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Cobalt price hits highest level since 2008 on electric car demand

Potential increase in royalties payable to DRC government has also pushed up prices

The price for the battery metal cobalt has hit its highest level since 2008, prompted by rising demand from electric cars and the prospect of higher taxes in the Democratic Republic of Congo.

Cobalt has quadrupled in price over the past two years and surged to $40 per pound this week, according to Metal Bulletin.

The rise comes as carmakers from Tesla to Volkswagen are looking to secure long-term supplies of cobalt for use in their rechargeable batteries. Last year, VW put out a tender looking for five years’ supply of the metal. Around 10 kilogrammes of cobalt is used in an electric car battery — over 1,000 times the amount used in an iPhone — according to BMO Capital Markets.

Over 60 per cent of the world’s cobalt comes from the DRC, where it is extracted alongside copper in large open pit mines and by hand by small-scale miners.

But the largest mining companies face higher costs for extracting the metal after President Joseph Kabila said on Wednesday he would sign a new mining code into law. That could see the royalties that miners have to pay to his government on their cobalt sales rise fivefold.

It could also encourage companies in the electric car battery supply chain to buy cheaper cobalt mined by hand by so-called “artisanal miners”, one trader said. Artisanal mining of cobalt, which is often done by children, rose by 20 per cent last year to make up between 13 to 16 per cent of the DRC’s supply, according to Darton Commodities.

The code was passed by both chambers of parliament in January and only requires Mr Kabila’s signature to become law.

Royalties on revenues from cobalt sales could rise to 10 per cent from 2 per cent if the metal is deemed a “strategic” mineral, while copper will rise to 3.5 per cent.

The high price of cobalt has also encouraged companies to mine for the metal outside the DRC. Clean Teq, a company that is developing a project to produce cobalt and nickel in Australia, raised A$150m from investors this week.

Cobalt 27, a Canadian-listed company that has amassed a hoard of over 2,900 tonnes of cobalt, has also raised over $180m from investors this week in a share placing. The company has an agreement to be paid a royalty on all future production of cobalt from the Dumont cobalt and nickel project in Quebec, which is expected to start production in 2020.