Labor strife, rights issues in Congo spur Canadian mining firms
to seek other sources
By David George-Cosh
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (January 3, 2018).
TORONTO -- A handful of Canadian miners are ramping up
operations to mine cobalt, betting on demand for a socially
responsible source of the metal that is in high demand as a key
component of electric cars.
Most cobalt currently comes from the Democratic Republic of
Congo, where supply is threatened by political, legal and labor
issues. That means car makers and battery suppliers are
increasingly looking elsewhere for the mineral.
Miners in Canada such as Vale SA, which has a cobalt-producing
mine in Sudbury, Ontario, Sherritt International Corp., and smaller
firms such as Royal Nickel Corp., First Cobalt Corp. and Fortune
Minerals Ltd. are raising funds and engaging in exploratory
drilling.
Mainly through operations led by Vale, Canada is the world's
third-biggest producer of cobalt, after the Congo and China,
accounting for about 6% of the world's supply, according to the
U.S. Geological Survey.
The metal is a crucial component of lithium-ion batteries, which
are used to power electric vehicles as well as portable electronic
devices due to its ability to conduct electricity when stacked with
other metals such as lithium and nickel.
The demand for socially responsible sources of cobalt comes as
the price of the metal has soared to $75,000 a metric ton on the
London Metal Exchange, more than double the price from the start of
2017.
BMO Capital Markets expects current cobalt prices to double in
the next two years as demand for electric-vehicle batteries
continues to outstrip existing supply of the metal, the bank said
in a report released in December.
The Congo produces roughly two-thirds of the world's cobalt, or
about 66,000 metric tons a year, but mines there have been
criticized over reports of child labor and unsafe conditions.
Amnesty International released a report in 2016 that found
thousands of children, some as young as 7 years old, and adults,
mine cobalt in the country and work in perilous conditions without
basic protective equipment. The organization was able to trace the
sale of that cobalt to Chinese refiners, which then resold the
mineral to battery component manufacturers.
In addition, a major mine there that is jointly owned by state
mining firm Gécamines, and Belgian-based Groupe Forrest
International SA, has been caught up in a labor-contract dispute.
And an analysis by the Carter Center, a human-rights nonprofit,
found nearly $750 million in royalties, bonuses and proceeds from
asset sales that are estimated to go to the Congolese government
are missing from Gécamines's accounts. Gécamines has disputed the
report and declined to comment.
Volkswagen AG and nine other leading car makers, including Ford
Motor Co. and Daimler AG, whose supply chains include cobalt
buyers, in November set up a "raw materials observatory" that aims
to address ethical and labor-rights issues in sourcing raw
materials, including cobalt.
A Volkswagen spokesman said the company remains in "intensive
discussions" with its suppliers to determine how to improve the
sustainability of its supply chain, especially for raw materials
used in electric vehicles.
Electrovaya Inc., a battery maker based in Toronto, is in
discussions with Canadian cobalt miners, including Fortune, to lock
down supply contracts for the coming years, said Chief Executive
Sankar Das Gupta. "All our customers want ethical sourcing," Mr.
Gupta said.
A Fortune spokesman said the company has signed numerous
confidentiality agreements with partners they are in discussions
with, and declined to provide further comment on Electrovaya.
For Robin Goad, chief executive of Fortune, which is developing
a mine in Canada's Northwest Territories, that may be an
opportunity.
Mr. Goad said that early next year he plans to announce project
financing for the mine, which is expected to produce 2,000 metric
tons of cobalt annually, as well as a refinery it plans to build in
Saskatchewan estimated at a total cost of 650 million Canadian
dollars ($516 million). He declined to give further details about
the financing.
"You can draw a straight line from our mine in the Northwest
Territories to the refinery in Saskatchewan and know that is being
produced here," Mr. Goad said. "When you get [refined] cobalt from
China, you don't know where it's being sourced from."
Miners outside of Canada are looking to cash in on demand for
cobalt. Toronto-based Sherritt International has nickel-cobalt
mines in Cuba and Madagascar that produce about 7,000 metric tons
of cobalt, roughly 6% of the world's total production.
"Market dynamics are right now in our favor with respect to
cobalt," said David Pathe, Sherritt's chief executive, adding that
the company is in a good position to source cobalt from mines free
of conflict and labor violations.
First Cobalt sees potential in abandoned open-pit silver mines
just outside Cobalt, Ontario, which is located approximately 300
miles north of Toronto and is named for its historic links with the
metal. More than 50 million pounds of cobalt and 600 million ounces
of silver were mined in the region before miners abandoned the area
shortly following the World War II after exhausting the region's
silver mines.
Now, there is enough pink-hued oxidized cobalt shown in
discarded rock piles in the 25,000 acres of land claimed by First
Cobalt to conduct exploration drilling, said Trent Mell, president
and chief executive of First Cobalt. Initial drilling activity
shows enough potential for a high-grade cobalt-silver vein system
in some mines, he said.
"Next year, we gotta drill the hell out of this thing," Mr. Mell
said.
Write to David George-Cosh at david.george-cosh@wsj.com
(END) Dow Jones Newswires
January 03, 2018 02:47 ET (07:47 GMT)
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