Cobalt: Decreases in mining and sustaining cobalt cost to aid profitability of mine supply in 2021

Waterfall graph of change in cobalt AISC cost, 2020 to 2021

According to Roskill’s Cobalt Cost Model Service (Extractive), cobalt’s all-in sustaining cost (AISC) of production is expected to fall by around 2% y-o-y in 2021 (from US$23,085/t to US$22,600t). As a result, this year Roskill estimates that over 98% of cobalt production capacity will be cash positive on an AISC basis, based on a forecast cobalt price circa US$39,700/t.

Granular analysis of the cost data highlights the impact of the main cost centres, which include mining, processing, site G&A, realisation, royalties, and sustaining/finance costs.

All cost centres except processing and site G&A will decrease on an average industry-wide aggregated basis in 2021. The remainder combined are expected to decrease by US$1,329/t, but this will be offset by an increase of US$859/t in processing and site G&A costs, resulting in an overall 2021 estimated AISC of US$22,600/t cobalt.

The DRC accounts for over 70% of mined cobalt supply and any movements in cost structures there will have a significant impact on overall cobalt cost trends. Since 2018, miners have renegotiated their intermediate transportation costs from the country to South Africa. The reduction in transportation costs has resulted in falling realisation (transportation) costs, which will carry through into 2021.

Major operations in the DRC have experienced a decline in sustaining capital (after heavy investments over the past few years). The Deziwa operation, which came online in 2020 with its low sustaining cost (on a unit cobalt basis), will also reduce the industry’s overall sustaining costs.

Improved operational efficiencies at significant producers such as Kamoto, Tenke Fungurume and Moa will lower mining costs.

Higher plant costs will drive the increase in processing costs at operations such as Goro, Tenke Funkurume and Voisey’s Bay; increases will be due to a variety of mine specific reasons.

Roskill’s NEW Cobalt Cost Model Service – Extractive report was released in December 2020 and is updated regularly. The service provides in-depth granular analysis of cobalt producing mines and projects. Key metrics include reserves and resources, production profiles, and a detailed break-down of costs (normal and pro-rata). The service covers production from 2015 onwards. For more information or to subscribe, click here.

Roskill’s Cobalt: Outlook to 2030, 16th Edition report was published in October 2020 and outlines industry trends and forecasts for the next decade. The report provides in-depth analysis on end-use applications and sustainability issues. For more information or to subscribe, click here.

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This article was written by Brian Ziswa. Please get in touch below if you wish to discuss further:

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