Global Cobalt Market Primed For New Sources of Vital Metal

Photo: Global Cobalt Market Primed For New Sources of Vital Metal

The world has seen the price of cobalt rise fiercely over the last few years. If the growth of projects like Tesla's Gigafactory are any indication of what is to come, industry is going to need huge supplies of cobalt. Until recently cobalt wasn't mined directly, as the byproducts of other mines was mostly sufficient to meet the modest demand for the metal.

But with the rise of electric vehicles, that dynamic is long gone, and the once little thought of metal is facing demand that was inconceivable to most a few years ago. While the market dynamic that has emerged for cobalt took most by surprise, there were some in the investment community that saw the explosion in demand coming.

Global Energy Metals Corporation (GEMC, TSX-V) is one of the leading pure-play junior cobalt miners out there, and their CEO, Mitchell Smith, has been watching the trends in cobalt for a long time. With more than a decade of experience in the cobalt space, Mr. Smith was in a perfect position to lead Global Energy Metals into a position that could create one of the first primary cobalt mines in the modern age outside of the Democratic Republic of the Congo (DRC).

Deep Connection

The cobalt market isn't like the copper or iron ore market. Because it has been a product of other forms of mining, the supply is mostly inelastic to price. Basically, if the price goes up, the supply may not change at all. Add to that the fact that until recently most of the world's cobalt came from the DRC, and it isn't difficult to see why we are now facing potential supply gaps.

Modern battery technology uses a lot of cobalt, and as people adopt electric vehicles, there will only be more demand hitting the market. Companies like Tesla don't want to deal with conflict minerals, so companies like Global Energy Metals Corporation are in a great spot to take advantage of the oversights that exist today in the cobalt market.

Mitchell Smith seemed to know that there would be an opportunity for cobalt suppliers, and as CEO of GEMC he forged a partnership with one of the foremost battery materials suppliers in the world, China's Beijing Easpring Material Technology. Easpring deals with battery manufacturing giants like LG Chem and Samsung, among others. Needless to say, these companies probably don't want to rely heavily on places like the DRC for vital metals.

Realistic Solutions

Potential mines like GEMC's wholly owned Werner Lake cobalt project in Ontario, Canada are examples of what might be able to wean industry off politically untenable sources of cobalt like the DRC. People who buy EV's are usually concerned with the state of the world, and they don't want the battery components to come from areas with spotty human rights.

The industries that produce batteries for EV's and other next generation technologies don't want to deal with the unstable nature of the DRC, regardless of the fact that companies like Glencore and Freeport-McMoRan have huge cobalt assets in the DRC that could theoretically fill supply shortages. Even if they could get the mines to produce reliably, there is no guarantee that the minerals would be allowed to leave the conflict ridden region.

There is no doubt that Mitchell Smith is sitting at the nexus of a very interesting group of investors and industries. The connections he has forged may yield tremendous advantages for both GEMC, and industry at-large.