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Pacific Rim Cobalt Corp.

Exclusive Interview with Ranjeet Sundher, CEO von Pacific Rim Cobalt Corp.

23.05.2018 - 09:02 by Profiteer

Insider buying in the last couple of weeks and a lot of news in the cobalt space were good reasons to conduct an exclusive interview with Ranjeet Sundher, CEO von Pacific Rim Cobalt Corp.

 

Exclusive Interview with Ranjeet Sundher, CEO von Pacific Rim Cobalt Corp.

Profiteer: Ranjeet, the German upper house of parliament, the Bundesrat, passed a resolution calling for a ban on internal combustion engines by 2030. The cross-party resolution wants the EU Commission in Brussels to implement a ban that would make sure that only zero-emission vehicles were being sold by 2030. Do you think that this will go through?

Ranjeet Sundher: I am optimistic that it will. Many countries are implementing bans and you almost see a new government doing it on a monthly basis. The world is going towards electric vehicles regardless, and these government mandates help push that process along faster, which is hugely beneficial to us. Auto manufactures are taking the initiative themselves and saying that they will no longer make internal combustion engines by 2030, so I think the wheels are in motion.

Profiteer: Ivan Glasenberg, CEO of Glencore, said in March that the automotive industry is waking up too late to the fact that China will hold most of the world's supply of battery raw material cobalt. Do you share his opinion?

Ranjeet Sundher: We agree 100%. We actually just came back from a trip to China and it is night and day to the North American and European industry. China consumes more than 60% of the world’s cobalt and is aggressively pursuing offtakes and even doing investments in juniors, which is quite rare for them. We are speaking to funds that are now setting up solely to invest in the cobalt sector and many of the battery companies have investment divisions looking at the space. The Japanese and Korean markets are also acting at a similar pace and securing supply quite far upstream.

This is perfect for us because our entire focus is the East Asian market. It’s the biggest market; has dense and large populations; has government mandates and subsidies for clean energy and electric vehicles; and the manufacturers and investment community understands the need for cobalt (and nickel).

Profiteer: Today, the Democratic Republic of the Congo has six of the top 10 cobalt mines globally. Due primarily to Chinese investment, by 2022, the central African nation will host the nine largest cobalt producers. Do you see that as a threat to your business?

Ranjeet Sundher: Not at all. As we discussed, the Chinese have been aggressive in the pursuit of cobalt and are willing to go upstream and to difficult jurisdictions. We have spoken with Chinese companies that have operations in the DRC and they are still looking for cobalt elsewhere, and they know how difficult it is because the universe of investable companies is very limited.

We are fortunate to have our asset in Indonesia, which is right in China’s backyard, and an area that has a long history of mining and cooperation with the Chinese. To further that, Indonesia is within China’s One Belt, One Road policy, which is incredibly significant. China has capital controls and the easiest way for Chinese companies to invest elsewhere is for it to be tied to government policy, and the One Belt, One Road policy is significant for resources and infrastructure.

Profiteer: Sales of battery-powered, plug-in hybrid and fuel-cell vehicles in China represent the largest global market, and could rise more than a fifth to surpass 1 million this year, according the estimates by the China Association of Automobile Manufacturers. You just finished a business trip to China. How was the feedback regarding your flagship project?

Ranjeet Sundher: The feedback was fantastic. As we have discussed, China is aggressive in the space and the world leader. We met with some of the largest battery players in the space, as well as resource funds and the validation they gave our business model was incredibly motivating. We are looking to secure a Chinese partner and this trip was the beginning of that process. Everyone saw what an advantage we were at with Indonesia’s proximity to the Chinese market, and some of the companies even showed us what their internal demands were for cobalt and they were quite astonishing. Chinese companies are traditionally slow to act, so we were surprised with the response that we received.

Profiteer: Pacific Rim Cobalt has just mobilized two drill rigs to commence an extensive exploration program at its 5,000-hectare TNM project in Indonesia. What can investors expect from the first set of drill results?

Ranjeet Sundher: I think investors should expect results in line with the historic estimate has shown - 1.37% nickel and 0.11% cobalt, and hopefully a higher grade on the cobalt. The previous work was done by largely US Steel and is incredible work. They spent over $10MM USD in the 1970s, which is around $80MM USD in today’s terms. That said, they were focusing on the nickel aspect, so they did not follow up on the high-grade cobalt. We are looking to increase our grade to closer to those high-grade holes of 0.14-0.19%.

Profiteer: Elon Musk recently said that it had managed to beat other leading battery makers by reducing the amount of cobalt with its own battery chemistry. The cobalt is used in the battery cathode to help maintain stability in the battery cell. Battery demand makes up about half of total global cobalt consumption due to the growth in electric cars over the past few years. How will Tesla’s developments impact the demand for cobalt down the road?

Ranjeet Sundher: That’s a great point. Tesla utilizes a Nickel - Cobalt - Aluminum (NCA) chemistry that relies less on cobalt than its peers. Tesla is not, and will not, be the predominant purchaser of cobalt, and that’s fine. Tesla announcements make for newsworthy headlines, but that is about it. To further that, they rely heavily on nickel, of which is one of the products that we hope to produce - so they are still in need of our product.

That said, almost all companies utilize an Lithium Cobalt Oxide (LCO) or Nickel - Cobalt - Manganese (NCM) chemistry that rely more heavily on cobalt. NCM is where the future is and the current trend is to change 5:2:3 and 6:2:2 chemistries (that would be 5 parts nickel, 2 parts cobalt, and 3 parts manganese; and 6 parts nickel, 2 parts cobalt, and 2 parts manganese) to a blend of 8:1:1 and 6:2:2. That does decrease the amount of cobalt over the next few years as the technology gains more prominence, but there are some important caveats. One, Benchmark Intelligence does not expect this to have any impact until the 2022. Two, it replaces the cobalt with nickel - one of our products. So once again, it’s still a net benefit to us.

Another interesting note is that the cost of electric batteries is almost at the same cost for combustion engines in terms of cost/energy. As it becomes cheaper, we will eventually see an even more rapid adoption of electric vehicles, possibly reaching 100% adoption.

Profiteer: Eurasian Resources Group wants to become one of the world’s largest cobalt producers with its operation in the Democratic Republic of the Congo and is spending up to $1 billion over the next two years ramping up production of 300,000 mt/yr of copper and 20,000 mt/yr of cobalt at its RTR operation. The problem for ERG is that climate change has meant low rainfall cutting back power production by the hydro-electric dams in the DRC so that they had already suffered cuts in production because of a lack of power. Is energy supply a problem for you in Indonesia?

Ranjeet Sundher: That’s an excellent question. It’s early to say what our exact energy requirement is going to be, but the processing option that we think will best fit our needs is not overly energy intensive. There is government power in the area and we can supplement energy with generators. We do not expect that we will need more than that.

Profiteer: Mercedes-Benz owner Daimler recently launched a human rights audit system to make sure its cobalt is not from child labour in the DRC. Is child labour a problem in Indonesia?

Ranjeet Sundher: The human rights problems in the DRC are a big issue with an estimated 15% of cobalt from the area having these types of issues. This largely stems from the artisanal mining practices in the area. In Indonesia, this is no the case. The companies operating on nickel laterites are generally larger companies. Not to say mining companies never have labour problems, but they are not in the same vein or extent. Once again, the child labour is mostly from artisanal mining. Glencore is not going to be having these issues. I am sure Daimler will have a clean audit - they just want to be able to show the market that their cobalt is clean. We use local workers and expats and the local government is happy to have us there.

Profiteer: Cobalt is rarely found as a native metal; it occurs as a by-product of metals such as nickel, copper and lead. What makes your flagship project in Indonesia so attractive?

Ranjeet Sundher: That is correct. What makes our project so attractive is that it is a nickel-cobalt laterite that is close to surface. We have 2 out of 3 of the cathode components. Battery companies can work on reducing cobalt in their chemistry, but they just replace it with nickel. Sprott and many of these other firms are saying that cobalt will be coming from laterites, and Indonesia has some of the best laterites in the world. High grade, thick limonite zone, and close to surface. I think that Indonesia will be a number 2 or 3 producer globally in short order, and our team are some of the most experienced operators in the country.

Profiteer: Experts assume that it will be a long while before cobalt production is able to match growing demand. How big is your window of opportunity?

Ranjeet Sundher: Most banks are assuming a cobalt deficit until the year 2030. There will be fluctuations along the way, but that will determine the way the ultimate pricing trend will go. That being said, the opportunity lies beyond that period. Electric vehicles are going to continue to gain prominence and that demand will continue to be there. To further that, any hiccup in the DRC - and we are already starting to see some - will lead to further deficits. I think there is a short term window to capitalize on this immediate deficit and scatter to secure supply, and there is a long-term trend that is not going away.

Profiteer: Thanks for the interview and a lot of success for the future!

 

The translated interview in German can be found here:
CEO-Interview Pacific Rim Cobalt / Gen III Oil - Ritterschlag durch Canaccord.
CEO-Interview Pacific Rim Cobalt (Teil 2) / Sernova - Big Deal bis Ende Juni?.

 

 

 

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