Nick French: We Are Approaching The Cobalt Cliff
Nick has been following the metals for over twenty-five years He feels the coming period will be a fascinating time for cobalt. Cobalt is a by-product of copper and nickel mining, and as a result, the supply can’t be easily adjusted. Also, 65% of supply comes from the unpredictable and logistically tricky Congo region.
If the cobalt price reaches $100 a pound, it will still not justify the creation of a nickel or copper mine to produce cobalt since the cost would be upwards of six billion dollars. He sees nothing in the next five years that will put a cap on the price. Current demand is near 100,000 tons per year, and there are very few places where cobalt use can be cut. It’s used in alloys for products like jet engines and medical devices, and this usage demand is still increasing by 6% per annum.
In the next five to ten years there are no alternatives to cobalt use in lithium-ion batteries. The only thing that can change is the ratios of the battery metals used which may halve the amount required per battery. However, battery demand itself is expected to rise ten-fold as electric vehicle production grows.
There are always large lead times between cap-ex and actual mine production. Not much additional production is coming online in the next five years. He discusses two projects both in the Congo that may produce 40,000 tons per year. Everyone agrees that the shortage by 2025 will be 170,000 to 200,000 tons per year.
There are very few pure cobalt plays. Cobalt 27 is one such play as they have 2100 tons warehoused in the United States.
Talking Points From This Weeks Episode
• Battery demand is expected to increase by a factor of ten.
• Auto manufacturers could begin purchasing cobalt companies.
• Most cobalt mining is a byproduct of other mining.
• 65% of cobalt comes from the Congo, and China uses 60% of the world’s supply.
Mr. Nicholas John French, also known as Nick, founded SFP Metals (UK) Ltd. in 1999. Mr. French has 25 years experience in the management of metals companies. He specializes in sourcing material, financial structures and the management of SFP’s business development strategies. Mr. French spent 22 years with London based trader Wogen Resources Ltd. during which time he rose from trainee to Managing Director and was at the trading desk when the price of cobalt rose from US$5/lb to US$50/lb during an eight-month period during 1978. During the following years, Mr. French was on the cobalt front line as the market developed new directions based upon the opening up of China as it turned from net exporter to net importer and the collapse of the Iron Curtain including the sell-off of the Soviet stockpiles. In 1997, he became the Chief Executive Officer of SFP Metals Ltd. While at SFP Metals; he structured finance deals with African producers, a joint venture with China’s largest producer and various long-term contracts with the world’s largest producers and consumers. In 2015, Mr. French stepped back to form his cobalt consultancy, Metal Investment Consultants and has spent the last two years advising various parties on the structure and potential of the cobalt market with occasional articles published in the industrial press and conference presentations. He has been a Director of Cobalt 27 Capital Corp. since April 20, 2017. He served as a Director of SFP Metals (UK) Ltd. Mr. French graduated from Cambridge University in 1975 with an M.A. in Geography (Economic).