Voisey's Bay poised to capitalize on demand for cobalt, but Vale silent
Sources say ballistic surge in cobalt prices makes underground mine project more likely
A ballistic surge in the price of cobalt could mean positive things for Labrador's Voisey's Bay mine, but if executives at Vale are excited, they certainly aren't saying.
Reuters is reporting that the Brazilian mining giant, which owns the Voisey's Bay mine and processing facility at Long Harbour, Placentia Bay, is looking to cash in on cobalt.
The international news agency is reporting that Vale is looking to sell unmined cobalt, worth hundreds of millions of dollars, to investors and that could be a positive sign as the company decides whether to proceed with an underground mine at Voisey's Bay.
Electric cars driving demand
It's called "streaming," and it allows an investor to make an upfront payment in exchange for future production at a discounted price.
Streaming is common on precious metals markets, but would be a first for the booming cobalt sector, according to Reuters.
Cobalt is a critical component in rechargeable lithium-ion batteries, and demand for the metal has skyrocketed because of the growing market for electric vehicles.
According to the London Metal Exchange, the price for a tonne of cobalt recently topped $80,000 US, up from $50,000 a year ago.
Sources tell Reuters that income from cobalt could be a smart way for Vale to finance construction of the underground mine at Voisey's Bay.
Vale began operating an open-pit mine and concentrator at Voisey's Bay in 2005, producing about 6,000 tonnes daily of two types of concentrate: nickel-cobalt-copper and copper.
Reuters, citing four sources, reports that Vale has hired the Bank of Montreal to raise around $500 million from bidders for cobalt that will be produced at Voisey's Bay.
The deal would be for 3,000 tonnes annually, according to Reuters.
How is Vale responding to this report?
"We are not commenting on reports of cobalt streaming," company spokesman Cory McPhee wrote in an email to CBC News.
Good sign for underground mine?
The report surfaces as uncertainty continues about the future of Voisey's Bay.
Faced with a depressed market for nickel and other minerals, Vale announced in August 2017 that it was taking a second look at plans to develop an underground mine at Voisey's Bay.
The roughly $2-billion project was sanctioned in 2015, and was scheduled to begin production in 2020.
That schedule is now unclear.
Vale said an engineering team is still working on the project at the company's St. John's office, and surface infrastructure required to support the start of the underground mine has been completed.
As for a decision on whether it will proceed — "Once our internal monitoring and assessments are complete, we'll be able to share a more precise timeline for decision with you," Vale wrote in a statement.
"The process of assessing findings, monitoring market conditions and adjusting schedules remains an active conversation."
The underground mine is critical to the project's future, since the open-pit mine is expected to be exhausted by 2022.
The underground mine would extend the life of Voisey's Bay to 2035.
Natural Resources Minister Siobhan Coady remains hopeful about the future of the mine.
"We have had regular contact with Vale during their review process," she said recently in a statement.
"It's a positive sign that they are assessing ways of moving forward with the underground mine during this time of depressed nickel prices.
"We remain hopeful and anticipate that Vale will reach a resolution in the near term."
Opposition has questions
Meanwhile, PC MHA and Natural Resources critic Keith Hutchings said it's time for Coady to provide more information.
He said nickel prices have slowly rebounded, and the hundreds of construction and long-term jobs associated with the underground mine are sorely needed as the economy reels under growing unemployment numbers.
"We certainly need the employment and economic activity in the province and certainly need to know where this is too," Hutchings said.
"(Is Vale) asking for more concessions? Is there penalties here? And have the timelines been adjusted, and if so, the public needs to be made aware now exactly what's happening."
Approximately 450 people work at the mine.