Nickel Is a Bonus for Miners Chasing Cobalt Battery Bonanza

LAGOS (Capital Markets in Africa) – Miners that can offer a two-for-one supply deal for battery makers — cobalt plus nickel — are aiming to win a bigger slice of the spoils of the global electric vehicle boom.

The two metals are often found in the same deposits, creating an opportunity for miners, and a suite of previously overlooked projects, as nickel joins cobalt as an increasingly important battery material. But, the arrangement isn’t without risks, as processing can be more expensive and complex.

Nickel is primed for a demand surge as the chase to improve performance of EVs spurs a shift to battery chemistry that’ll need more of the metal. The vehicles now account for only 2 percent of demand for high-purity nickel, but by 2030 they’ll need more than all of last year’s production, Bloomberg New Energy Finance said in a May report.

And there aren’t many new mines coming into production that’ll deliver the type of nickel needed by next generation vehicles, according to Ardea Resources Ltd., which is developing a project near Kalgoorlie in Western Australia that will also produce cobalt.

“The nickel is a big positive,” said Katina Law, executive chairwoman of the Perth-based company. “That’s an area where there are likely to be shortages in the future — there’s a supply gap that we can meet.”

Along with Ardea, other developers include Australian Mines Ltd. and Clean TeQ Holdings Ltd. in Australia as well as Canada’s Royal Nickel Corp. BHP Billiton Ltd., the world’s top miner, is also carrying out test work aimed at producing nickel and cobalt sulphates, materials used in rechargeable batteries.

By 2030 there’ll be a 25-fold surge in battery demand for passenger EVs and buses, which promises a major boost for cobalt, nickel and a suite of other metals, Bloomberg NEF estimates. At the same time, there’s a risk that the auto industry’s plans could be disrupted by a lack of the materials, according to consultancy Wood Mackenzie.

Battery producers are seeking to strike long-term supply deals for nickel, and operations that can supply multiple battery raw materials will be in demand, said Benjamin Bell, managing director of Australian Mines, which in March agreed a pact with SK Innovation Co. for cobalt sulphate and nickel sulphate output from its planned mine in Queensland.

“It makes it easier, because then they’re reliant on fewer moving parts in the supply chain,” he said by phone.

Australian Mines, which expects to win an equal share of revenue from nickel and cobalt over the long term, is discussing supply deals for its other planned projects with parties including Japanese and South Korean battery producers, Bell said.

While the top cobalt producing nation, the Democratic Republic of Congo, is preparing to more than double output through 2021, demand growth is probably strong enough to support the crop of global projects aiming to enter production early next decade, said Michael Giblin, a London-based metals and mining analyst at S&P Global Market Intelligence.

About 69 percent of cobalt output in 2017 was the result of copper mining — the primary method in the DRC — while about 29 percent was produced alongside nickel, according to Darton Commodities Ltd., an industry consultant.

Independence Group NL, which supplies nickel, cobalt and copper from the Nova mine, will take a decision next year on adding technology to produce nickel sulfates after successful tests, Chief Executive Officer Peter Bradford said Monday in an interview with Bloomberg Television. Capturing a premium for nickel sulphate would boost revenue by about 60 percent, he said.

The producer will consider a shift further along the battery supply chain into cathode precursors, an intermediate material that includes a combination of metal sulphates. “We could envisage a future where we collaborate with an electric vehicle battery producer to potentially produce cathode precursors,” Bradford said.

Projects producing both nickel and cobalt will be dependent on a strong nickel price to be competitive, S&P analyst Giblin said. They can also be costly and typically need to use technically challenging processing technology, he said. That poses risks as shown when Melbourne-based Clean TeQ’s shares fell the most in more than a year after a June filing that set out higher development costs for one of its projects.

Perth-based Ardea is evaluating development options at Goongarrie that could cost as much as $918 million and also is holding talks with potential customers and partners, Law said. “We’ve had a lot of interest from different parties,” she said by phone. “It’s across the board: industrial conglomerates, automakers, traders and other mining houses.”

The developer is also studying production of other battery materials including vanadium and manganese, and is aiming to complete an agreement with a partner by the end of the year, Law said.

Source: Bloomberg Business News