A new and little known agency of the United States federal government just invested USD$25 million into a Brazilian cobalt and nickel mine.
Who is the US DFC?
The United States Development Finance Corporation US DFC was formed in December 2019 as a replacement for several agencies including Overseas Private Investment Corporation (OPIC) and Development Credit Authority (DCA) of the United States Agency for International Development (USAID).
As you might expect from the name of these groups, US DFC is tasked with providing or facilitating the finance of development projects by the private sector in middle and lower income countries.
It has a US$60 billion funding budget and which more than double the combined budgets of its preceding agencies.
The US DFC is not unlike Canada’s Export Development Canada (EDC), Business Development Bank of Canada (BDC) and a bit of the new Canada Infrastructure Bank (CIB) all in one agency.
Why Does Anyone Car About Cobalt?
Cobalt is a key ingredient in the manufacture of Lithium Ion Batteries:
“…The use of cobalt in lithium-ion batteries (LIBs) traces back to the well-known LiCoO2 (LCO) cathode, which offers high conductivity and stable structural stability throughout charge cycling. Compared to the other transition metals, cobalt is less abundant and more expensive and also presents political and ethical issues because of the way it is mined in Africa.” SOURCE
Electric car companies like General Motors are aggressively working to reduce their use of cobalt in their electric car batteries. Early in 2020 GM announced its amazing Ultium battery pack uses 70% less cobalt than traditional EV batteries and Telsa just announced it expects to have a zero-cobalt battery within a year or two. However, there so many companies in need of this critical material it could take decades to eliminate its use.
Why Would the US Government Be Interested in A Brazilian Cobalt Mine?
The United States Government, and most other governments, are increasingly concerned about China’s increasing global power. China is publicly attempting to centralization the control of several strategic technologies:
“…Made in China 2025 has aimed to transform China into a manufacturing superpower. In particular, the plan highlighted 10 priority sectors, which include new-generation information technology; advanced numerical control machine tools and robotics; aerospace technology, including aircraft engines and airborne equipment; and biopharmaceuticals and high-performance medical equipment.” SOURCE
Click on each of these two charts and see if you can figure out why they the US made a notable investment in a South American mine:
Put simply China controls fully half of the worlds Cobalt mining and refining. That dominance scares the rest of the world because china has shown a willingness to restrict access to critical component metals as recently as 2019:
“…In May 2019, Chinese President Xi Jinping made a well-publicized visit to a rare-earth-metals company in Jiangxi province. On the same day, he gave a speech in which he called on his country to prepare for a “new Long March” to overcome challenges from abroad. Taken together, they were seen as a signal that China might use its control over 90 percent of the world’s production of rare earth metals as leverage in its trade war with the United States. At any time, China could restrict or even embargo the export of the metals…” SOURCE
It has been said that the United States, Canada and other Western countries lack a formal industrial policy that can meet the China’s might. The Americans don’t like being beholden to an ever more emboldened China so if they want to avoid that noose, they had best start developing a plan fast. $25 million is going to do precious little to adjust the current balance of power.
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