In the past 25 years, there have been numerous major changes in the cobalt market. Prior to 1978, cobalt was almost exclusively supplied from Zaire (now the Democratic Republic of Congo) and Zambia as a byproduct of copper and sold on a producer price basis. In the past five years there has been a move to nickel-based operations, and recently some primary cobalt operations have been commissioned.
In general, cobalt demand was always dependent on price. In 1978, the cobalt price rose sharply following the so-called “Shaba” Incident in Zaire, in which the National Front for the Liberation of the Congo, a political opposition group hostile to Zaire’s then-president Mobutu Sese Seko, launched an attack from Angola on Zaire’s mineral-rich Shaba province. Driven by fears of supply disruptions, companies endeavoured to substitute cobalt with alternative materials. These efforts resulted in a massive reduction in cobalt demand, which did not recover until the early 1990s. Thereafter, demand rose rapidly as cobalt began to be used exclusively in specialty applications.
A major change in refined cobalt production in the past 20 years has been the increase in suppliers. In 1980, 10 producers accounted for more than 90% of worldwide refined cobalt supply, but by 2001 that figure was 18%, and as new producers entered the market, many existing producers increased their production. In addition, the American Defense Logisitics Agency became a major supplier in 1993, when it began disposing of cobalt from the U.S. Strategic Stockpile. In 1991, Russia became a major exporter to the West whereas, prior to that, it had been a net importer of about 3,000 tonnes per year.
Apart from the early 1990s, when Gnrale des Carrires et des Mines (Gecamines) and producer Zambian Consolidated Copper Mines began experiencing production problems, these changes have resulted in a steady increase in refined cobalt supplies.
Another major change in supply patterns has been the trend on the part of many consumers to use low-grade cobalt containing materials rather than primary cobalt. It is impossible to obtain an accurate figure for refined cobalt from intermediate/scrap but estimates suggest it is in the area of 3,000 tonnes per year (excluding that which is processed by the major producers).
In 2001, OMG and Chambishi Metals commissioned slag-treating plants in the DRC and Zambia, respectively, with a total capacity of about 9,000 tonnes cobalt per year (of which 4,000 tonnes from Chambishi is new). The Big Hill project in the DRC will assist Ohio-based OMG in reaching its target of 12,000 tonnes cobalt per year. Numerous commissioning problems mean Anaconda Nickel’s Murrin Murrin project in Australia is still attempting to ramp up to capacity. Uganda-based Kasese and Australia-based Bulong planned to increase production to 1,000 tonnes per year by 2003, while Mopani Copper in Zambia was added to the list, as its Nkana refinery now has an annual capacity of 2,500 tonnes.
Chinese cobalt production is expected to increase to about 5,500 tonnes per year in the next few years from 3,500 tonnes this year.
These increases are expected to add about 14,000 tonnes per year of cobalt to the market within the next few years.
Over the past decade, many lists of potential new cobalt producing projects, at various stages of development have been drawn up. Few of these projects have materialized, owing to several factors, as outlined below:
q Cobalt price — The large reduction in cobalt demand in the past year has resulted in a decline in the cobalt price to its lowest level since 1983. If the price of cobalt does not improve from current levels (US$6-7 per lb.), projects treating slag or intermediates could have difficulties.
q Technical problems — The three Australian first-generation high-pressure acid leach (HPAL) operations are experiencing technical difficulties and are still attempting to ramp up to full capacity. The difficulties have caused Murrin Murrin and Bulong major financial problems. The Cawse project has now been acquired by OMG. A question mark still hangs over at least the first two operators.
q Availability of feed — Availability of cobalt-containing concentrates will become a problem in Zambia by 2004 as a result of declining ore from the Nchanga open pit. This could pose a problem for Chambishi Metals and Mopani Copper, which are already hurt by the lack of concentrates from Roan Antelope Mining (a subsidiary of African-based Binani Industries). Some of the planned increases depend on receipt of feed material from the Democratic Republic of Congo (DRC). About 10,000 tonnes of cobalt-containing feed materials come from the DRC annually. This has been a good source of revenue for the DRC, but that could cease at current cobalt prices. Also, production increases in China will largely depend on the acquisition of feed material, as the country is known to have few domestic sources of cobalt ore.
q Cobalt production as byproducts of nickel or copper — The fact that cobalt is mainly a byproduct means production is reliant on either nickel or copper production. With the exception of Formation Capital’s operation, literally all scheduled additional copper production to 2010 will be from non-cobalt-bearing ores.
The greatest potential for new cobalt production in the DRC appears to be from the Kolwezi tailings project of American Mineral Fields (AMF). However, as it is basically a primary cobalt production process, Kolwezi is reliant on the cobalt price. The recent withdrawal of Anglo American from the project casts doubts on its future.
It is estimated that over the next eight years, an extra 350,000 tonnes per year of nickel will be required to meet demand. Of this, about 85,000 tonnes per year are projected to enter the market by 2005. A glance at the planned projects shows that Murrin Murrin I, Tocantins in Brazil, and Japan-based Sumitomo are the only ones likely to bring additional cobalt into the market before 2005, as these are already in progress.
Little production from new nickel producers will enter the market before 2005, based on the assumption that construction of a refinery takes about two years and it takes a further two years to ramp up to 85-90% capacity. Based on this, the most promising projects — Goro Goro, Ravensthorpe and Murrin Murrin II — will not be commissioned until at least 2004-2005, or ramp up to capacity until 2006-2007, even if a decision to proceed with the latter two projects is made this year. Formation Capital could begin production in 2003 as it plans to buy feed for its refinery, pending deliveries of concentrate from mining operations in Idaho.
— The preceding is from an information bulletin of the U.K.-based Cobalt Development Institute.
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