Cobalt has emerged as a critical metal in the context of battery-driven electrification and global energy transition. This newsletter provides a strategic view of the cobalt market dynamics by examining pricing history, geological fundamentals, cost structures, and demand scenarios. It aims to equip investors and stakeholders with a grounded understanding of cobalt economics, decoupling market perceptions from fundamental indicators.

1. Introduction: Strategic Relevance of Cobalt

Cobalt has been a strategic and critical metal for the United States since the 1980s. Chinese interest emerged strongly in 2006 and culminated in 2011 through a strategic cooperation framework with the Democratic Republic of Congo (DRC), notably highlighted by the acquisition of Tenke Fungurume by China Molybdenum.

In parallel with the surge in battery production for electric vehicles (EVs), this environment created a boom for cobalt investors: hedge funds, traders, and industrials pursued opportunities through offtake agreements, streaming contracts, acquisitions, and exploration.

Supply chain scrutiny increased following Amnesty International reports (2016, 2017) on human rights abuses in DRC mines, prompting companies like Apple, Samsung, and HP to review sourcing practices.

This issue analyzes the correlation between cobalt pricing and the fundamentals of supply and demand to support strategic investment decision-making.

2. Historical Cobalt Price Dynamics

The cobalt price has gone through distinct historical phases:

• 1920s–1970s: Prices were largely set by Congo (then Belgian Congo), with major shifts driven by geopolitical disruptions (e.g., the 1977 invasion in Zaire).
• 1980s–1990s: Producer cooperation between Zaire and Zambia weakened after the Soviet Union breakup, ushering in volatile « market pricing » influenced by traders.
• 1994 spike: A sudden price increase (~$30/lb) proved unsustainable, likely driven by perception rather than fundamentals.
• 1996–2006: US legislation authorized disposal of 18,000 tonnes of cobalt from DLA reserves, depressing prices.
• 2008 rally: Prices exceeded $40/lb due to DRC export moratorium and strong demand from electronics and aerospace.
• Post-2009: Traders and companies like Glencore began vertical integration to compete with Chinese influence.
• 2017 peak: A renewed price surge to ~$40/lb driven by EV battery expectations.
• 2018 correction: Despite strong interest, prices fell to ~$30/lb, reflecting speculative overreach.

Key Drivers:

1. DRC dominance in pricing until early 1990s.
2. Trader-driven market dynamics post-1990s.

3. Supply Fundamentals

3.1 Geological Context

Cobalt is found in various geological settings:

• Sediment-hosted: Tenke Fungurume (DRC), Mt Lisa (Australia)
• Hydrothermal/Volcanogenic: Bou Azzer (Morocco), Keretti (Finland)
• Magmatic Sulphide: Noril’sk (Russia), Sudbury (Canada), Kambalda (Australia)
• Laterite: Koniambo (New Caledonia)
• Manganese nodules: (undeveloped)

3.2 Resource Estimates

• Identified resources: ~25 Mt (USGS 2018), excluding seabed nodules
• Manganese nodules: ~120 Mt cobalt equivalent
• Global reserves: ~7.1 Mt (USGS 2018), ~50% in DRC
• 2017 Production: 110 kt, R/P ratio ~71

3.3 R/P Ratio Comparison

• Nickel: 35
• PGM: 168
• Chromium: 16
• Copper: 40
• Zinc: 17

Producers such as Glencore and ENRC show high potential to increase output without additional exploration.

4. Production Cost Benchmarking

A Monte Carlo simulation using public data estimates C1 cash costs by deposit type:

Note: Costs exclude royalties, CAPEX, taxes, amortization, and overhead.

5. Demand Outlook

The IEA projected demand could reach 300,000 t/year by 2030, largely driven by EV battery needs. However, investment decisions should account for:

• Immature battery technologies
• Trend toward cobalt-light or cobalt-free chemistries
• Role of recycling and second-life batteries
• Other uses: robotics, aerospace

6. Strategic Insights for Investors

• Cobalt prices are prone to perception-driven volatility.
• Operating costs do not justify price spikes above $30/lb.
• Reserve bases and R/P ratios suggest scalable supply potential.
• ESG scrutiny is reshaping sourcing strategies.
• Investors should target deposits with by-product economics and low C1 costs.

Conclusion

Short-term cobalt price spikes are rarely justified by fundamentals and should not guide long-term strategy. Strategic investors should focus on deposits with robust economics and scalability.

A sustained cobalt price above $25/lb would likely unlock development of important laterite resources globally, notably in Cameroun and Madagascar.

Disclaimer

This document is for information purposes only and should not be relied upon. This is not an offering circular, information memorandum or any other form of offering document.

Where the writer expresses or implies an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. 

ABM Consultants does not undertake any obligation to release any revisions to any « forward looking statement » to reflect events or circumstances after the date of this article, or to reflect the occurrence of unanticipated events.

Prepared by Yassine Belkabir, Managing Director of African Bureau of Mining Consultants

 http://www.abminingconsultants.com

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