Cobalt investing in Australia: the DRC problem and the ASX alternative

More than 70% of the world's cobalt supply comes from one country: the Democratic Republic of Congo. The DRC's cobalt production has been associated with well-documented child labour concerns, unsafe artisanal mining conditions, and governance instability. Tech companies from Apple to Tesla to Samsung have spent years trying to source cobalt that meets their ethical procurement standards — with mixed success.

Australia holds the world's second-largest cobalt deposits. It currently produces about 2% of global cobalt supply. That gap between potential and actuality is either an opportunity or a reminder of how hard it is to compete with low-cost production in a developing economy. Probably both.

Here is what Australian investors need to understand about cobalt — and the one ASX company making a serious attempt to close that gap.

For background on cobalt's role in the electrification story, see our Australia's critical minerals explained piece.

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What cobalt does and why it matters

Cobalt sits inside most lithium-ion battery chemistries used in EVs today. It improves battery stability, increases energy density, and — critically — prevents thermal runaway (the technical term for a battery catching fire). The EV market now accounts for approximately 40% of global cobalt demand, up from a fraction of that a decade ago.

The problem is that cobalt is unevenly distributed and awkwardly extracted. The DRC accounts for more than 70% of global supply, and a significant portion of DRC production comes from artisanal small-scale mining (ASM) — individuals digging with hand tools, including children, in conditions that would not meet any Western safety standard.

Battery manufacturers and automakers are acutely aware of this. The EU's Battery Regulation, which came into effect in stages from 2023, requires battery companies to conduct due diligence on cobalt supply chains and provide disclosure on the social and environmental conditions of extraction. This is not charity — it is compliance.

For Australian cobalt producers, this creates a structural opportunity. Australia mines under conditions that meet Western ESG standards. Any buyer that needs an ethically auditable cobalt supply chain — and increasingly, they all do — has limited options outside DRC, and Australian supply is one of them.

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The supply problem: cobalt is mostly a byproduct

Here is the complicating factor for Australian cobalt supply: most Australian cobalt is not mined for cobalt. It is a byproduct of nickel mining.

Olympic Dam (BHP) produces cobalt as a byproduct of copper and uranium. Most WA cobalt comes from nickel operations. When nickel mining contracts — as it has dramatically in the past two years, with BHP closing Nickel West and IGO divesting Nova — cobalt output falls with it. You cannot increase cobalt production without increasing nickel production, and Australian nickel production is currently at a cyclical low.

This byproduct dependency is why Australia produces only 2% of global cobalt despite holding the second-largest deposits. To produce cobalt as a primary product requires a purpose-built project targeting cobalt-bearing ore bodies — which is exactly what Cobalt Blue Holdings is attempting.

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Cobalt Blue Holdings (ASX: COB) — the pure play

Cobalt Blue Holdings is developing the Broken Hill Cobalt Project in far-western New South Wales — one of the largest undeveloped primary cobalt resources outside Africa. The JORC Mineral Resource is 127 million tonnes at 867 parts per million cobalt equivalent, containing an estimated 87,000 tonnes of cobalt.

Where the project stands: COB is in the pre-production development phase. An updated Preliminary Feasibility Study is targeted for completion in Q4 2026. The Environmental Impact Statement is approximately 80% complete. The company is assessing staged development pathways including a minimum 10-year starter case to reduce upfront capital requirements.

The numbers: Market cap of approximately $49 million — a tiny company. COB is pre-revenue, meaning it generates no income from cobalt sales and is funded by capital raises. Investors at this stage are buying the option on a future mining operation, not current earnings.

The bull case: If you believe the ethical supply chain premium for non-DRC cobalt will materialise into real purchasing contracts, and if Cobalt Blue can secure financing and navigate the approvals process, BH Cobalt could become a significant contributor to global ethically-sourced cobalt supply. The resource base is real and substantial.

The bear case: COB has been working on this project for the better part of a decade and remains pre-FID (Final Investment Decision). The capital required to build a cobalt mine and refinery is substantial — well beyond what COB's current market cap implies. Financing a project of this scale typically requires a major offtake agreement with a battery company or automaker, and those negotiations take time. The cobalt market has also experienced price weakness through 2024–25, though prices have started recovering.

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The DRC factor: why ethical cobalt could command a premium

The ethical cobalt angle is real, but it has not yet translated consistently into a price premium in commodity markets. The cobalt price is still largely set by DRC production, and most cobalt trades as a commodity rather than a differentiated product.

What is changing is corporate procurement. The EU Battery Regulation requires supply chain due diligence and disclosure. Major EV manufacturers have made public commitments to reducing DRC exposure. Several large battery manufacturers have signed supply agreements specifically prioritising non-DRC cobalt sources.

Whether this creates a durable, material price premium for ethically-sourced cobalt — rather than just compliance checkbox ticking — is the key question. If it does, Australian producers like Cobalt Blue are well-positioned. If the market remains commodity-priced regardless of origin, the cost advantage still sits with the DRC.

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For most investors: cobalt exposure through ETFs

Given the pre-revenue, speculative nature of the main ASX cobalt pure-play, most investors seeking cobalt exposure will access it more safely through diversified ETFs.

• XMET (Betashares Energy Transition Metals ETF) includes cobalt in its mandate alongside copper, lithium, nickel, and rare earths
• ACDC (Global X Battery Tech & Lithium ETF) holds exposure to the battery value chain including companies with cobalt procurement exposure

Neither is a pure cobalt play, but both provide some exposure to cobalt price movements as part of a broader green metals basket. For investors who want to understand all four ASX green metals ETFs, see our green metals ETF comparison.

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Frequently asked questions

1. Why does the DRC dominate cobalt supply? The DRC holds the world's largest cobalt reserves — approximately 50% of known global reserves — and has been mining them at scale for decades, including through artisanal and small-scale mining that operates at very low cost. The combination of geology and low-cost labour makes DRC cobalt the global price-setter, regardless of the ethical concerns associated with some of its production methods.

2. Does Australia have cobalt deposits? Yes — Australia holds the world's second-largest cobalt deposits. However, most Australian cobalt is produced as a byproduct of nickel mining rather than as a primary product. With Australian nickel production at a cyclical low due to the Indonesia-driven price crash, Australian cobalt output has declined as well. Cobalt Blue Holdings' Broken Hill project is an attempt to develop a purpose-built primary cobalt operation.

3. What is Cobalt Blue Holdings (COB)? COB is developing the Broken Hill Cobalt Project in NSW — a JORC resource of 127 million tonnes at 867ppm cobalt equivalent, containing approximately 87,000 tonnes of cobalt. The company is pre-revenue, with a Preliminary Feasibility Study targeted for Q4 2026. Market cap is approximately $49 million, making it a speculative small-cap investment.

4. Is cobalt demand growing? Yes. EV batteries account for approximately 40% of global cobalt demand, and that share is growing as EV sales increase. However, battery manufacturers are also working to reduce cobalt content in their chemistries (the trend from NMC 111 toward NMC 811 and LFP batteries uses less cobalt per unit). Cobalt demand grows in absolute terms as EV volumes grow, even if cobalt intensity per battery is declining.

5. Will Australian cobalt attract a price premium over DRC cobalt? Not consistently at present — cobalt largely trades as a commodity priced by DRC production. However, corporate procurement practices are changing under regulatory pressure (particularly the EU Battery Regulation), and supply agreements with ethically-verified sources are increasingly sought. Whether this translates into a durable spot price premium remains to be seen.

6. Is COB a good investment? COB is a pre-revenue speculative investment in a large cobalt resource that has been in development for nearly a decade. The ethical supply chain angle is a genuine differentiator. But the company needs to raise significant capital, secure a major offtake partner, and navigate years of approvals before it produces cobalt commercially. It is appropriate only for investors who understand speculative resource stocks and can afford to lose their entire investment.

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Sources

• Cobalt Blue Holdings — Broken Hill Cobalt Project
• EU Battery Regulation — supply chain due diligence requirements
• Department of Industry, Science and Resources — Australia's Critical Minerals List

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This article is for general information only and does not constitute financial, tax or legal advice. Share prices and market capitalisations are indicative as at July 2026 and change continuously. Speculative small-cap stocks carry the risk of total loss of capital. Consult a licensed financial adviser before making investment decisions.