During FY2018 A-Cap commenced implementation of its diversified minerals strategy with a primary focus on the exploration and/or acquisition of cobalt projects to supply cathode materials to the battery industry. A-Cap will continue to advance the optimisation work of its Letlhakane Uranium Project in Botswana, to ultimately supply uranium U308 product to a nuclear facility as prime fuel for base load power generation and its service to the battery industry markets and consumers.
While the industry is confident in the long-term fundamentals of uranium and nuclear power, there is less certainty in the short term with industry expectation that the market will gradually move towards balance post calendar year 2020. This market sentiment is evidenced by major producer curtailments, suspension of US government sales to uranium U308 inventory, Japanese facility restart delays and a deferral of facility construction commencements and announcements globally.
The board’s diversified minerals strategy is focussed at the significant growth expectation and demand shortfall in cathode materials supply to the battery industry. A-Cap is committed to becoming a supplier of cathode materials and to this end will establish partner and strategic relationships with battery grade materials refineries and materials manufacturers to ensure its project development investment is de-risked with stable and cost competitive supply arrangements. A-Cap will structure its partner relationships to take advantage of new materials processing and refinery technologies, particularly in production of cobalt products used directly in battery manufacture, ensuring A-Cap is not exposed in the value chain to the ultimate battery customer.
The cobalt industry is responding to an anticipated demand increase driven predominantly by the EV battery industry. McKinsey Minespan estimates1 that the industry could add capacity expansions of between 110 and 120kt by 2025, bringing the total potential mine supply to 225 to 235kt.
Approximately 40 to 45kt of cobalt mine capacity additions are expected to come from two projects, both in the Congo – Glencore’s Katanga Mining Joint Venture and Metalkol Roan Tailings Reclamation. The DRC represents 70% of global mine supply of cobalt. Given the increasing supply exposure in the DRC, the proposed development of new cobalt projects in Australia are a direct response to the anticipated shortfall in mine capacity supply.
The cobalt commodity spot price can be expected to be volatile as it will be linked to the speed and rate of adoption of all batteries EV and battery chemistries. Cobalt has in the past been dominantly a by-product of nickel and copper mining. China still dominates the world in battery making capacity, currently making up over fifty percent of global lithium-ion battery production.