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Cobalt Crunch Time

|Includes: IVPAF, Kings Bay Res Corp. (KBGCF), TSLA

Apparently, there is no shortage of lithium development projects worldwide, but there is a shortage of lithium processing capacities.

In case of the other battery-critical element, cobalt, there is a shortage of development projects especially in safe jurisdictions. Some 65% of global cobalt production comes from the "Democratic Republic" of the Congo, an extremely political unstable country with deeply-rooted corruption, where approximately 20% of the nation's cobalt output originates from unregulated, illegal artisanal miners, of which an estimated 40,000 miners are children according to UNICEF. James West recently explained:

"Auto makers need cobalt that is not mined artisanally because the supply chain gets audited. So the hot commodity is to find non-Congolese cobalt sulphate and nickel sulphate."

Andrew Miller from Benchmark said:

"In many ways, the cobalt industry has the most fragile supply structure of all battery raw materials."

In 2014, Tesla pledged to use only North American resources for its battery production at its Gigafactory and has also claimed to stop sourcing its cobalt from the Philippines due to environmental concerns, which will be a future issue for cobalt as demand rises.

The cobalt market has been gaining momentum both in price and global awareness about the precariously escalating supply-demand metrics. Cobalt is about to become the next "big thing", a hype that has unique fundamental ingredients to outshine the lithium boom. MetalBulletin recently noted:

"Cobalt prices continued to surge this week as stocks remained in tight hands amid anticipations of further investor-fuelled price rises."

No wonder that Tesla's big kahuna, Elon Musk, has started to knock on cobalt doors in the Western World to offer offtake agreements. However, cobalt developers are in a much stronger negotiating position than mighty Musk has previously thought. This is somewhat in stark contrast to the lithium space and shows quite plainly that the cobalt boom will be different from lithium. It will be pivotal, for Tesla and all the others trying to jump on the bandwagon of global electrification. No cobalt, no Tesla?

The current battery of a Tesla Model S includes about 23 kg of cobalt, that´s up to 60% cobalt by weight. Already today, battery usage accounts for almost half of total cobalt demand. By 2020, cobalt use in battery applications alone is expected to be greater than the entire world market for refined cobalt in 2015. About 97% of global cobalt supply comes as a by-product. According to CRU, 60% of current cobalt production comes from copper mining, 38% from nickel operations and only 2% from primary cobalt mines in Morocco and Uganda. Last year, Freeport McMoRan and Lundin sold its stakes in the Tenke Fungurume Mine in Congo, one of the world´s largest known cobalt deposits, to China Molybdenum.

James West recently spoke to Robert Friedland from Ivanhoe Mines Ltd., who had the following story to share:

"Elon came to me because we have a nickel sulphate and cobalt sulphate operation in Australia, not the Congo," he said. "And Elon said 'I've got the world's biggest battery factory, so I want to buy your nickel and your cobalt at the current metal price for 10 years, because I'm the biggest buyer.' "

So we told Elon Musk, you know, Elon, that's interesting. We'll think about it. And then two months later we went back to him and said "Elon, you're totally screwed. The Germans are building a gigafactory twice as big as yours, the Chinese are building four of them bigger than yours, the Japanese are building two and the Koreans are building one. So unless you're willing to pay to buy our cobalt and our nickel at whatever the price may be in the future, you're not going to be able to build any batteries in your own gigafactory and your whole company is going out of business, and we're going to make money shorting your stock."

Surface sampling on the Lynx Lake Property returned high grades of cobalt and copper.

Looking at cobalt projects around the world and particularly in North America, Rockstone has found the Lynx Lake Copper-Cobalt Project from King's Bay Gold Corp. being one of the best early-stage projects, with a real chance of making a significant discovery with a drill program. Generally, cobalt grades of 0.5% are considered world-class.

Although surface grades are not comparable to resources, reserves or production grades, King's Bay's grab samples of 0.94% cobalt, 1.39% copper, 0.21% nickel, 0.23% vanadium, 0.39% molybdenum, 0.0112% bismuth and 6.5 g/t silver are an indication of what the upcoming drill program may discover.

Above map shows the The Lynx Lake Property before it was expanded from 20 to 240 km2. The property benefits from proximity to the Trans-Labrador Highway (to the left of below picture) and a 3-phase power line running across the property (to the right of below pricture). The Trans-Labrador Highway goes directly to deep water ports.

With so much interest being garnered in the cobalt sector the company has been feverishly working to advance its Lynx Lake Copper-Cobalt Property in Labrador. Below is a list of milestones that King's Bay has completed in the first 20 days of 2017.

On January 3, the company closed a financing with total proceeds of $938,753 CAD.

On January 11, the permit for an airborne electromagnetic ("EM") geophysics survey was received.

On January 17, the company increased the Lynx Lake Copper-Cobalt Property land package from 20 to 240 km2 in order to adequately cover the geological structures and geophysical signatures of interest.

On January 19, the closing of the Lynx Lake Property acquisition was announced.

The next steps for King's Bay will be the completion the airborne survey and evaluation of the data for high priority drilling targets in the spring. The company will be looking to expand its holdings in the cobalt sector through potential acquistions and or joint ventures.

Historical Timeline Lynx Lake Copper-Cobalt Property

This survey will be strategically placed within the newly expanded land area in order to explain some of the EM anomalies that have been discovered during surficial reconnaissance. Government regional low resolution residual magnetic surveys and preliminary handheld electromagnetic surveys done by local prospectors have shown strong conductors beneath the overburden, and provide incentive to explore the area further for additional subsurface mineralization.

Prior to 2008, the property was deemed too remote and as such remained virtually unexplored. In 2008, the Department of Transportation constructed the new Trans-Labrador Highway, which now runs through the property, making it easily accessible. During blasting for road aggregate on the property in the same year, disseminated and massive sulphide mineralization was discovered.

In 2009, local prospectors sampled and assayed the aggregate quarry on the eastern portion of the property and assayed up to 0.94% cobalt, 1.39% copper, 0.21% nickel and 6.5 g/t silver.

In 2014, regional low resolution magnetic surveys by the government and hand-held electromagnetic surveys by local prospectors revealed strong conductors beneath the overburden.

In 2015, the western portion of the property was grab sampled, yielding 0.57% cobalt, 1.03% copper, 0.1% nickel, 0.36% chromium, 0.39% molybdenum, 0.23% vanadium and 5 g/t silver.

Discovery Potential

Although the property has never been drilled before, the sampling assays in both the eastern and western part of the property (before it was expanded) indicate great possibility for a large body of mineralization at shallow depths. Thanks to excellent road accessibility to deep sea water ports, a power line that runs directly adjacent to the property and the proximity to the town of Happy Valley-Goose Bay, King's Bay believes that it's a perfect time now to explore this highly prospective property amid rising energy metal prices, first and foremost the battery-critical element cobalt.

King´s Bay will be exhibiting at the upcoming Vancouver Resource Investment Conference (booth #301) this Sunday and Monday as well as the AME Round Up which runs from January 30 to February 2 (booth #424). The Government of Newfoundland & Labrador has provided King´s Bay with an opportunity to participate within their booth. CEO Kevin Bottomley and Director Brad Hoeppner will be travelling to St. John´s for the Northern Exposure Conference (booth #201) which runs from January 24 to 26.

Rockstone is looking forward to King's Bay's upcoming geophysics and subsequent drill program as a massive cobalt-rich deposit may get discovered.

Previous Coverage

Report #1: "Potential for a Massive Discovery of Cobalt, Copper and High-Tech Metals" (October 27, 2016)

Company Details

King's Bay Gold Corp.
Suite 1450 - 789 West Pender Street
Vancouver, B.C. V6C 1H2 Canada
Phone: +1 604 681 1568

Shares Issued & Outstanding: 40,806,423

Canadian Symbol (TSX.V): KBG
Current Price: $0.11 CAD (01/19/2017)
Market Capitalization: $5 million CAD

German Symbol / WKN (Frankfurt): KGB1 / A2AN0E
Current Price: €0.073 EUR (01/19/2017)
Market Capitalization: €3 million EUR

Disclaimer: Please read the full disclaimer within the full research report as a PDF (here) as fundamental risks and conflicts of interest exist.

Cobalt: A Precarious Supply Chain

By Jeff Desjardins,

How does your mobile phone last for 12 hours on just one charge?

It's the power of cobalt, along with several other energy metals, that keeps your lithium-ion battery running.

The only problem? Getting the metal from the source to your electronics is not an easy feat, and this makes for an extremely precarious supply chain for manufacturers.

Our infographic today comes to us from LiCo Energy Metals, and it focuses on where this important ingredient of green technology originates from, and the supply risks associated with its main sources.


Cobalt is a transition metal found between iron and nickel on the periodic table. It has a high melting point (1493°C) and retains its strength to a high temperature.

Similar to iron or nickel, cobalt is ferromagnetic. It can retain its magnetic properties to 1100°C, a higher temperature than any other material. Ferromagnetism is the strongest type of magneticism: it's the only one that typically creates forces strong enough to be felt, and is responsible for the magnets encountered in everyday life.

These unique properties make the metal perfect for two specialized high-tech purposes: superalloys and battery cathodes.


High-performance alloys drive 18% of cobalt demand. The metal's ability to withstand intense temperatures and conditions makes it perfect for use in:

-- Turbine blades
-- Jet engines
-- Gas turbines
-- Prosthetics
-- Permanent magnets

Lithium-ion Batteries:

Batteries drives 49% of demand - and most of this comes from cobalt's usage in lithium-ion battery cathodes:

Type of lithium-ion cathode Cobalt in cathode Spec. energy (Wh/kg)
LFP 0% 120
LMO 0% 140
NMC 15% 200
LCO 55% 200
NCA 10% 245

The three most powerful cathode formulations for li-ion batteries all need cobalt. As a result, the metal is indispensable in many of today's battery-powered devices.

-- Mobile phones (LCO)
-- Tesla Model S (NYSE:NCA)
-- Tesla Powerwall (NMC)
-- Chevy Volt (NMC/LMO)

The Tesla Powerwall 2 uses approximately 7kg, and a Tesla Model S (90 kWh) uses approximately 22.5kg of the energy metal.


Cobalt production has gone almost straight up to meet demand, and production has more than doubled since the early 2000s.

But while the metal is desired, getting it is the hard part:

1. No native cobalt has ever been found in nature.

There are four widely-distributed ores that exist, but almost no cobalt is mined from them as a primary source.

2. Most cobalt production is mined as a by-product.

Mine source % cobalt production
Nickel (by-product) 60%
Copper (by-product) 38%
Cobalt (primary) 2%

This means it is hard to expand production when more is needed.

3. Most production occurs in the DRC, a country with elevated supply risks:

Country Tonnes %
Total 122,701 100.0%
United States 524 0.4%
China 1,417 1.2%
DRC 67,975 55.4%
Rest of World 52,785 43.0%

(Source: CRU, estimated production for 2017, tonnes)


Companies like Tesla and Panasonic need reliable sources of the metal, and right now there aren't many failsafes.

The U.S. hasn't mined cobalt in significant volumes since 1971, and the USGS reports that the United States only has 301 tonnes of the metal stored in stockpiles.

The reality is that the DRC produces about half of all cobalt, and it also holds approximately 47% of all global reserves.


1. The DRC is one of the poorest, corrupt, and most coercive countries in the planet.

It ranks:

-- 151st out of 159 countries in the Human Freedom Index
-- 176th out of 188 countries on the Human Development Index
-- 178th out of 184 countries in terms of GDP per capita ($455)
--148th out of 169 countries in the Corruption Perceptions Index

2. The DRC has had more deaths from war since WWII than any other country on the planet.

Recent wars in the DRC:

-- First Congo War (1996-1997) - A foreign invasion by Rwanda that overthrew the Mobutu regime.
-- Second Congo War (1998-2003) - The bloodiest conflict in world history since WW2 with 5.4 million deaths.

3. Human Rights in Mining

The DRC government estimates that 20% of all cobalt production in the country comes from artisanal miners - independent workers who dig holes and mine ore without sophisticated mines or machinery.

There are at least 100,000 artisanal cobalt miners in the DRC, and UNICEF estimates that up to 40,000 children could be in the trade. Children can be as young as seven years old, and they can work up to 12 hrs with physically demanding work, earning $2 per day.

Meanwhile, Amnesty International alleges that Apple, Samsung, and Sony fail to do basic checks in making sure the metal in their supply chains did not come from child labor.

Most major companies have vowed that any such practices will not be tolerated in their supply chains.


Where will tomorrow's supply come from, and will the role of the DRC eventually diminish? Will Tesla achieve its goal of a North American supply chain for its key metal inputs?


Read more at the source:

Disclosure: I am/we are long KBGCF.