Cobalt mine not completely out of the blue

Catie Clark//October 21, 2021

Cobalt mine not completely out of the blue

Catie Clark//October 21, 2021

View of the Idaho Cobalt Project site southwest of Salmon under development in 2018. The site is now renamed as the Idaho Cobalt Operations.
View of the Idaho Cobalt Project site southwest of Salmon under development in 2018. The site is now renamed as the Idaho Cobalt Operations. Photo courtesy of Jervois Global

The decades-long saga of bringing a cobalt mine online in the mountains 25 miles to the west of Salmon has been on and off the burner since the 1990s. Today, Australian cobalt firm Jervois Global plans to ship its first load of cobalt concentrates from the mine in July 2022, according to information that mine manager Matt Lengerich provided to the Mountain Express. When the mine goes online next year, it will become the first operating cobalt mine in both the United States and Idaho in several decades.

Jervois calls its cobalt mine the Idaho Cobalt Operations (ICO). The property is approximately 200 acres. The firm kicked activities on the site in high gear during the summer of 2021 as it finished its mill and floatation facility and initiated activities to bring the mine into production.

According to Lengerich, the mill at the ICO site will take 1,200 tons of ore daily and refine it into cobalt and copper concentrate. The concentrates will be shipped to the firm’s São Miguel Paulista nickel and cobalt refinery in the Brazilian State of São Paulo.

The long lead time to mining

The ICO is on the northwest end of the Idaho Cobalt Belt, which is the largest unmined cobalt resource in the United States. The Idaho Cobalt Belt is a 40-mile long, one-to-two-mile wide trend of cobalt and copper mineralization enriched sufficiently to be economic to mine when the price of cobalt is high enough to support mining activities.

Formation Capital Corporation (FCC), the American business arm of Canadian mining firm eCobalt, began exploration activities on what is the ICO today in the 1990s. The firm declared its intent to mine the property in 2001, dubbing it the Idaho Cobalt Project (ICP).

The ICO is next to the inactive Blackbird Mine, which produced cobalt between 1901 and 1982.  The Blackbird Mine is one of three sites in Idaho that is a proposed Superfund site. The Blackbird Mine, which started ore production in the bad old days of no environmental protection, is responsible for creating a dead zone on Panther Creek, devoid of aquatic life, and for negatively impacting the endangered Chinook salmon and threatened steelhead and bull trout of the Salmon River.

By 2007, the ICP received its waste water discharge permit from the U.S. Environmental Protection Agency, overcoming one of the most significant hurdles on the road to becoming a viable mine. According to the Idaho State Journal, eCobalt considered siting a cobalt refinery in Idaho in 2015. Both Blackfoot and Kellogg were front runners. eCobalt carried out development activities at the ICP with increasing levels of activity through 2019, including an announcement that it intended to built a cobalt refinery in Blackfoot in early 2018.

The price of cobalt fell in 2018, which resulted in eCobalt scaling back the scope for the refinery in Blackfoot by the end of the year. By early 2019, the bottom fell out of the cobalt market and eCobalt cut back on all of its ICP activities and cut back on employees, essentially mothballing the project.

eCobalt out, Jervois in

Jervois has not been shy in its stated goal of becoming the number two cobalt refining power in the world after number one heavyweight China. Part of its strategy included “merging” in midsummer 2019 with eCobalt in a stock move that was essentially in the acquisition of the Canadian company and its American branch, FCC, which held the rights to the ICP. Jervois promptly renamed the ICP as the ICO.

In its January 2020 feasibility study, Jervois still discussed that the Blackfoot refinery site, which would include a roaster, was still on the table. In a late September statement, Jervois announced its intent to purchase the cobalt and nickel roaster and refinery site in São Miguel Paulista, with the intent of not building the Blackfoot facility described in the January 2020 feasibility study.

Jervois still owns the site of the former proposed Blackfoot facility on Pioneer Road in the part of unincorporated Bingham County with the Blackfoot zip code and address, near the American headquarters of the Spudnik Equipment Company. A small pile of construction material left by eCobalt in early 2018 still occupies the site, according to Kurt Hibbert, economic development director for Blackfoot.

Jervois has not completely pulled out of the Blackfoot area and the property may still be included in the firm’s future development plans. As explained in an email to the Idaho Business Review, Jervois Global CEO Bryce Crocker stated: “Whilst a new refinery is currently not envisaged by Jervois in the United States (studies indicated it was unfortunately uneconomic), there are pre-treatment routes for cobalt concentrate involving our site in Blackfoot that remain on the table.”

Why the Cobalt mine matters for Idaho

Because of Idaho’s position as a resource area for several minerals used for batteries, including cobalt, how the cobalt market works is germane for understanding the motions of mining interests in the state.

Cobalt is listed in the Federal Register as a critical mineral. Cobalt is used in batteries for electric vehicles (EV). For example, the current cobalt content of a standard battery pack for a Tesla Model S or Model X is approximately 44 pounds, according to the U.S. Department of Energy.

Based on a current review of commodities projections by the Idaho Business Review, the demand for EV batteries is expected to grow between 12% to 30% annually over the next several years. This anticipated demand is currently accelerating the price of cobalt, as evidenced by the recent rise in cobalt prices on New York’s CME market and the London Metals Exchange.

The cobalt crash of 2018-2019

At the start of 2017, cobalt was selling for $40,000 per metric tonne (~$18/pound) on the London Metals Exchange (LME), which is the leading global mining commodities market. Because of increasing demand for cobalt, the price of cobalt skyrocketed to over $95,000/tonne by March 2018.

With this huge surge in prices, cobalt production in the Democratic Republic of Congo (DRC) exploded, which fed the cobalt refineries in China. This is important because the DRC currently accounts for 70% of the world’s cobalt production.

The result of this pair of Congo mining and Chinese refining was a dumping of excess cobalt on the world market, and the bottom fell out of the market in the latter half of 2018. By December 2018, the LME price of cobalt had fallen to $55,000/tonne (~$25/pound). In January 2019, the price had dropped to below $30,000/tonne (~$13.60/pound). By August 2019, cobalt prices bottomed out at $26,000/tonne (~$11.80/pound).

The aftermath of the cobalt crash

In industrially-advanced economies with fair labor laws and environmental regulations, cobalt miners mothballed their mines and refineries because these low prices could not sustain the cost of mining operations. One example of this was described by the U.S. Geologcial Survey in its 2020 mineral commodity report for cobalt: “In early August, a Switzerland-based producer and marketer of commodities announced that, owing to low cobalt prices, it planned to place its world-leading cobalt mine on care-and-maintenance status by year end 2019.”

Between September 2019 and January 2021, the price of cobalt floated between $28,000/tonne and $40,000/tonne. As factories and businesses began to reopen at a greater rate during the winter of 2021, the price of cobalt increased to $53,000/tonne. After a dip to below $43,000/tonne in June, the price has since floated between $50,000/tonne and $53,000/tonne.

The effect of mothballing in 2019 decreased mined production while companies used up their stockpiled cobalt during the pandemic economic downturn. The market has not returned to conditions of increased demand. Because of the time lag involved in restoring production in industrially advanced economies, supply is still behind in delivering the growing EV battery sector.

As Livewiremarkets.com described the cobalt situation as thus: “The biggest influence on the cobalt market is the reality that 75% of supply emanates from the DRC — which is not so democratic and altogether unpleasant. The output is also controlled by Chinese intermediaries.”

Unless the rest of the world can insulate itself from this market-controlling pair of countries, the cobalt market will remain susceptible to what these two nations do with their cobalt production. Until these market parameters change, a repeat of the cobalt crash of 2018-2019 is possible with the result that Idaho cobalt mining activities could once again be curtailed.