Canadian lithium, cobalt miners may benefit from EV batteries boon

EV batteries use a game changer for small mining companies

Canadian mining companies developing cobalt and lithium mines all over the world are hoping to benefit as automakers shift to building electric vehicles, driving up the need for EV batteries.

According to a Reuters report, Toronto-listed cobalt companies, Ecobalt Solutions and Fortune Minerals are in talks with over a dozen groups, including car and EV battery makers.

The discussions range from preliminary to more advanced and concern financing projects.

For the past five years, miners have been struggling with relatively tight equity funding and the interest in miners from downstream players on the battery supply chain would be a boost for the companies.

“We anticipate additional transactions in the coming months and years. It is a function of demand-supply imbalance,” John Kanellitsas, President and Vice Chairman of Lithium Americas Corp told Reuters.  His company raised nearly $300 million this year for a project in Argentina.

Lithium miners have been able to lock in deals faster than cobalt developers as supply shortage fears lingering since 2015 have egged on investors.  At that time, cobalt was still in surplus.

But recently, prices for cobalt have doubled as suppliers demand for the mineral have risen.  Cobalt miners who have been advancing their projects for over 10 years are now in a better position to secure funding, Cormark Securities analyst MacMurray Whale told Reuters.

Whale says constrained supply and soaring demand for EV batteries “suggest to me that it can’t be better.”

Paul Farquharson, CEO of Vancouver-based Ecobalt, told Reuters his company is looking to sign a long-term supply agreement with one or more customers to help fund a cobalt mine in Idaho.

Should they get the funding, the risk for the project will be lower and banks will be more likely to provide debt financing and other investors will fund the balance.

The Idaho project is projected see about 75 per cent of its revenue come from cobalt and it is located in what is considered a safe political jurisdiction.

The Idaho mine is fully-permitted and Reuters says it the most likely of the Canadian cobalt developers to secure financing.  Eight Capital analyst David Talbot says he believes financing may be in place within six months.

Talbot added two projects in Quebec by Nemaska Lithium and Mason Graphite could also secure funding in the coming months.

Fortune CEO Robin Goad said his company is looking for over $700 million to develop its Nico cobalt mine and processing plant in Canada.  The company is hoping to secure financing next year once it releases a feasibility study on the expanded project.

“Our biggest advantage is to be able to market our project as a Canadian source of supply,” Goad told Reuters.

Currently over half of the world’s cobalt supply comes from the Democratic Republic of Congo.  The country is politically unstable, lacks legal opacity and child labour is used in mines.  All of these factors are concerns for automakers looking for secure, ethically-sourced battery raw materials.