Chile set to revive its dormant cobalt sector

Already a major producer of copper and lithium, Chile is gearing up to join the electromobility revolution by reviving its dormant cobalt sector.

During an interview with Resource World Magazine, Chilean Mines Minister Baldo Prokurica said the ultimate goal is for Chile to become a supplier of lithium ion batteries to the global auto sector

In order to achieve that goal, Chile is hoping to become a producer of cobalt in the near future, a move that would enhance the Latin American country’s ability to supply so-called battery metals, including lithium and copper, which are vital ingredients in the production of mobile consumer devices and electric vehicles.

According to a recent Reuters article global, auto makers are gearing up to invest US$300 billion to develop electric vehicles and procure or manufacture batteries over the next five to 10 years. China will be the driving force in the growth of both electric vehicles and battery manufacturing. China is expected to account for 45% of all spending on electric vehicles, the Reuters report said.

By mining cobalt, Chile also is hoping to capitalize on reports that customers in the battery manufacturing industry are looking for alternatives to the Democratic Republic of Congo (DRC), currently the source of 54% of the world’s cobalt supply.

Amnesty International has warned electric car companies to seek out alternatives to the DRC, which is well known for its mineral wealth, but also civil wars, corruption and use of child labour.

Reports of child labour at small mines in the Congo has prompted some end users to trace the supply chain for cobalt in the batteries they buy.

It is a trend that is presenting opportunities for countries that can offer cobalt mined from operations that are not tainted by an association to corrupt practices in the DRC.

“Chile is a politically stable democracy,” said Prokurica. “We take care to respect human rights and our environmental regulations are very strict,” he said. “We don’t have the problems that you are seeing in some African countries.

Prokurica plans to convey that message to the global mining sector during the 2019 Prospectors and Developers Association of Canada conference in Toronto this week.

He said Chile was a significant producer of cobalt prior to the World War Two. At that time, the cobalt was being mined from small scale operations. Another Chilean government official said geologists are aware of other cobalt deposits in Chile that could be brought into production to support the country’s electromobility plans.

Chilean Cobalt Corp., a subsidiary of U.S. holding company Glenlith Inc., is currently working to develop cobalt resources in the San Juan District (700 kilometres north of Santiago), formerly the largest cobalt producing district in Chile. Chilean Cobalt’s asset portfolio includes the La Cobaltera project, which covers 1,500 hectares and is home to three former cobalt mines.

The San Juan District successfully exploited cobalt for decades, and a common facility (La Cobaltera), processed the ore before it was shut down in 1944.

Chile is already the world’s leading producer of copper. It also ranks as the globe’s second largest producer of lithium.

Chile produced 5.8 million tonnes of copper and 81,378 tonnes of lithium in 2018.

As an electric vehicle can contain more than a mile of copper wiring, Chile expects to be a beneficiary of the expected rise in demand for electric vehicles. Prokurica said the trade war between China and the U.S. has put pressure on the price of copper. But he is confident that a resolution to the trade war will send copper prices up from current levels.

Chile hopes to capitalize by increasing its annual copper production to 6.5 million tonnes within the next three years. During the PDAC conference, Prokurica planned to share that message in presentations to senior officials from Teck Resources Ltd. (TECK.B-TSX, TECK.A-TSX, TECK-NYSE] and Amerigo Resources Ltd. [ARG-TSX].

Prokurica spoke to Resource World on the day after the CEO of iron ore miner Vale SA [VALE-NYSE], and several other senior company executives resigned following a January, 2019, rupture of a tailings dam at Vale’s Corrego de Feijao mine in Brazil.

The rupture released huge amounts of toxic sludge, killing at least 300 people who were caught in its path.

“We see that situation in Brazil as a catastrophe that affects the industry worldwide,” Prokurica said. He said the disaster will lead to tighter regulations and stricter tailings dam monitoring procedures in his country.

Vale is currently the world’s largest producer of iron ore.