Mining Efforts Miss the Jackpot

For the last several decades, industrialization and use of petroleum-powered vehicles has created enormous demand for oil. Countries that produce the ‘black gold’ have lived influencing the global economy and political landscape. Energy has always been the driving factor in economic growth, and hence, global clout. Recently, however, the world has witnessed the growing use of electric vehicles (EVs), with their use projected to rocket in the following decades. As such, cobalt is expected to be the new oil. The mineral used to make EV batteries last longer could have the potential to replace oil in becoming an important factor in deciding energy-induced influence. China is already trying to grab and lead the future by controlling large cobalt-producing regions such as the Democratic Republic of the Congo (DRC). In this article, EBR’s Eden Teshome investigates if Ethiopia is ready to take advantage of this growing global demand for cobalt.

As the world becomes increasingly aware of the dangers of climate change, more and more people are looking for ways to reduce their carbon footprints. One method gaining traction among consumers and businesses alike are electric vehicles (EVs). They produce zero emissions, contributing much less to air pollution and global warming. Additionally, they are expected to be cheaper to operate than gasoline-powered cars, even though initial purchase price is somewhat higher for EVs.

All of these factors have contributed to a surge in EV sales in recent years with sales reaching a record of 6.6 million, including fully electric and plug-in hybrids. Globally, the demand for EVs has grown tenfold between 2010 and 2020. That number is expected to grow significantly over the next decade or so as more people adopt this technology.

The growth in demand for EVs can be seen by the increasing number of models available on the market with major automakers like Ford, General Motors, and Tesla continuously releasing new models. In addition, a growing number of startups are entering this space with innovative new designs and features. This increased competition is good news for consumers because it will lead to even greater innovation and lower prices over time.

So, vehicles will stop using petroleum fuel. But what is going to be the energy source to move these automobiles? The short answer is electric batteries. As far as the innovation of EVs is concerned, electric batteries— made of various materials like lithium —are where manufacturers are currently racing against each other. But the making of the batteries itself is not where the innovators are spending the most and energy—they have already done that.

Now, how long a battery lasts before needing a recharge is where the prize is.

One particular mineral—cobalt—is essential in doing just that. Cobalt is generally produced as a by-product and as such, its supply is dependent upon the economic feasibility of copper and nickel mining in a given market. Depending on the concentration of cobalt and the precise composition of the used ore, several methods for extracting cobalt from copper and nickel exist.

The price of cobalt has doubled between 2011 to 2018 on the world market. However, prices then fell by 45Pct in the following two years after reaching a near-decade high of around USD100,000 per ton in early 2018. Prices then rose in January 2021 due to the rocketing demand for electric vehicles (EVs) in 2020 and 2021. The United States, Japan, the Republic of Korea, the United Kingdom, and the European Union all consider cobalt to be a critical mineral.

Electric vehicles (EVs) overtook other battery applications to become the top end-use segment for the first time last year, resulting in a 22Pct increase in cobalt demand. According to a survey provided by the Cobalt Institute, demand increased by 32,000 tons in 2021 alone, with electric vehicles accounting for 59 thousand tons or 34Pct of demand. Global EV sales increased in 2021 compared to 2020, with the industry expected to account for half of the cobalt consumption by 2026.

Cobalt is an important raw material used in the cathodes of electric car batteries. But with cobalt and nickel costs rising last year, there has been a lot of talk about using zero-cobalt batteries. Despite the fact that cobalt-free lithium-iron-phosphate cathodes are gaining market share, cobalt-containing battery chemistries accounted for 74Pct of the worldwide EV battery market last year.

The large demand for cobalt in the first quarter of 2022 supported higher prices and helped several cobalt equities achieve strong year-to-date gains. Investors and market analysts expected Cobalt to perform well in 2021, and it did. Due to increased demand from the electric vehicle industry, prices began to rise, and by the end of the year, the price of the battery metal had doubled.

As far as the production and export of cobalt are concerned, one African country is on the map as it always has been when it comes to the exploitation of natural resources—the Democratic Republic of the Congo (DRC). With 15 mines owned and operated by the Chinese, DRC is leading the production and supply of the future oil. The Chinese have been exploiting DRC’s cobalt potential since the beginning of this millennium. DRC is the world’s largest cobalt producer, accounting for nearly 60Pct of global production. Even though its output declined from 2019’s 100,000 metric tons to 95,000 in 2020, the country has remained the top producer of metal for some time. A series of human rights and labor violations have been reported in connection to the production of the mineral, however.

Some automakers are pressing for additional electric car battery production in Europe, while citing concerns over DRC cobalt. This endeavor may result in increased cobalt demand from Russia in the future; the only question is whether Russia will be able to keep up. Despite having 250,000 MT of cobalt reserves, Russia is still well behind the DRC in terms of output.

Nickel, a large Russian miner, is one of the top five cobalt producers in the world. As mining in the DRC gets more difficult, investors are turning their attention from Africa to Australia. Cobalt production in Australia—only one-fifth of the DRC’s production—decreased slightly from 2019 to 2020, from 5,740 MT to 5,700. Nickel mines are primarily found in the western half of the country, primarily in the Kalgoorlie and Leonora regions. The Philippines is another country that produces cobalt, making it the world’s fourth-largest producer. Cuba, Canada, Papua New Guinea, China, Morocco, and South Africa are all featured.

The mining sector in Ethiopia seems to be getting momentum with new attention given to it via the Ten-year Perspective Plan (TYPP) of the incumbent Prosperity Party. According to the Ministry of Mines’ 2021/22 fiscal year nine-month performance report, 6,947 kilograms of gold, 78,603 kg of tantalum, 120.5 kg of opal, more than 2,000 kg of precious metals, and more than 7,000 metric tons of new industrial minerals were produced. Gems and industrial minerals garnered a total of USD458 million on the export market. During the fiscal year, the Mining Investment Fund raised ETB41 million for the benefit of the environment and the community. The sector faces key security issues in some locations and variations in the regional structure.

The Lega Dembi and Sakaro are among the largest ore-based gold mines that have been mined by private companies with the amount of gold produced by these mines is reported to be around 5 tons per year. Further, National Mining Corporation (NMiC) previously reported finding of the largest gold and base metal reserves in the regional states of Oromia and Tigray. The 550,000 kg gold reserve in Dawa Okote in Oromia Regional State, according to the company, is worth about USD5 billion. Gold reserves of 18,000 kgs were also discovered in Werri, State of Tigray, believed to be worth USD792 million.

According to NBE’s FY 2020/21 annual report, 9.56 MT of gold was exported, generating a value of around USD672 million—242Pct higher than the previous period.

Despite the promising potential and efforts to tap into it, a big piece seems to be missing—what industry observers are saying could be the oil of the future. The ministry in charge of the matter seems to be more focused on strengthening the already existing practices than exploring new ones.

“Fertilizer is one of the main goals of the Ethiopian government and Prosperity Party because productivity is dropping. So the only way to boost it is to combine technology and agriculture, as well as introduce fertilizers to farmers,” Takele Umma, Minister of Mines said as he presented his ministry’s report to Parliament on May 24, 2022.

Of course, the production of copper in Ethiopia—a process that could also help in the production of cobalt—is a relatively new industry, with the first major copper mine opening in 2006. Copper production has quickly become an important part of the Ethiopian economy and is expected to continue growing in importance. The main reasons for this are the high quality of Ethiopian copper ore and the government’s efforts to promote investment in the industry.

The quality of Ethiopian copper ore is among the highest in Africa, making it attractive for investors. In addition, the government has been working to improve infrastructure and create a friendly business environment that encourages investment in mining. These factors have helped spur rapid growth in Ethiopia’s copper production industry.

The impact of this growth can be seen throughout Ethiopia’s economy. Copper exports generated over USD1 billion in revenue for Ethiopia between 2007 and 2016, and this number is expected to grow as more mines come online. This money has helped fund important development projects throughout the country while creating jobs for thousands of Ethiopians.

“There has been no study on base metals such as nickel and cobalt to date, but when there is, there are several areas with significant potentials, such as Adola in the Guji Zone,” Dereje Hailemariam (PhD), an Executive Director at the Ethiopian Geological Institute told EBR. At that time, perhaps some happenings concerning cobalt will be observed in Ethiopian mining circles. The jackpot in mining could therefore be with cobalt, even more than gold. EBR

10th Year •June 2022 • No. 108

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