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Electric vehicles seen driving cobalt crunch by mid-2020s

LAS VEGAS (Reuters) - The increasing popularity of electric vehicles may create a crunch for supplies of cobalt in the early-to-mid 2020s, miners and analysts say, adding that small operators trying to start up mines outside Africa could play a bigger role over time in satisfying demand for the metal used in rechargeable batteries.

The Democratic Republic of Congo (DRC) produces nearly two-thirds of the world’s cobalt as a by-product of its copper mines and is taking an increasingly confrontational stance toward foreign mining companies, including a new mining code that hikes royalties and taxes.

Human rights groups have said some cobalt from the Central African country could come from mines using child labor, raising additional concerns about sourcing within the industry and among buyers of the metal.

Cobalt is an important ingredient of current batteries and brokerage UBS described it in a report this week as “the commodity which could stall the exponential growth in electric vehicles.”

While supplies from Congo are expected to remain the most important factor in global supply for years, exploration and development companies at the 2018 Cobalt Institute conference in Las Vegas this week said potential buyers looking to lock in supplies were eager for projects in other countries.

“There’s going to be a big demand from organizations, end users and battery makers that will want to secure supply that’s non-DRC just because of all of the political risks to that supply,” said Brendan Borg, managing director of Celsius Resources Ltd (CLA.AX), an Australian mining company that hopes to begin production in Namibia by 2021.

More than 100 companies mining or exploring for cobalt are listed on the Toronto Stock Exchange and TSX Venture Exchange, up from fewer than 30 in 2015, according to SNL Financial. The exploration companies, known in Canada as junior miners, are considering locations ranging from Indonesia to Namibia, Canada, and Idaho and Utah in the United States.

Those explorers will need more funds, though, to bring production on line.

“The industry needs to see more investments particularly in those exploration stage projects,” Caspar Rawles, an analyst with Benchmark Mineral Intelligence, said on Wednesday. Benchmark provides research for mining companies and manufacturers.

Demand for electric vehicles, using cobalt in batteries, could spark a deficit of cobalt as soon as 2022, he said.

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