The “critical minerals” area of the resources market is gaining worldwide attention, as the trend to “decarbonisation” and the clean-energy transformation gathers pace.
Lithium attracts most of the attention, but in September I looked at a group of companies producing some other metals that will play important roles.
Here are three more that I think are very attractive projects: but each of the three show the long path from project, through planning, to production. However, the need for the minerals that these three companies will produce is undoubted; and they should, if all goes well, start producing into markets that are very keen to buy their products. The catch for investors is that at this stage, all three must be considered speculative stocks. But for people who believe in the profound economic and industrial theme of the clean-energy transformation, these are potentially lucrative investment propositions — if everything goes right for them.
- Cobalt Blue (COB, 24 cents)
Market capitalisation: $96 million
12-month total return: –63%
Three-year total return: 37.8% a year
Analysts’ consensus valuation: $1.175 (Stock Doctor/Refinitiv, one analyst), $1.60 (FN Arena, one analyst: Macquarie)
Cobalt Blue describes itself as the only large-scale, non-African, greenfield (that is, new) primary cobalt project in the world.; and the “the only pure-play cobalt producer in the listed world,” because virtually every other listed cobalt company produces cobalt as a by-product of nickel or copper mining.
Cobalt Blue owns the Broken Hill Cobalt Project (BHCP), in the famous New South Wales mining city. There, Cobalt Blue’s three tenements host a combined mineral resource estimate of 118 million tonnes, for contained 81,100 tonnes of cobalt metal, enough for an initial mine life of 17 years.
Originally, Cobalt Blue planned the BHCP as an integrated open-cut mining and refinery operation to produce mixed cobalt hydroxide precipitate and refine it into cobalt sulphate (suitable as a battery cathode metal), nickel sulphate (used in electroplating and battery cathodes) and high-purity sulphur. While nickel will only be a minor product, producing it will be a bonus. But this year, the company changed plans, moving its refinery operations from Broken Hill to Kwinana in Western Australia.
Cobalt Blue has completed a concept study of a 3,000-tonnes-a-year cobalt/nickel refinery at Kwinana and is currently completing a definitive feasibility study (DFS) for the refinery project, expected to be delivered in late 2023. The proposed plant will transform the company’s mixed hydroxide precipitate (MHP) from Broken Hill into cobalt sulphate for export to the emerging battery markets in Europe and the US, through Kwinana port (Fremantle Outer Harbour). While the initial refinery plan was to build capacity to refine about 3,500 tonnes a year of BHCP output at Broken Hill, the company plans to build the Kwinana refinery on a larger scale, to treat BHCP material and material for third parties.
Cobalt Blue also has the Cobalt in Waste Streams Project (CWSP) up its sleeve: in this, it will use its proprietary minerals processing technology to potentially recover gold, silver, copper, zinc, cobalt and sulphur from a concentrate produced from the tailings. COB’s proprietary technology offers the potential to convert the sulphides into elemental sulphur.
The Kwinana move is expected to accelerate the timeline for producing battery-grade cobalt sulphate, and allow for early revenue streams, through the third-party processing deals to. COB projects lower site/construction costs as well as equipment delivery costs, compared to building the refinery in Broken Hill. Once construction gets under way next year, the company says the refinery will be finished in 2025.
The cobalt market has been over-supplied, analysts don’t see that as sustainable, and the market is expected to get a lot tighter over the next few years. Most of the world’s cobalt comes from the Democratic Republic of Congo (DRC) – about 73 per cent of global production – and the country also has the largest cobalt reserves in the world, amounting to 4 million tonnes. But the DRC is one of the poorest and most unstable countries in the world, and its cobalt production is linked to human rights abuses including child labour, corruption and environmental destruction. Russia is the second-largest producer. Western customers quite simply need more reliable and verifiably good-business-practice suppliers, and Cobalt Blue will fit that bill perfectly – coming into the market at the right time. Stockbroking firm Blue Ocean Equities has a target price for Cobalt Blue of up to $1.45.
- Diatreme Resources (DXR, 2.4 cents)
Market capitalisation: $90 million
12-month total return: –36.8%
Three-year total return: 22.7% a year
Analysts’ consensus valuation: n/a
North of Cooktown in far north Queensland, there are massive dune systems that have been accumulating sand for millions of years. The silica in this sand is among the world’s purest, and since the late 1960s, Australia’s first (and so far only) silica mining operation, run by Mitsubishi, at Cape Flattery, supplies high-quality silica to the global glass, foundry and chemical industries.
Silica is an essential raw material in the production of smartphone glass, and other specialty glass uses. But demand for silica is surging in the renewable energy industry, where the commodity is important in the manufacture of photo-voltaic cells (PV) in solar panels.
High-purity silica is vital for this purpose; about 70% of a solar panel is comprised of glass made from high-purity, low-iron silica. Solar panel manufacturers need silica at more than 99% purity silica with less than 120 parts per million (ppm) iron oxide levels.
High purity silica can also be converted into silicon, which can potentially to be used to increase the energy capacity of lithium-ion batteries.
Australian company Diatreme Resources hopes to supply some of that demand, with two high-purity, low-iron silica sands projects in North Queensland, to the north, south and west of Cape Flattery.
The first project, the Northern Silica Project, currently hosts a resource of 235 million tonnes, at higher than 99.9% silicon dioxide content, and iron content inside manufacturers specifications. Over the last two years, drilling has almost doubled the resource size.
Diatreme is currently working through environmental impact statement (EIS) consultations, and landowner negotiations. The definitive feasibility study (DFS) – on which the company could raise finance – is expected in the first half of 2025. Final investment decision (FID) is expected in the second half of 2025, and if the green light was given, site works and construction would begin, and the first shipment could be expected about a year later.
Once under way, the target is to produce 121 million tonnes of high-purity, low-iron silica sand over 25 years, with an initial rate of 3 million tonnes a year rising to 5 million tonnes a year. The plan is to “tranship” the product via barge to ocean-going ships, at the Port of Cape Flattery.
At the southern end of its tenements, Diatreme also has the Galalar silica sand project, which has an estimated resource of 75.5 million tonnes. Galalar will be developed after Northern, and is anticipated to feed future production, out to a 50-year project life.
The 2022 International Mining and Resources Conference (IMARC) heard projections that the global silica sand market will grow from US$22.9 billion ($36.3 billion) in 2022 to US$32.1 billion ($50.9 billion) in 2028, growing at a compound rate of 5.6%. The Asia-Pacific market alone needs an extra 40 million tonnes a year of high-quality sand over that period. In July, Diatreme signed a non-binding memorandum of understanding (MOU) for a potential offtake project with Chinese company FLAT Glass, one of the world’s largest manufacturers of PV-grade glass.
Belgian-based global industrial materials heavyweight Sibelco – which is a leading supplier of silica to the Asian market for specialty glass – is Diatreme’s joint venture partner, agreeing in June 2022 to pay $35 million for a 26.8% interest in Diatreme’s silica projects: $11 million of this was paid in January, and the balance of $24 million is due in December. Sibelco is a significant shareholder in Diatreme, with a 15% stake in the company. This puts Diatreme in a strong cash position.
- Elementos (ELT, 13 cents)
Market capitalisation: $25 million
12-month total return: –57.4%
Three-year total return: 1.3% a year
Analysts’ consensus valuation: 70 cents (Stock Doctor/Refinitiv, one analyst)
Of all its metal peers, tin has the broadest potential uses in autonomous and electric vehicles (EVs), renewable energy, advanced robotics, advanced computation/IT, and lithium-ion batteries where the metal offers a potential solution for one of the most concerning problems – their propensity to catch fire, in a manner that is very difficult to extinguish.
This is the alarming “secret” of EVs, with which the industry is grappling, behind-the-scenes. The occasional “thermal runaway” phenomenon in a lithium-ion battery can’t easily be prevented, and no-one wants to be sitting in their Tesla at the red light and experience spontaneous combustion of the battery.
But if tin is used as a coating inside the parts of lithium-ion battery, it could be the solution to the problem,
Elementos wholly owns two world-class tin projects, with high-grades, large resource bases and plenty of exploration potential, in mining-friendly jurisdictions. Its flagship Oropesa Project in Spain, acquired in January 2020, is regarded as one of the world’s largest undeveloped, open-cut mineable tin deposits.
Oropesa contains a JORC compliant measured, indicated and inferred Resource of 75,834 tonnes of tin, 95% of which is classified as measured or indicated, which forms the basis for the definitive feasibility study (DFS). 38% of the 2023 MRE is classified as measured resources, at 7.4 million tonnes, at a grade of 0.36% tin. As a result, Oropesa should produce some 5,400 tonnes of a 62% tin concentrate annually, equivalent to 3,350 tonnes of tin, over a mine life expected to be about 16 years to the life of the mine.
Recently the company announced a bonus of significant zinc mineralisation at Oropesa, which has the potential for a maiden zinc mineral resource, and a zinc by-product of tin production.
Elementos is currently proceeding through the DFS, after which, if accepted, it can obtain financing and start construction. With tin production scheduled to start in 2025, Elementos expects to begin supply into a forecast global tin supply deficit of about 40,000 tonnes a year – and importantly, supplying European carmakers from a European mine.
Elementos also owns the Cleveland project in Tasmania. Previously mined in 1908—1917 and 1968—1986, Cleveland has a hard-rock JORC-compliant resource of 7.47 million tonnes (Mt) at 0.75% tin and 0.13% copper, for 56,100 tonnes of contained tin, and 5,000 tonnes of contained copper – and the deposit also contains two other critical minerals, tungsten and fluorite. The company plans to redevelop the project which currently has a tailings resource, open-pit resource and an underground resource of tin and copper.
With only a handful of new tin projects being developed around the world, Oropesa first, and Cleveland later, are well-placed to be two of only a few projects that get financed and developed in the next decade.
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