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Exponential Increase in EVs Drives New Cobalt Supply Chains

NetworkNewsWire Editorial Coverage: Supply anxieties and ethical concerns are clouding the otherwise seemingly sunny drive to automobile electrification. The world is already awash in mobile devices and is rapidly moving to enhanced electrical grids and electric vehicle (EV) ubiquity. However, the indispensable lithium-ion (Li-ion) battery — vital for gadgets, grid storage and electric propulsion — also requires cobalt to retain and discharge electricity. Lithium is plentiful and easily mined; cobalt is the conundrum that has manufacturers of battery-dependent products most worried.

  • EV sales projected to explode to 30 million units by 2030.
  • Cobalt — critical for Li-ion batteries — is nearly single-sourced and ethically challenged.
  • New North American supply chains look to provide solutions

Most of the world’s cobalt supply comes from the Democratic Republic of Congo. The DRC has an unstable and historically corrupt government and an exceptionally poor human rights record; additionally, much of the country’s cobalt is mined by hand, often by children. Economically precarious, cobalt is virtually single-sourced. Currently about two-thirds of the world supply and half of all global reserves come from the DRC. Moreover, two years after Amnesty International’s scathing expose that showed exploited children mining cobalt, child labor is still being used to procure the mineral at so-called artisanal mines. No other comparable commodity is so dominated by a single source, creating enormous potential risk for EV makers. The troubling aggregate of political corruption, supply uncertainty, operational complexity and ethical opacity has delivered a clarion call to EV makers and spurred a global quest for secure and humanely sourced cobalt resources. At the vanguard of this search is First Cobalt Corp. (TSX.V: FCC) (OTCQX: FTSSF) (FTSSF Profile), a vertically integrated pure-play cobalt company with significant North American assets. Leveraging company assets and expertise in conjunction with the savvy of a legendary EV pioneer, First Cobalt is determined to be North America’s premier source of cobalt delivered to global electric automakers like Ford Motor Company (NYSE: F), B.M.W. AG ADR (OTC: BMWYY), Volkswagen AG (OTC: VWAGY) and Mercedes maker Daimler AG (OTC: DDAIF) (XE: DAI).

Eye-popping Expectations

Global electric vehicle sales are projected to grow at a staggering CAGR of 32.57 percent over the next seven years. Forecasts from Bloomberg NEF show sales of electric vehicles increasing even faster after that. From a record 1.1 million sales worldwide in 2017, sales are projected to reach 11 million in 2025 then skyrocket to 30 million in 2030 as the vehicles become cheaper to make than internal combustion engine cars. It’s difficult to fathom a 10-fold increase in electric vehicles in seven years and even harder to comprehend a 30-fold increase in 12 years, but somewhere between the current market and a 30-fold increase is one heck of an opportunity.

Conflict and Conundrum-free Cobalt

The DRC’s artisanal mining volume was reduced when battery makers and users came under public pressure to fully vet supply chains, but unabated global demand pushed cobalt prices to new highs, and backyard mine production rebounded. Even with intense scrutiny and vetting, it’s nearly impossible for battery makers to ascertain cobalt sources. More than half of the global supply of refined cobalt chemicals used in Li-ion batteries comes from China, which in turn gets 90 percent of its cobalt from DRC.

There’s an ever-rising chorus from EV makers clamoring for secure, ethically sourced cobalt. As part of a collective response to these concerns, First Cobalt Corp. (TSX.V: FCC) (OTCQX: FTSSF) adopted the Responsible Cobalt Initiative in 2017 and is intent on building — from raw product to refined chemicals — a North American-based, vertically integrated cobalt company.

First Cobalt owns three substantial North American assets. The company’s flagship asset is the Iron Creek Cobalt Project in Idaho, which has an inferred mineral resource estimate of 29.6 million tons grading 0.11 percent cobalt equivalent. First Cobalt also controls a prodigious land package composed of 50 past-producing mines in the Canadian Cobalt Camp and, importantly, the company owns the only permitted cobalt refinery in North America capable of producing battery-grade materials.

The validation and value of assets are likely bolstered by the recent appointment of automotive icon, Henrik Fisker, to the First Cobalt’s Board of Directors. Fisker, a legendary designer and entrepreneur renowned for making dreams reality, brings a wealth of knowledge, innovation and real-world experience to First Cobalt’s board. Henrik’s vision is behind some of the most emotionally appealing vehicles ever created, including the BMW Z8, the Aston Martin DB9/V8 Vantage, VLF Force 1 to the Fisker Karma and more. Fisker is the founder, chairman and CEO of Fisker Inc., an American automaker revolutionizing the development of EVs with innovative battery solutions.

“Electric vehicle automakers and battery manufacturers have a responsibility to ensure any materials we use in our batteries are sourced in an ethical way,” Fisker stated in the news release announcing his appointment. “I have made a commitment to contribute to a better world all the way down the supply chain. We must stop looking at innovation superficially and start taking responsibility for our products end to end and give our customers the true choice to be part of a sustainable future

“During this last few weeks, I have spent considerable time with the First Cobalt team, seeing their cobalt project, Iron Creek, in Idaho as well as the First Cobalt Refinery in Ontario,” he continued. “I was extremely impressed with the depth and extent of commitment from the entire First Cobalt team to the safety and training of all employees, ethical mining practices and the focus on environmental protection around their projects.”

First Cobalt President and CEO Trent Mell praised Fisker’s experience and potential for advancing future developments.

“First Cobalt’s strategy is to explore, mine and refine cobalt material in North America with the goal of providing cobalt to the American EV market,” Mell stated. “Henrik’s knowledge of the EV space and experience as a successful OEM automotive manufacturer will play a key role as First Cobalt continues to execute on this strategy. The vision and energy that Henrik has demonstrated throughout his career will be an important asset as the Company continues to develop its projects in North America.”

Throughout his career in the automotive sector, Fisker has become synonymous with iconic cars and groundbreaking leadership in premium electric vehicle development. His vision and innovation are behind some of the most emotionally appealing vehicles ever created, and now he’s sharing that vast expertise with First Cobalt in the development of a unique North American cobalt supply chain.

Validating Historic Estimates

To substantiate assets and solidify objectives, First Cobalt recently announced a mineral resource estimate of 29.6 million tons of 0.11% cobalt equivalent at the Iron Creek Project. Unlike almost all other cobalt mines, First Cobalt’s Iron Creek Project is primarily a cobalt deposit with copper as the byproduct.

“The initial resource estimate and the pace of progress at Iron Creek have exceeded our expectations,” Mell stated. “We have delineated a sizeable primary cobalt deposit on patented property, and mineralization continues to expand to the east, west and at depth. The mineralogy is simple, and initial metallurgical test work is very encouraging with high metal recoveries. Cobalt is associated with pyrite rather than minerals containing arsenic, which may offer processing and offtake advantages.”

Mell also stated, “This initial Inferred Resource estimate is an important step forward to a potential source of ethical cobalt in America. Drilling is now underway to test the mineralization strike length from 450 meters to over 900 meters, while also systematically testing depth extensions to over 300 meters to support an updated resource estimate in early 2019.”

The Iron Creek property consists of mining patents and exploration claims covering almost 1,700 acres with significant infrastructure in place to support multiple drills and underground activity. With a strong balance sheet, First Cobalt is fully funded to complete the 2018 exploration programs and plans to be at the forefront of the cobalt-driven battery revolution.

The Insight

If there are any doubts about an EV explosion, look at any major auto manufacturer — every single one is rapidly expanding product lines and production of electric vehicles. Electric mobility is still in its infancy, but even with challenges and speed bumps ahead, it won’t end any time soon. Well-positioned portfolios in strategic critical components of EVs could easily excel and outperform well into the next decade.

EV Makers

Automotive icon Ford Motor Company (NYSE: F) designs, manufactures, markets and services a global line of Ford cars, trucks, SUVs and electrified vehicles. Ford has already invested $11 billion to bring 16 fully electric vehicles into a global portfolio of 40 electrified vehicles by 2022 and is aggressively pursuing leadership positions in electrification, autonomous vehicles and mobility solutions. Ford’s Team Edison focuses exclusively on development of electrified vehicles for both Ford and Lincoln.

B.M.W. A.G. ADR (OTC: BMWYY) is among the world’s leading manufacturers of automobiles and motorcycles and plans to offer 25 electrified vehicles — 12 fully electric by 2025. BMW has established ecological and social sustainability throughout the value chain and a commitment to conserving resources as an integral part of its strategy. BMW is trying to secure a 10-year supply of cobalt — all the way down to the level of the mine — for EV batteries.

Volkswagen AG (OTC: VWAGY), one of the world’s biggest automakers, has one of the industry’s most ambitious targets for battery car sales. Volkswagen outlined its strategy to electrify all segments of its vehicle lineup across the globe and to become a worldwide industry leader in e-mobility by 2018. Volkswagen is actively seeking long-term cobalt supplies.

Daimler AG (OTC: DDAIF) (XE: DAI) engages in the production and distribution of cars, trucks and vans. The company’s flagship brand, Mercedes-Benz, announced a full line of electric cars called the Mercedes EQ, set to market in 2020. Daimler has vowed to ethically source battery materials for electric cars and recently joined the Responsible Cobalt Initiative, which seeks to find ethical ways to source the material.

For more information about First Cobalt Corp, please visit First Cobalt Corp. (TSX.V: FCC) (OTCQX: FTSSF)

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