By Tom Vulcan

Strangelove: Well let's see now ah, searches within his lapel cobalt thorium G. notices circular slide rule in his gloved hand aa... nn... Radioactive halflife of uh,.. hmm.. I would think that uh... possibly uh... one hundred years. On finishing his calculations, he pulls the slide rule roughly from his gloved hand, and returns it to within his jacket.

—Dr. Strangelove: or, How I learned to stop worrying and learned to love the bomb

For Dr. Stangelove, Brigadier General Jack D. Ripper, Group Captain Lionel Mandrake, Air Force General "Buck" Turgidson and all others in the film, the Soviet cobalt/thorium bomb - the Doomsday Bomb - had the potential to wipe out all life on Earth as we know it.

While the film may be a comedy, granted a very dark comedy, for we small and worried boys growing up in late '50s and '60s Europe, in our dark moments the cobalt bomb (first hypothesized by the physicist Leo Szilard in the late '50s) was anything but comic.

Little did we know that, while theoretically possible, in practical terms such a bomb would require unrealistically huge amounts of cobalt to work: It would have to be some two and a half times as heavy as the battleship Missouri!

Now, along with molybdenum, the London Metal Exchange (LME) is proposing to introduce contracts in cobalt on the exchange in the second half of 2009. This is quite a development for a metal for which the total output in 1916 was only some 554 tonnes, of which 400 tonnes were oxides to be used in colorings; for example, cobalt blue. 

Cobalt Now

Cobalt has come a long way both from being produced in such small quantities and used so narrowly.

Cobalt is now used in myriad different ways...

Source: CDI

 ...and is produced in significantly larger quantities. Last year, according to the Cobalt Development Institute (CDI) in the U.K., excluding cobalt from companies that produce it by treating various cobalt-containing intermediate products and scrap but do not report their numbers to the CDI, total refined cobalt availability was some 53,723 tonnes. (This figure includes the delivery of some 617 tonnes of cobalt by the U.S. Defense Logistics Agency (DLA) from the country's National Defense Stockpile.) 

 Demand for the year, according to a presentation given by Roskill Information Services (Roskill) at the CDI cobalt conference in Toronto this May, was some 58,900 tonnes. Demand was, primarily, for its use in batteries and superalloys, followed equally by that in hard metals and catalysts. 

Source: Roskill Information Services

Some Important Cobalt Uses

Health

Because of its central place in cobalamin, or Vitamin B₁₂, cobalt is vital to most animals - including humans. Whereas the likes of cattle and sheep can get their cobalt through such means as licks, cobalt "bullets" and the addition of cobalt to the soil (a concentration of some 0.13 to 0.30 mg/kg will perk up the health of grazing animals no end), humans cannot just eat it. We have to get it from animals, dairy products or leguminous veggies: a lack of Vitamin B₁₂ in both animals and man can lead to anemia.

Some other uses of cobalt in the health field include as an antidote to cyanide poisoning, as an alloy used in prosthetics (for example, artificial hip and knee joints), for sterilizing medical supplies and food, for radiotherapy of cancers and, finally, in the magnets used in MRI and CAT scanners. 

Batteries

Rechargeable batteries in portable electronic devices are ubiquitous, whether in digital cameras, iPods, laptops, mobile phone or power tools.

In general, we use three major types of such batteries:

• Nickel-Cadmium (Ni-Cd)
• Nickel-Metal Hydride (Ni-MH)
• Lithium-ion (Li-ion)

Over the last 10-12 years, Li-ion batteries have, by value, come to dominate the market.

Source: Umicore

Of these three types, per cell, lithium-ion cells contain the most cobalt. And whichever type a battery may be, cobalt is an essential constituent, not least because it improves the battery's properties.

In addition, there are, of course, the batteries for hybrid electric vehicles ((HEVs)). Currently, most all HEVs use Ni-MH batteries, each of which contains some 3-5 lbs. of cobalt.

If, in the future, Li-ion batteries are adopted as the norm in HEVs, each could contain up to 5-7 lbs. of cobalt. And even if, as some people believe, the cobalt content in such batteries is quite significantly reduced, they will still contain at least some cobalt.

However, whatever the choice may be for HEVs, the lithium-ion battery business is booming, and looks set to remain healthy for some time yet. While each of the Japanese giants - Matsushita (MC), Sanyo and Sony (SNE) - has recently announced major investment in Li-ion battery production, Korean company Samsung, too, is keeping a close eye on the market. According to a recent article in The Wall Street Journal, the Yano Research Institute in Tokyo, Japan, is forecasting double-digit demand for such batteries for portable electronic equipment through 2009, "followed by a rise of more than 5% annually after that." 

Superalloys

As its contribution to the special characteristics of superalloys (and certain steels), cobalt notably brings high temperature strength. In addition, alloys using cobalt are very resistant both to hot corrosion and thermal fatigue. An added advantage, particularly over nickel alloys, is their weldability.

Cobalt is, therefore, commonly to be found not only in nuclear reactors, power plants and chemical equipment, but also in space vehicles, rocket motors and casings. And, as an additive to steel, it is to be found, amongst other things, in landing gears, torque shafts, arrestor hooks and gun barrels. 

Source: Roskill Information Services

Its most important use as a constituent of superalloys is, however, in jet engines and other types of turbines. In 2007, according to Roskill, the greatest use of superalloys was in the aerospace industry, followed by that in industrial gas turbines. Because of their high temperature strength, superalloys are of particular importance in the manufacture both of turbines' blades and other structural parts in their hot section.

Source: Wikipedia Commons

 A typical, high-bypass jet engine, producing, say, 40,000 lbs. of thrust, will contain up to some 130 lbs. of cobalt. 

Catalysts

Some of the latest figures suggest that the chemical markets now account for around two-thirds of total cobalt consumption. Much of this consumption can be accounted for by the use of cobalt in a number of different catalysts, in particular in the petrochemical and plastics industries.

Some of its most important uses as a catalyst are to:

• increase polymerization/oxidization rates in the plastic industry, when manufacturing the resin for, say, plastic bottles, or recording tapes, and in the textile industry;
• serve as a promoter in hydrosulfurization catalysts in hydroprocessing, i.e., in the process of removing sulfur from crude oil in refineries; and,
• help convert natural gas to liquid (hydrocarbon) in the Fischer-Tropsch process, otherwise known as FT for GTL.

Cobalt Supply

There is very little primary cobalt production. For the most part, the metal is derived as a by-product of copper and nickel mining and processing. Whereas prior to 1995 most cobalt was a by-product of the copper industry, since then the balance has shifted to the nickel industry.

Currently the split of refined cobalt production sources is:

Nickel                          48%

Copper (& other)          37%

Primary cobalt              15%

 However, both with higher cobalt prices and advances in extraction techniques, this last figure may rise in the future.

The main sources of cobalt are in:

• Nickel sulphide ore bodies in Australia, Canada, Finland and Russia
• Copper-cobalt deposits in the Democratic Republic of the Congo (DRC) and Zambia
• Nickel oxide ore bodies in Australia, Cuba, New Caledonia and Russia
• Mixed ores, tailings and slag in the DRC and Zambia

Those countries, or regions, producing most cobalt-containing ores are, however, not necessarily major producers of the refined metal. While Africa, with some 70% of the market in 1980, may once have been the world's largest producer of refined cobalt, it accounts for only about 11% today. Since 2002, China has become a major player in the market and now accounts for 23% or more of refined cobalt production.

The World's Cobalt Mining and/or Refining Countries

NB: Refining can be from newly mined ores or from older

slags, by-products and scrap. The definition is that "new"

cobalt is produced.

Source: CDI

 Cobalt Demand

The demand for cobalt has been healthy over the last 10 years and looks set to remain so, even if there has been a slowdown in consumption. CRU Strategies, part of the CRU Group (CRU), puts the rate of compound annual growth over this period at 8.1%.

Source: CRU

Geographically, the greatest increase in demand has come from Asia and China.

Source: CRU

Going forward, demand for cobalt in all areas and industries looks set to remain strong.

Although the HEV battery question has yet to be settled, demand for rechargeable batteries for portable electronic devices should remain healthy, and grow.

As the aerospace industry - both civilian and military - and gas turbine users generally, seek further fuel efficiency, demand for superalloys will continue to have solid support. Indeed, for the period 2008-2012, Roskill is forecasting a 4% growth in cobalt demand in superalloys.

Continuing industrial growth both in Asia and China will also underpin increased demand for cobalt in the hard metal sector where it is used both in mining and for metal cutting and forming. Growth in this sector could be as much as 5% per annum.

While the outlook for cobalt use in magnets may not be as rosy as it is for its use in other areas, the metal will remain in healthy demand as a pigment; a drier for inks, paints, etc.; a chemical soap; a tire adhesive (it's what sticks the rubber to the steel in your radial tires); and, of course, as a catalyst in the oil and textile industries.

Finally, a further area in which there appears still to be great hope for cobalt as a catalyst, is in GTL projects. Although such catalysts only currently consume some hundreds of tonnes of cobalt each year, and only in one or two projects - for example, the large conversion plant in Qatar - should oil prices remain high, its use in this area will certainly become more attractive. OM Group notes that cobalt consumption in the Fischer-Tropsch process is already growing at 10-20% a year.

Opportunities In Cobalt

While the price of cobalt metal has fallen from the highs of earlier this year, it is currently on the rise again.

Source: http://www.minormetals.com/

Where its price goes from here will depend upon a number of factors. Three of the most important are:

• End-use demand: apparently still healthy, and set to remain so;
• Future production costs: always going up; and
• Supply and supply constraints: dependent not only both on the DRC's and China's participations in the market and their agreements vis-à-vis the DRC's cobalt production and output, but also on any delays to additional production coming onstream - little new production is expected to come onstream this year, but plenty is expected from 2009 on.

Total Forecast Cobalt Production

Source: CDI

As with a number of other strategic metals, should China see problems with satisfying its own internal demand for cobalt, then we may see limits on its exports of the metal.

However, although export rebates on cobalt cathode/powder, and various cobalt compounds, have already been removed (albeit that they have also been raised on certain other cobalt-containing items, particularly Li-ion batteries), at the Minor Metals & Rare Earths conference held in Hong Kong early in September, Xu Aidong, chief analyst at the Beijing Antaike Information Development Co., concluded his analysis of the Chinese cobalt market with the observation that: "In 2008 Cobalt consumption of China is about 14091 tonne, increasing 9.4%Y-o-Y, and the refined cobalt production will be around 19026 tonne, the surplus between production and consumption need to be exported." Indeed, he envisages the price for 99.3% pure cobalt recovering in 2008 and reaching the $40-42 per lb level.

Until such time as cobalt is actually traded on the LME and, indeed, until such time as the market has shown itself to be both liquid and have sufficient depth, to the uninitiated, investing in physical cobalt is probably not advisable - except with professional guidance. Not only is the existing market really quite complex, it tends also to lack transparency. In addition, liquidity will always be an issue.

Since currently the U.S. neither mines nor refines any cobalt, it has to rely totally on imports, stock releases and secondary materials; for example, superalloy scrap and spent catalysts.

With the Defense National Stockpile Center having already announced that, as part of an "ongoing review" it is reducing the sale amount of cobalt, and with the fact that, in the period 2003-2006, the U.S. imported 19% and 9% of its cobalt needs from Russia and China, respectively, domestic cobalt plays could soon hold special significance.

Among these are Formation Capital Corporation (Bloomberg Ticker - FCACF:PK) with its Idaho cobalt project - a pure cobalt play - and PolyMet Mining Corp. (Bloomberg Ticker - PLM:US), a Canadian mining operation that is currently waiting on permitting for its NorthMet cobalt-bearing project in northeastern Minnesota.

Cobalt remains, however, essentially either a nickel or copper play (sometimes both). (CRU even goes so far as to say that it is "reverting to being a by-product commodity.") Investing in any of the major concerns (whether producers and/or refiners) producing cobalt internationally will, therefore, provide exposure to considerably more than just cobalt.

A brief list of some of those publicly traded should be illustrative:

• BHP (Bloomberg Ticker - BHP:US)
• Eramet (Bloomberg Ticker - ERA:FP)
• Freeport-McMoRan Copper & Gold Inc. (Bloomberg Ticker - FCX:US)
• Norilsk (Bloomberg Ticker - NILSY:US)
• OM Group (Bloomberg Ticker - OMG:US)
• Sumitomo (Bloomberg Ticker - 3713:JP)
• Umicore (Bloomberg Ticker - UMI:BB)
• Vale Inco - owned by Companhia Vale do Rio Doce (Bloomberg Ticker - RIO:US)
• Votorantim (Bloomberg Ticker - VCP:US)
• Xstrata (Bloomberg Ticker - XSRAY:US)

 And, if it's not blacklisted for U.S. investors because of its cobalt operations in Cuba, the Canadian company, Sherritt International Corporation (Bloomberg Ticker - S:CN) has interests in cobalt operations not only there, but also in Madagascar.

On the other hand, there are a number of smaller companies, some based in North America, that have international operations targeting cobalt. These include Geovic Mining Corp (Bloomberg Ticker - GMC:CN), a Canada-based mining company, with cobalt interests in Cameroon, and another Canada-based company, Caledonia Mining Corporation (Bloomberg Ticker - CAL:CN), with interests in Zambia.

With Morocco currently one of the two countries in which cobalt is extracted alone, exposure to the metal can be achieved through Managem (Bloomberg Ticker - MNG:MC), quoted on the Moroccan exchange.

In 2007, according to the USGS, "purchased scrap represented an estimated 22% of cobalt reported consumption." So, once again, one needs only to turn to scrap for exposure; this time to cobalt!

It is probably a little known fact that on the seafloor (in the mid-Pacific in particular) sits a great deal of cobalt - some estimates put it at over 1 billion tonnes. How you get at it economically is another matter, but there is a lot there to be got at. So, it may be worth keeping your eyes out for the likes of Nautilus Minerals Inc (Bloomberg Ticker - NUS:CN), a company with particular expertise in undersea resources and cobalt, and Neptune Minerals (Bloomberg Ticker - NPM:LN), another explorer and developer of seafloor mineral resources.

Finally, keep scanning the press for articles on how to store solar power after the sun's gone down. A recent article in The Economist noted that scientists at MIT had come up with a new way to use cobalt that might make this much easier. There would be significant mileage in this.

Afterword

Albeit back in June this year, answering its somewhat racy question, "Looking to amass a supply of valuable minerals and metals?", the august periodical Foreign Policy listed cobalt as one of "... five hot commodities you may want to consider stocking up on." So, now it's over to you!