makers in an effort to lock into the future raw mineral market. Australia is the world’s largest producer of lithium.
Two key minerals in EV batteries
It has been easier to get investments for lithium mine development because the mineral has been in short supply since around 2015. At that time, the world had a surplus of cobalt. However, with EV battery manufacturing taking off, cobalt has become scarce. For this reason, cobalt prices have surged.
And interestingly, while we hear about lithium in batteries all the time, about 55 percent of all cobalt goes into battery chemicals compared to about 40 percent for lithium, according to a Dec. 4 BMO Capital Markets report.
More to the point, deficit forecasts for cobalt due to a constrained supply and soaring demand puts Canadian cobalt miners in the right place at the right time. Cormark Securities analyst MacMurray Whale said, “All those elements together suggest to me that it can’t be better.”
Most of us know that 50 percent of the world’s cobalt comes from the Democratic Republic of Congo (DRC), a country steeped in political instability. It is well-known that child-labor is used in the cobalt mines, and this has presented an ethical problem for auto and battery manufacturers.
Canada is global hub for mine developers
Canada is the second-largest country in the world by landmass, but you may be surprised to learn that with well over 1,200 publicly listed mining companies, Canada has long been the global hub for mine developers with projects around the world.
With 75 percent of the world’s mining companies based in Canada, there has to be a reason, right? Well, it is called metal streaming. Metal streaming is an unique business arrangement that defines the right to purchase a percentage of a mine’s production at a fixed, and usually heavily discounted price.
This means a mining company can make public offerings without needing to operate mines in Canada. And while streaming companies like to describe themselves as non-operating mining companies, they could also be called highly specialized venture capital providers.
