The rise in green activity means African miners will play a major role in sourcing key components for electric vehicles and batteries.
Their core ingredients of nickel, lithium, cobalt and manganese are found in many mines across the continent, which will be kept busy in the coming years.
Already, the Democratic Republic of Congo produces an estimated 70% of the world's cobalt, "and its government likes to describe itself as the OPEC of cobalt.
As this green-mineral economy continues to gain importance, the main African players - South Africa, Zimbabwe, the DRC- will have their hands full.
The continent’s rich resources, including cobalt and lithium, mean African miners will be key players as the world switches to electric vehicles and wind and solar power. For the moment, though, platinum and palladium for fuel-injection vehicles are very much in demand.
Loose talk from mining companies about “sustainability” irritates their critics, who point out that.
it cannot be sustainable to extract minerals such as copper or cobalt that are non-renewable resources. Mining companies may, however, be on surer ground when they stress their contribution to the ‘green economy’.
The world’s billions of petrol and diesel engines are a massive known source of carbon emissions, and the electric vehicles (EVs) and batteries that can replace them all depend on components that only mining companies can supply. Global consumers, however, still prefer petrol and diesel vehicles to electric ones. Chinese state subsidies on electric vehicles and increasingly steep fines imposed by the European Union on their fuel-vehicle manufacturers is pushing up demand for EVs, nonetheless.
Kinshasa’s cobalt gamble
This in turn drives continued demand for the minerals with which to make them. A 2020 World Bank report states: ‘Production of graphite, lithium and cobalt will need to be significantly ramped up by more than 450% by 2050 — from 2018 levels — to meet demand from energy-storage technologies.’
EV batteries, and most batteries now used to store solar power, have as their core ingredients nickel, lithium, cobalt and manganese. The Democratic Republic of Congo (DRC) produces an estimated 70% of the world’s cobalt supply, and its government likes to describe itself as the OPEC of cobalt.
In 2018, as the international cobalt price spiked at a remarkable $94,000/tn, the Congolese government imposed a ‘strategic minerals’ tax of 10% on cobalt exports, ignoring howls of protest from the mining community. But the tax has generated a disappointing yield for the government, as the cobalt price collapsed to under $30,000/tn in 2019, recovering slightly to $32,500 by late 2020.
The main reason the cobalt price tumbled in 2019 was the Chinese government reducing its subsidy on EVs, which quickly lowered consumer demand there and pushed the global market into oversupply. This led international speculators, who had during 2017-18 been betting on cobalt’s remorseless price rise, to do an about turn and storm for the exits.
In August 2019, Swiss commodities producer and trader Glencore placed its Mutanda copper and cobalt mine in Lualaba, DRC, on care and maintenance. This removed about 15% of global cobalt production and succeeded in halting the price rout, though not in encouraging much of a price recovery.
In the longer term, prospects are rosier. They are buoyed by steadily rising international demand for cobalt and the other battery metals, to the point where mining companies may be unable to mine sufficient supplies without massive new investment in exploration and production.
According to London-based analysts Benchmark Mineral Intelligence, there was more than $60bn in new global investment in lithium ion battery production in 2019 alone. Benchmark calculates that an additional $170bn has been committed by battery manufacturers in further production capacity up until 2028.
Campaigners worry about the conditions in which cobalt is mined in the DRC. There is a pending lawsuit against Apple, Microsoft, Tesla and others, arguing that they are benefiting from the use of child labour. Earlier this year, China’s Huayou Cobalt stopped buying artisanal cobalt from the DRC. ‘We can only temporarily stop sourcing artisanal cobalt until relevant standards can be recognised and supported by the whole industry,’ the company said.
Currently, the world’s largest battery factory belongs to Tesla, a US company, producing batteries annually with combined electricity storage capacity of 37GWh. The next biggest is China’s LG Chem factory in Nanjing, with 28GWh. By 2030, it is predicted that Tesla’s largest factory will produce a massive 100GWh. China’s CATL, whose factories today produce 72GWh, making it the world’s largest battery manufacturer, will by 2030 also be producing 100GWh, and LG Chem’s Nanjing plant is on course to produce another 92GWh.
Recent technological advances mean that the quantity of cobalt needed in each EV battery continues to come down, but overall demand for cobalt is still likely to increase because of the projected growth in the number of batteries worldwide. Due to cobalt’s cost, companies are seeking to innovate.
In September, Tesla announced it is working on batteries that do not use cobalt cathodes. However, analysts reckon that from 2022 onwards, demand may start to outstrip supply, unless there is rapid investment in new mines.
It is a similar story with lithium, which is more abundant and widespread than cobalt, but will also need to be mined in far larger volumes to keep up with anticipated demand. Where the money will come from, however, is unclear. So far, banks seem to lack appetite to pour in funds on the scale required, and analysts speculate that it may take large-scale investment in mining by battery and vehicle manufacturers themselves, which would be unprecedented.
Zimbabwe is said to have some of the continent’s richest lithium deposits, but investors are wary of the country’s investment climate. Australia’s Prospect Resources is developing the Arcadia mine outside of Harare, with managing director Sam Hosack saying: “This will be the first major mining project to come on-stream in the post-Mugabe Zimbabwe.”
The transition away from fuel vehicles to EVs spells trouble in the long run for the platinum and palladium industries, since the bulk of demand for both metals is for catalytic converters to reduce CO2 emissions. It was in large part market anxieties about these metals’ uncertain place in the green economy that drove a 10-year slump in the fortunes of South Africa’s platinum and palladium producers, which ended in 2019.
But the fact is that millions of new fuel vehicles continue to hit the roads each year, and all of them, especially in Europe, need catalytic converters if their manufacturers are to keep the carbon emissions fines levied on them by the EU to a minimum. Miners simply cannot meet demand, pushing prices to record highs. In early November, the platinum price was around $900/oz and the palladium price was a staggering $2,300/oz.
This is great news for South Africa’s platinum and palladium miners and, sure enough, share prices are surging. Impala Platinum’s share price, for example, rose from R45 ($2.10) in 2015 to R165 in late 2020, while the Anglo American Platinum share price rose 380% over the same period. The mines are a precious source of foreign exchange for South Africa, and clearly there is still life in the brown economy yet.