Ardea Resources (ARRRF)

[tootalljones]

Key cobalt EV info from genius John Patterson, Seeking Alpha
tootalljones Sunday, 11/05/17 06:32:33 PM
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There will be a "feeding frenzy" for cobalt producers. Cobalt production must increase "by 1928%" to support EV revolution. China now has locked up 60% of global production. Cobalt prices must go through the roof. There are almost no major deposits, and with the Congo/China tandem have a huge grip on this desperate market, the price will go through the roof. TRIPLE DIGITS.

It is all here, in this article and the many comments.

https://seekingalpha.com/article/4110450-cobalt-cliff-will-crush-teslas-business-may-restore-sanity-ev-industry

Brilliant John Patterson's recent conclusion is this:

"With an average cobalt content of 8 kg per car, the 41,200 tonnes available for EV batteries in 2025 will only support the manufacture of 5.15 million EVs, a little over half of the aspirational totals set forth above.
.....At this point I have to believe the EV revolution has entered a melee phase where there won’t be enough cobalt to satisfy everybody’s needs and anyone who wants to play the game will have to stand toe-to-toe and compete for cobalt supplies with China Inc. and six of the world’s ten largest automakers."

Some of the raw data Patterson shares in his seminal article dated september 29,2017:


In the last 18 months, several events, developments and reports have corroborated, ratified and reinforced my original thesis, including:

Market Price

Cobalt prices have soared from $10.50 per pound in March 2016 to a recent high of $28.35 per pound.

Major Mine Purchase

In May 2016 China Molybdenum bought a 56% stake in the DRC’s Tenke Fungurume Mine from Freeport McMoRan for $2.65 billion and gained control over 10% of global cobalt production in a single transaction.

In July 2017, China Moly facilitated BHR Partners’ purchase of a 24% stake in the Tenke Mine from Lundin Mining for $1.14 billion.

China Dominates Cobalt Refining

Between the Tenke purchase and contracts to finance the Eurasian Resource Group’s Roan Tailings Project, Chinese interests will control at least 60% of the world’s refined cobalt production for the foreseeable future.

Updated Chinese Subsidy Regime

In January 2017, China updated its subsidy regime for new energy vehicles to favor higher energy densities and longer travel ranges while permitting the use of nickel-cobalt battery chemistries. As a result, a significant portion of the China market that was previously dominated by cobalt-free batteries is likely to change chemistries.

Bernstein’s 2017 Black Book

In March 2017 Bernstein released the latest version of its EV Black Book which devotes 60 of its 271 pages to cathode powder formulations, raw material requirements and the principal players in those markets.

In their slow adoption scenario, Bernstein expects the battery market for passenger EVs to exceed 360 GWh per year by 2025, which implies an annual cobalt demand of roughly 55,000 tonnes.

Interestingly, Bernstein also forecast a mining industry capital spending requirement of $350 to $750 billion to support a full transition to EVs and noted “the lead time required for conversion of exploration success into an operating mine has lengthened considerably and now stands at ~30 years.”

Ultimately, Bernstein’s battery materials discussion concludes, “Either the world must do without EVs or it must pay more for the commodities it consumes, the choice really is as simple as that.”

UBS Bolt Teardown

In May 2017, UBS published the results of their teardown analysis of a GM Bolt EV and estimated that global cobalt production would need to increase by 1928% to support an annual EV build of 100 million units. My estimate of a mere 900% global cobalt production growth requirement pales in comparison.

Morgan Stanley Cobalt Report

In June 2017, Morgan Stanley issued a 25-page commodity report on cobalt that surveyed planned capacity additions and forecast primary refined cobalt supply growth from 94.4 tonnes in 2016 to 148,300 tonnes in 2025.

On the demand side, Morgan Stanley forecast that in 2025, 59,600 tonnes of cobalt would be used for non-battery applications, and 47,500 tonnes would be used for consumer products batteries, which would leave 41,200 tonnes for use in EV batteries.

VW's Glencore contract

In July 2017, we learned that Contemporary Amperex Technology and its customer Volkswagen signed a four year 5,000 TPY cobalt offtake agreement with Glencore last fall.

VW's Contract Solicitation

In September 2017, we learned that VW is soliciting 10-year requirements-based cobalt offtake commitments for 16,000 to 24,000 TPY and wants contracts in place this year.

Until recently, I wasn’t completely convinced that leading automakers were truly committed to their EV initiatives. While the Chinese are deadly serious about promoting new energy vehicles as a mean of reducing pollution in their mega-cities, Nissan (OTCPK:NSANY), Tesla, GM (NYSE:GM) and BMW were the only western automakers with credible EV programs. That dynamic changed after dieselgate when VW came to the EV party with a vengeance, partly as penance for past sins and partly in response to Germany’s increasing political support for electric drive.

In its “Global EV Outlook 2017” the International Energy Agency summarized the electric car ambitions of the world’s automakers as follows:

BMW

100,000 electric car sales in 2017; and
15-25% of the BMW group’s sales by 2025.

Chevrolet

30,000 annual electric car sales by 2017

Chinese OEMs

4.52 million annual electric car sales by 2020

Daimler

100,000 annual electric car sales by 2020

Ford

13 new EV models by 2020

Honda

Two-thirds of the 2030 sales to be electrified vehicles
(including hybrids, PHEVs, BEVs and FCEVs)

Renault-Nissan

1.5 million cumulative sales of electric cars by 2020

Tesla

500,000 annual electric car sales by 2018; and
1 million annual electric car sales by 2020

Volkswagen

2-3 million annual electric car sales by 2025

Volvo

1 million cumulative electric car sales by 2025

With an average cobalt content of 8 kg per car, the 41,200 tonnes available for EV batteries in 2025 will only support the manufacture of 5.15 million EVs, a little over half of the aspirational totals set forth above.