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America's only cobalt mine faces challenges in China-dominated market

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2023-07-24

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In the rugged Idaho wilderness, at an elevation of approximately 8,000 feet, an ambitious cobalt mine, decades in the making, reveals the hurdles America's clean-energy ambitions confront in a market dominated by China.

"Let's think really carefully," said Rod Eggert, an economics professor at the Colorado School of Mines. "How high of a priority is this?"

Over the years, miners battled wildfires, permitting disputes, market fluctuations, and a corporate takeover while steadily progressing towards the mine's completion. The Australian-owned project was poised to change the game this spring, being touted as the sole cobalt mine of its kind in the U.S. – a significant step towards America's aspirations for renewable energy.

"Cobalt is a metal that's really going to be quite critical," stated Bryce Crocker, Jervois Chief Executive. "We believe in what we’re doing ideologically in terms of protecting Western supply chains."

Cobalt, an essential metal for cellphones, jet engines, munitions, and electric-vehicle batteries, is predominantly processed in China. Federal and state officials praised the Idaho mine, hailing it as a symbol of America's renewed mining interests.

"Even if they lose money on cobalt production, they don't care because they can cash in on the copper," said Susan Zou, an analyst at consulting firm Rystad Energy, highlighting China's strategy.

However, just as the mine was ready to produce its inaugural pound of cobalt, Jervois Global, the owner, suspended operations, laying off hundreds of workers. The global cobalt market shifted dramatically, causing prices to plummet for the lustrous silvery metal.

This predicament highlights the challenges the U.S. faces in establishing a robust battery supply chain, particularly with the growing demand for electric vehicles and renewable-energy infrastructure. The U.S. and its allies encounter stringent environmental standards, higher labor costs, and limited interest from investors when extracting commodities, while China dominates refining capacity and supports mines in low-income countries.

The Biden administration's efforts to accelerate electric-vehicle adoption aim to curb America's fossil fuel consumption. However, tax credits for models with fewer components and minerals from China have limitations, and diversifying supplies poses challenges.

"We hope that the United States has 10 cobalt mines in 10 years' time, but I just don't see it," expressed Bryce Crocker, underlining the difficulties in domestic cobalt production.

Economists and executives foresee similar obstacles in the pursuit of renewable-energy infrastructure. The race to secure critical minerals might require Washington to support projects that cannot stand independently, potentially raising costs and slowing the energy transition.

Jervois had plans to transport cobalt from the mine to a processing plant abroad before the suspension of operations. With uncertain prospects, the company awaits cobalt prices to reach economically viable levels—around $25 or higher.

The market conditions have fueled skepticism among investors, causing Jervois' shares to plummet, but the company's major shareholder, AustralianSuper, supports the halt in operations. Analysts agree that it makes sense to wait for electric vehicles to drive up cobalt prices, despite reduced cobalt usage per battery.

The Idaho cobalt mine is strategically situated in the so-called Idaho Cobalt Belt, a region with limited cobalt deposits in the U.S. Jervois invested around $155 million to complete the Idaho facility, nearly double the initial estimates, attributing the cost overruns to inflationary pressures and the remote locale's challenges.

While Jervois explores a potential domestic refinery through a Pentagon-funded drilling project, it grapples with the reality that America's spotty environmental records discourage new mines' development. The average time to production for precious and base metals deposits in the U.S. discovered since 1980 was 13 years.

The pursuit of domestic mining for the energy transition remains uncertain, as challenges persist in securing critical minerals. The future of the Idaho cobalt mine hangs in the balance, awaiting market conditions to make its vision of bolstering America's energy security a reality.

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