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Tesla kills three birds with one Congolese stone

June 22, 2020

Elon Musk is giving his rivals the heavy metal blues.

By securing 6,000 tonnes a year of cobalt directly from mining giant Glencore’s Democratic Republic of Congo operations, the Tesla boss is guaranteeing plentiful supplies of the battery ingredient while minimizing headaches over its provenance. With China hoovering up more and more of the blue metal, he’s also putting the squeeze on electric vehicle competitors like General Motors and Volkswagen.

DRC should wield more power over the cobalt market than Saudi Arabia does over the oil one. Its south -eastern Katanga region is home to two-thirds of the metal’s available reserves. But DRC’s reputation for conflict and strife makes it risky and expensive to get at. Hence why Musk has always expressed a preference for engineering cobalt out of Tesla car batteries.

THIS YEAR, GLENCORE’S DRC MINES WILL PRODUCE 26,000 TONNES OF COBALT ORE, ABOUT 18% OF GLOBAL SUPPLY

Securing a quarter of Glencore’s Katanga Copper Company’s cobalt, around 4% of world output, suggests that preference is still some way from reality. It’s nearly four times what Tesla used in 2019, according to consultancy Benchmark Mineral Intelligence.

By focusing on the only non-Chinese cobalt miner in DRC, Musk is also minimizing the risk of labour abuse exposés, especially when Covid-19 is hampering normal on-the ground supply chain auditing.

Glencore’s more mechanized operations make it unlikely that cobalt from rocks dug out by DRC’s legions of pick-wielding informal miners, some of them children, finds its way into Tesla batteries. That’s less verifiable with smaller-scale Chinese producers.

Musk’s Western rivals will find it harder to find similar peace of mind, especially as Volkswagen, BMW and General Motors’ vehicle batteries all use more cobalt.

This year, Glencore’s DRC mines will produce 26,000 tonnes of cobalt ore, about 18% of global supply. Chinese operators like China Molybdenum, will produce another 37%. Yet off-take agreements with miners like Glencore, which sends half its DRC cobalt ore to Chinese processors like Gem Jiangsu Cobalt Industries, mean that Chinese refineries control almost 70% of the world’s refined cobalt, according to BMI.

With Tesla and China tying up almost three-quarters of the world’s available supplies, there will be less for everybody else. The metal is currently fetching just $30,000 a tonne, a third of its 2018 peak, due largely to a glut of supply from DRC’s informal miners.

As and when prices recover, Musk will be insulated.

A company that has recently restructured and refinanced in the cobalt space is Fuse Cobalt Inc.https://fusecobalt.com/(TSX-V: FUSEOTCQB: FUSEF, FRA:43W2). Fuse Cobalt Inc. is a Canadian-based mineral exploration company focussed on the exploration of high value metals required for the manufacturing of batteries, specifically cobalt.

Of note, Fuse also has a long-term business relationship with Glencore plc (LSE: GLEN) having purchased the Glencore Bucke Cobalt Property from them, and with the ownership of the adjoining Teledyne Cobalt Property, Fuse has a large land position that is 100% owned and located in the historic cobalt mining region of Cobalt, Ontario Canada. These properties have three distinct agreements with Glencore, namely a back-in provision, a production royalty and an off-take agreement.

Mr. Setter, Fuse President & CEO, comments “It was not that long ago, our past drilling results on our Ontario cobalt properties revealed Intersections of 21.9% Cobalt Over 0.36 M and 18.7% Cobalt Over 0.15 M at Teledyne Cobalt Property (News Release Jan 18, 2018), and Intersections of 8.42% Cobalt Over 0.30 Metres on the Glencore Bucke Property (News Release Jan 17, 2018). These are spectacular results. These results along with other high-grade cobalt drill results found during past exploration programs, are the reason why we are excited to continue to work on our properties.”

Strategically, Fuse’s Ontario Cobalt Properties cover the southern extension of the former producing 15 Vein on the past-producing Agaunico Mine Property. Historically, the Agaunico Mine produced 4,350,000 lbs. of cobalt and 980,000 oz. of silver during the mining boom of the early 1900’s (Cunningham-Dunlop, 1979).

The Fuse Distinction

The ability to raise capital in all market conditions which will ensure corporate objectives are consistently met and shareholder returns are maximized regardless of fluctuations in the global macro economic environment that may impact commodity pricing.

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