This Battery Metal Could Outperform Lithium
By May 3, 2018– Published in on
The fact that cobalt prices have been on a tear isn't news. But under the surface of the cobalt market, there could be a dislocation brewing.
A decade ago, no one cared about the cobalt market. The vast majority of the world's cobalt was produced as a byproduct from other forms of mining, and it was used in low tech fields that didn't matter much to the investment world.
So what changed?
The smartphone revolution for one thing. While there is a growing demand from the Electric Vehicle (EV) sector, today the vast majority of cobalt is used by smartphone manufacturers like Apple and Samsung.
Smartphones have been dropping in price, and this has allowed more and more consumers to enter the market. Many smartphone users also want to regularly upgrade to the latest technology, which means that batteries are being replaced long before it is necessary.
Consumers may not realize how tight the cobalt market is, but the companies that need to source cobalt in increasing quantities are painfully aware of how precarious the supply situation is at the moment.
There is no sugarcoating the fact that more than half of the world's cobalt supply comes from The Democratic Republic of the Congo (DRC). In addition to being politically unstable, small scale mining in the DRC is notorious for using child labor.
The London Metal Exchange (LME) recently launched a program that aims at rooting out cobalt that can't be traced back to responsible mining practices. The implication of this policy is that unless proven otherwise, cobalt from the DRC is probably being produced with labor practices that isn't up to international standards.
Leaving the human rights issues to the side, the fact that a double digit percentage of the world's cobalt supply is being sourced from child slaves should be seen as a massive oversight when it comes to the reliability of supply.
For the moment cobalt is still flowing out of the DRC, but if there were another round of political upheaval, large amounts of cobalt could disappear from world markets in the space of a week.
The cobalt supply might be shaky, but the demand side is solid and expected to grow at more than 9% p.a. until 2022. Recent negations between cobalt heavyweight Glencore and Volkswagen failed to reach any sort of agreement, with Glencore betting that prices will continue to rise.
Junior miners that have prospective cobalt deposits outside of the DRC have been popular with investors as well. TSX-V listed First Cobalt Corp. (TSX-V.FCC) shares have fallen below the highs they hit early this year, but are still up massively since they took off in 2016.
First Cobalt is one of the largest junior cobalt miners in the world, with a land package in Canada that comprises more than 50 historic mines, and a fully permitted cobalt refinery near Cobalt, Ontario. First Cobalt recently expanded their land holdings via an acquisition in Idaho, USA. They are also one of the largest juniors operating, but there are many more who are looking to buy into a district that could be a reliable source of cobalt.
ASX listed Meteoric Resources just added a sixth property to their Canadian portfolio, which is also centered around Cobalt, Canada. With all the options investors have in the cobalt space, getting great research is key to investing wisely.
The upcoming International Mining Investment Conference (IMIC) is a great place to learn more about the cobalt industry, and which companies are well placed to grow into a waiting market. In addition to numerous presentations by resource industry professionals, this year's IMIC will feature a in depth look at the battery metals that are at the heart of the next leap forward in human technology.
This year's IMIC be taking place on May 15th and 16th at the Vancouver Convention Center East. You can register right now, and be sure to use the discount code 'CAMBRIDGE', so you can save $10 off the $19 preregistration fee.
Registration on the day of the event costs $30, so don't hesitate to preregister, and reserve your place at the IMIC for a great price!