Cape Lambert Resources Limited (ASX:CFE) and Fe Limited (ASX:FEL) are leveraged to cobalt and are encouraged by growing demand from technology providers and the looming electric vehicle boom.
Both have cobalt projects in the Democratic Republic of Congo (DRC), which holds close to half of the global cobalt reserve base, and is the largest supply source with more than 60%.
Cobalt has tripled in price in the last 18 months and now sits at record highs in excess of US$80,000 per tonne.
Cobalt prices have tripled in the past 18 months.
Users want more cobalt
As major cobalt users, such as Apple Inc. (NASDAQ:AAPL), seek increasing supplies of cobalt, companies with resources and reserves of the tech metal are well placed to benefit.
This is particularly the case for those with deposits in the DRC as it is a proven supplier and has large, relatively untapped resources.
Increased demand is set to drive prices towards US$100,000 per tonne as producers strive to keep up supplies.
Cobalt is an essential ingredient in lithium-ion batteries for smartphones.
While those devices use about 8 grams of refined cobalt, the battery for an electric car requires more than 1,000 times more.
Long-term supplies sought by Apple
The supply shortage story has been supported by recent accounts of producers seeking to acquire long-term supplies directly from miners.
A Bloomberg report this week states that Apple is in talks to buy long-term supplies seeking to ensure it will have enough of the key battery ingredient amid fears of a shortage driven by the EV boom.
About a quarter of global cobalt production is used in smartphones and Apple is believed to be seeking contracts to secure several thousand tonnes a year for five years or longer.
Bloomberg reports that Glencore PLC (LON:GLEN) chief executive officer Ivan Glasenberg late last year named Apple among several companies the miner was talking to about cobalt.
Apple is likely to find itself in competition with carmakers and battery producers to secure supplies.
EV producers also seek contracts
Companies from BMW and Volkswagen to Samsung are also seeking to sign multi-year contracts to ensure they have sufficient supplies of cobalt to meet ambitious targets for EV production.
The trend was supported this week when Australian Mines Limited (ASX:AUZ) signed a cobalt and nickel supply deal with Korea's SK Innovation Co. worth circa US$3.9 billion at current prices.
SK Innovation plans to use the raw materials at an EV battery manufacturing plant in Hungary and has agreed to buy all the planned output for up to 13 years from Australian Mines’ Sconi project in Queensland.
READ: Cape Lambert Resources to begin engineering review at cobalt project
Cape Lambert expects to begin producing cobalt from its Kipushi Tailings Project in the DRC later this year and is undertaking an engineering review of the processing plant.
A DRC-based joint venture company, Soludo-Lambert Mining SAS, has been established to develop and operate the project.
Cape Lambert’s 50/50 partner in the joint venture is Paragon Mining SARL.
The Kipushi project consists of a tailings dam and an adjacent mining licence containing the processing plant.
The company has also received environmental approvals in Zambia which will allow it to begin exploration at the Kitwe cobalt-copper tailings project.
READ: Fe Limited attracts investors to advance cobalt asset in the Democratic Republic of Congo
Fe Limited, of which Cape Lambert is a major shareholder with 39.63%, will shortly receive assay results for cobalt from its Kasombo Copper-Cobalt Project in the DRC.
Kasombo was acquired from Cape Lambert in November 2017 and is near the Kipushi project.