SPOTLIGHT: Is the cobalt world ready for Ambatovy?
“It promises all cobaltaholic soap opera lovers the titillating foretaste of the gladiatorial battle that will ensue with Darton Commodities wielding the mace on one side of the ring and producers snorting defensively behind their shields on the other side of the ring...where each party is determined to have the lion’s share of the consumer-based feast.”
“It promises all cobaltaholic soap opera lovers the titillating foretaste of the gladiatorial battle that will ensue with Darton Commodities wielding the mace on one side of the ring and producers snorting defensively behind their shields on the other side of the ring…where each party is determined to have the lion’s share of the consumer-based feast.”
This was how one UK trader described last week’s announcement that Ambatovy, a nickel/cobalt mining and refining operation located in Madagascar, will be marketing its cobalt as early as this quarter through trading company Darton Commodities.
The Ambatovy project has been subject to delays, leading some in the nickel and cobalt markets to believe that any new metal supplies would not reach the market this year.
It is held 40% by Sherritt International Corp, which is also the operator; Sumitomo Corp and Korea Resources Corp both hold 27.55; while SNC-Lavalin Inc, the engineer, holds the remaining 5%.
UK-based Darton will be the sole agents responsible for marketing Ambatovy brand cobalt products into the European and Indian markets, Darton’s Guy Darby confirmed to Metal Bulletin.
The news sent a ripple of shock through the cobalt market, particularly as most market participants said they had not expected Ambatovy to sell through an agent.
“Darton are very capable, but it goes against the grain of the industry,” a second source said, noting that Kazakhstan-based mining company ENRC had ended its marketing agreement with Darton just a few months earlier in order to sell material itself.
While it will take time to ramp up production to Ambatovy’s annual refined cobalt capacity of 5,600 tonnes, and 60,000 tpy of nickel, the market is working out how the cobalt that will be entering the market will affect prices.
“This could really be a game changer for 2013,” one cobalt consumer said.
Indeed, several Metal Bulletin sources said news of the metal arriving will weigh heavily on prices.
“It’s the realisation,” said one US trader, continuing: “Everybody knew the supply was coming, but no-one was expecting it before the end of the year.”
“I had expected a $10 per lb market [current Metal Bulletin low-grade cobalt price: $12.60-13.65 per lb]. I now forecast an $8 lb floor at some point over the next year,” said the first source.
“It’s not just Ambatovy. That’s the final straw,” he added, drawing attention to shifting fundamentals, more flexible selling by those producing cobalt as a by-product, as well as generally flat demand.
But others were unconvinced that the impact would be felt as severely, or as quickly.
“I’m not sure if Ambatovy will produce at full capacity in the near-term, so the impact won’t be felt immediately,” a trader in Asia said.
“The impact on the price is unclear. I heard people claiming it would kill the price, but it will all depend on whether they [Ambatovy] can get their operation permits extended,” said the second source.
Sherritt International Corporation, a joint-venture partner in the project, announced in September that Ambatovy had received a six-month authorisation to commercially operate the processing plant in Toamasina, Madagascar.
During this time, the government of Madagascar intended to continue its review of the project.
At the end of the six-month period, the authorisation is to convert to a life-of-mine operating permit, Sherritt said at the time.
“Initially the news will impact sentiment. But we won’t have a flood of material. The material will probably start off a bit grubby and it will take time to ramp up,” another experienced source in the cobalt market predicted.
“We will confirm quality shortly, but we anticipate initially 99.6% [cobalt content], improving to 99.8% as the various elemental extraction circuits begin to perform. Ultimately it will be a pure 99.8% product with minimal deleterious elements,” Darby told Metal Bulletin when asked about the cobalt content expected from Ambatovy.