Cobalt, more so than lithium, has become one of the most sought-after commodities due to the projected increase in production of batteries for electric vehicles (EVs) and power storage systems for renewable energy generation. Cobalt is used in three of the four types of batteries used by electric car-makers.

With 94% of cobalt produced as a by-product of copper or nickel production, the market is currently in a supply-deficit situation that is forecast to worsen as demand increases. With supply flat at around 100,000 tonnes per annum, a lack of primary cobalt deposits presents structural challenges to boosting supply, and booming demand has seen the LME cobalt price increase by more than 100% over the past year.

Cobalt is a critical element in battery performance as its use in cathodes helps increase battery life and increased battery means increased range EVs, which is the tipping point to unlock mass uptake.

What’s more, public backlash against conflict minerals produced with child labour or in areas of political instability has forced manufacturers of consumer electronic products and automakers to steer clear of cobalt and other elements produced in certain countries. Companies such as Apple and Tesla, and the world’s leading automakers are avoiding conflict cobalt, but with 54% of mined cobalt coming from the Democratic Republic of the Congo consuming companies are keen for alternative supplies.

Castle, in the relatively benign and safe jurisdiction of Canada, thinks it is the answer to this supply conundrum.

Its Castle and Beaver properties were formerly mined for silver but the quartz and calcite veins also contain high-grade cobalt, which was overlooked during previous mining. Mines in the greater Cobalt Camp produced over 500 million ounces of silver and 30 million of pounds of cobalt in the 1900s. Historical silver production didn’t focus on cobalt mineralisation and the low-grade silver veins were largely ignored, even if they contained high-grade cobalt. The Castle property historically produced at least 9.5Moz silver and 300,000lb cobalt.

Castle’s president and CEO Frank Basa is a professional hydro-metallurgical engineer. More importantly, he worked at Agnico Eagle (CN: AEM) when it operated the Castle mine in the 1980s and developed the Re-2OX process to extract cobalt from the Castle deposit. Having acquired the Castle properties seven years ago, Basa is now looking to bring them on stream as a primary cobalt operation with silver as a by-product.

This is music to the ears of Japanese and Chinese industrial consumers that are keen to get their hands on cobalt supplies. “One of the takeaways from my recent trip to Asia is that there is a critical shortage of cobalt and the trading houses are very keen on working with us,” said Basa.

Castle is ramping up bulk sampling to produce material to test with battery manufacturers and advance discussions with trading groups. A bulk sample containing 1.8% cobalt is currently being tested by SGS Lakefield to a Japanese specification sheet to produce material to test with battery manufacturers. Preliminary metallurgical tests earlier this year showed silver and cobalt recoveries of 98.5% and 70.5%, respectively, with concentrate grades of 11,876 g/t silver and 10.5% cobalt. Additional testing is underway to optimise grind and reagents.

“We should have the results back from SGS in a month or so and it will take 12-18 months product testing with the Asian traders to qualify it. They want to see if we can meet their specifications and that they can trust us, and that may lead to investment from them,” said Basa.

Meanwhile, the company expects to start permitting a mill facility on site to get a head start on the sometimes-lengthy process as it ramps up exploration.

Exploration

Castle is taking a two-pronged approach to exploration. It has received permits to access the old underground workings to undertake bulk sampling on the first level and underground drilling. The mine workings have visible cobalt in veins that pinch and swell and continue intermittently for tens of metres. The first level extends about 365m east‐west and 360m north‐south.

A 5,000m short-hole surface drilling programme will commence in July to test various targets identified from a geophysical IP survey earlier in the year to get a bead on the best areas for high-grade cobalt. Drilling in 2011 where the IP survey was conducted returned high-grade cobalt, with grades in excess of 1%. Hole CA11-09 intersected 0.12m @ 1.44% cobalt. “Historically, we found that where there is high-grade silver there is low-grade cobalt and where there is low-grade silver there is high-grade cobalt,” said Basa.

But Basa is keen to drill underground to test the halo effect mineralisation in the old veins. Chip sampling from the back of a quartz-carbonate vein on the first mine level confirmed the presence of high-grade cobalt and nickel with strongly mineralised results including 1.8% Co, 8.6% Ni and 25.2 g/t Ag. Castle believes there is significant high-grade cobalt waiting to be found and it aims to produce an initial resource estimate within a year.

The mine already has 11 levels developed by former operators with dewatering planned to provide access to lower levels.

Re-2OX recycling

If becoming a primary cobalt producer were not enough, Castle thinks it has another ace up its sleeve as the potential of the Re-2OX processing technology does not end at the mine gate. Basa thinks it can be adapted to extract cobalt from lithium-ion batteries and is testing the concept with testwork with SGS Lakefield. 

Used cell phone and computer lithium-ion batteries are piling up in warehouses due to a lack of recycling capability. And with EV batteries having a seven-year working life, battery stockpiles could spike in coming years. “No one is recycling these batteries. There may be more cobalt sitting around in used battery stockpiles around the world than is going to be mined, but we need to know more about what is available,” said Basa.

Re-2OX is a closed loop acid- and cyanide-based bulk leach process that can strip out gold, silver, platinum, lithium and base metals from batteries. “This is proven technology that we spent six years and $6 million optimising 30 years ago. The first run on batteries gave very good results. We found that batteries contain 7-13% cobalt, but also manganese and arsenate,” said Basa.

Castle Silver has also identified a gold trend to the southeast where trenching in 2014 indicated a grade of 2.24 g/t Au over 2.2m with copper values as high as 1.03% in bedrock. This zone will be explored as a 50-50 joint venture with Granada Gold Mine.