TIPOS DE INDEMNIZACIONES, AYUDAS Y OTROS DERECHOS

Cobalt has, in general, high recovery efficiency, typically of 75-90 %, and it represents an important source of refinery revenue of approximately 15 %21 _{(Oakdene Hollins and}

Fraunhofer ISI, 2013). Thus, there are large incentives for its recovery, both at existing refineries, and for developing poly-metallic deposits.

However, although cobalt may be mined, it is not always recovered during processing of copper or nickel concentrates and was, in the past at least, often lost to mine tailings or stored pending further processing. According to (Roskill Information Services, 2014) this decision seems to depend heavily on the price of cobalt in comparison to extraction costs, and the process routes used in individual operations22_.

A decrease in cobalt recovery is seen when comparing mine and refinery production on a year-on-year basis, as given in Figure 21. From this, the annual average amount of cobalt recovered can be estimated at 79 %, falling below known average efficiency values. Moreover this ratio appears to have declined significantly over recent years, and was on average 66 % between 2010 and 2015.

21 _{To be noted that since 2012, cobalt prices almost doubled to the current amount of 65,000 EUR/tonne.} 22 _{According to (Roskill Information Services, 2014), numerous nickel operations in Philippines and New}

Figure 21 Cobalt mine and refinery production and ratio on a year-on-year basis.

Data source: (BGS, 2015)

Several barriers can limit cobalt production from mining activities (Box 8). These factors include reserves depletion or unforeseeable production stoppages at active mines, the slow speed of developing mining projects from exploration to production, and economic and socio-environmental determinants.

0

0.2

0.4

0.6

0.8

1

1.2

0

50000

100000

150000

200000

R

ef

in

e

ry

p

rod

u

ct

ion

/

M

in

e

p

rod

u

ct

io

n

Co

b

al

t

p

rod

u

ct

io

n

(t

on

n

e

s)

Box 8. Mine supply - barriers to accessibility

The rate of cobalt production from mining is affected by a number of factors: • Exhaustion of mineral reserves at operating mines;

• High costs of production restricting extraction at certain prices;

• Unfavourable economic environment, restricting investment in the exploration of new reserves;

• A retreat into resources protectionism in producing countries;

• Socio-environmental determinants whereby economic extraction also implies developing a social license to operate.

• Events such as strikes, plant failures and other factors that can lead to unforeseeable production stoppages;

• Expansions at the mine site aimed at increasing production and/or extending mine-life are likely to occur throughout the mine’s life, if market conditions are favourable. Other factors that can be expected to increase production are technical developments and improvements in mining configuration, processing and metallurgical performance; On the other hand, structural adjustments to meet changes in demand patterns while maintaining a stable price level might not be possible:

• Bringing new supply or capacity on stream is lengthy; it takes on average 10-15 years from discovery to production, thus supply shortages can persist and lead to significant price rises. These time frames can be further constrained by delays during the

development period, which can be expected, especially in less favourable market conditions. Uncertainties and challenges in raising investment for mine development – due to generally increasing mining costs combined with uncertainties associated with market prices – are a major source of delays in setting up new operations. Developments are normally brought into line with material prices picking up, while some delayed

projects may be reactivated by the appropriate market signals.

• Unexpected factors, such as geopolitical events, labour disruptions, permit issues and various technical challenges (e.g. mining engineering and metallurgical problems) can stall or put the development of planned and prospective mines on hold.

• Once capacity is in place and fixed costs are paid, producers are reluctant to limit output in response to lower prices (SEI, 2012).

Another frequently highlighted risk relates to what is referred to as by-products market dynamics, whereby cobalt production is largely driven by demand for the primary metal/s, hence it will not be increased if it is not cost-effective to increase the production of the primary metal/s.

This makes uncertain whether existing cobalt contents in potentially available resources can be produced. For example, global cobalt mine production decreased from 141 000 tonnes in 2015 to 126 000 tonnes in 2016, mainly owing to lower production from nickel operations (WMD, 2018), (USGS, 2017).

The prices of copper and nickel contribute decisively to this dynamic, affecting the quantity of cobalt that is produced, and consequently the amount of cobalt that is recovered from these sources. Disruptions may occur as a result of low prices, yet in cases of high revenues, a by-product may also influence the supply of the primary metals.

Figure 22 provides an overview of nickel and copper prices since 2000. Here it is observed that the price of nickel is significantly higher than that of copper, and that in general both nickel and copper prices show a slight decrease since 2010, a trend which is

more pronounced in the case of nickel. Moreover, with the exception of the last two years when cobalt prices surged, generally since 2000, these have followed the same trends as nickel prices.

The current situation with nickel prices threatening to decrease, might pose additional risks to cobalt production, potentially rendering around 39 % of its production, thought to come from nickel operations, more vulnerable to disruption.

Figure 22 Evolution of cobalt and nickel prices and comparison with cobalt prices.

Data sources: [based on USGS and (S&P Global Market Intelligence, 2018) data].

Note: Copper and nickel prices respectively refer to: LME, grade A, min. 99.9935 % purity, cathodes and wire bar (copper); LME, cathodes, minimum 99.8 % purity (nickel).