With a global shortage of cobalt predicted, Global Energy Metals has agreements in place that both secure supply and secure access to end-users.
Global Energy Metals Corp. (GEMC:TSX.V) is striving to become a niche supplier of cobalt. In March, the company signed a long-term strategic cooperation agreement with Beijing Easpring Material Technology Co., a major battery component supplier, to build an efficient and reliable cobalt supply chain.
Global Energy Metals reported that as part of the cooperation agreement, the two companies "have agreed to a joint venture that will allow for the identification, acquisition, development, funding and commercialization of cobalt projects. GEMC will acquire the expertise and relationships that Easpring offers, including low-cost capital from Chinese institutions, leading Chinese engineering and construction skills, and Chinese machinery, equipment and other critical suppliers that meet world-class standards of quality at competitive costs in exchange for access to GEMC's project development opportunities."
Global Energy Metals has noted that it has granted Easpring "Right of First Refusal to acquire an interest of each project by committing to pay for the pro-rata project acquisition and ongoing development costs." The cobalt concentrate could be shipped to Easpring, which would refine it to the exact specifications of the end-user.
In May, Global Energy Metals announced that it had entered into an agreement with Hammer Metals Ltd. to earn up to a 75% interest in the Millennium Cobalt Project in the Mount Isa mining region of Australia.
Mitchell Smith, president and CEO of Global Energy Metals commented, "We believe that Millennium represents one of the best cobalt opportunities currently available not only in that region but also globally. Millennium is an ideal first acquisition that fits into our objective that includes the acquisition of additional high-quality mining assets and providing cobalt supply to our end-user partners."
As part of the agreement, Global Energy Metals must spend a minimum of CA$2.5 million on project exploration and development work within three years of signing a definitive option agreement to earn the 75% interest, divided as follows: CA$500,000 within six months for 25% interest, CA$1 million within 18 months for a cumulative 65% interest and CA$1 million within 36 months for the full 75% interest.
Cobalt is a critical component in lithium-ion batteries, and most cobalt produced is a byproduct of mining copper and nickel. The U.S. Geological Survey reported in its 2017 survey that global cobalt mine production decreased in 2016, mostly attributable to lower nickel production. According to the USGS, "growth in world refined cobalt supply was forecast to increase at a lower rate than that of world cobalt consumption, which was driven mainly by strong growth in the rechargeable battery and aerospace industries. As a result, the global cobalt market was expected to shift from surplus to deficit."
While the Democratic Republic of the Congo (DRC) produces more than half of the world's supply of cobalt, concerns over political instability, infrastructure, transportation and issues such as artisanal mining that uses child labor have led many manufacturers to search for economic and reliable cobalt supply outside of the DRC.
Global Energy Metals, with the agreements it has in place, is positioned to supply end-users with economic and stable sources of cobalt, to take advantage of the expected rising price environment for the mineral.