Brazil Co. Looks to First-Ever Cobalt Stream

Brazilian miner Vale is seeking to sell un-mined cobalt worth hundreds of millions of dollars to investors, as speculation rises over a shortage of the metal needed to make batteries, sources familiar with the matter said.

Such streaming, which allows an investor to make an upfront payment in exchange for future production at a discounted price, has expanded as a form of finance for precious and base metals companies but this deal would be a first for the booming cobalt sector, Reuters reported.

Cobalt is a critical component in rechargeable lithium-ion batteries and its price has benefited from a push by governments and automakers to promote electric vehicles to cut emissions from diesel and petrol cars.

Prices have soared by nearly 150% since the beginning of last year to around $80,000 a ton, spurred in part by nervousness about reliance on top cobalt producer Democratic Republic of Congo, which is plagued by pockets of lawlessness and conflict.

Carmakers such as Volkswagen have sought contracts to lock in long-term supplies of cobalt for their ambitious electric vehicle plans.

Cobalt extends battery life. Analysts estimate each battery uses between 8-12 kg of the metal, while the overall market is estimated at just over 100,000 tons a year.

Vale has hired Canada’s Bank of Montreal to raise around $500 million from bidders for cobalt that will be produced at its Voisey’s Bay nickel mine in eastern Canada, four sources said.

“BMO is also going out to talk to the automakers and battery producers, people like Samsung and Toyota,” one of the sources said. Samsung said it did not comment on rumor or speculation and Toyota had no immediate comment.

The process started at the end of December, with prospective buyers reviewing the information, two of the sources said.

A Vale spokesman in Canada declined to comment. BMO did not respond to a request for comment.

The deal could provide the winning bidder with up to 3,000 tons of cobalt for production starting in 2020, one of the sources said. Around 2,000 tons would be delivered in the first 10 years, with the remaining 1,000 in the next 10.