One Critically Hot Metal, Cobalt

Cobalt 12 Year Price Chart

Cobalt is hard not to love right now and a handful of junior companies have sprung to life in the wake of cobalt’s aggressive two year price run. While ups and downs in the price of cobalt are going to occur, this commodity’s demand is not just a temporary blip on the chart.

Investor demand for battery metals is coming from the Electric Vehicle (EV) market, and specifically the battery market. January sales of EV’s this year saw a 70% increase year-over-year, with 159,139 EV’s sold last year in the US, 50% of sales coming from California. California has a zero emission vehicle (ZEV) mandate, moving towards a green goal of 1.5 million ZEV’s by 2025. Volkswagon is forecasting sales of 2-3 million EV’s by 2025, with BMW forecasting EV’s will be 15-25% of worldwide sales by 2025.

After Daimler announced a $1.1 billion USD investment in battery production, Fred Lambert at electrek noted this bullish announcement about the German automaker last November:

“Daimler has been fleshing out its electric vehicle strategy over the last year and a big part of it came to life in Paris earlier this year with the unveiling of Mercedes’s new ‘EQ’ brand and the first vehicle under that electric brand: ‘Generation EQ’.

The German automaker admitted that it fell behind in the electric vehicle segment, but it hopes to come out on top by 2025 with 25% of its production being electric. Now an executive confirmed that the company is planning a $11 billion investment for the first series of vehicles to come out.”

The next leg up in the mass adoption of EV’s is coming, and fast. Global Market Insights is predicting lithium ion batteries to become a $53 billion dollar market by 2024. Only as far back as 2007, average battery costs were approximately US$1,200/kWh. Tesla is achieving costs under US$190/kWh today. This price drop is catapulting battery metals and the EV industry forward.

TSX.V: CSRCastle Silver Resources, featured here in March Castle Silver’s Got Grade (and Cobalt): $CSR.V, is one of the primo cobalt juniors eyeing up that battery market from more than one angle. They recently announced something of a complementary business unit, launching their 100%-owned hydrometallurgical process for cobalt miners. Branded Re-2OX, this innovative process was developed by Frank Basa, CEO of Castle Silver, in conjunction with the National Research Council. This new cobalt processing test program has been optimized over the years since its inception during Castle Mine’s last production cycle, and it’s extremely adaptable for high recovery of multiple metals and elements from all feeds with varying chemistries.

Castle Silver, advancing the high-grade, past-producing Castle Silver and Beaver properties in Ontario, is carrying out advanced-stage testing through SGS Lakefield to evaluate the amenability of the process for efficient recycling of spent lithium-ion batteries as well. Excerpt below compliments of this Rockstone Research Interview.

“The most exciting thing is that we have a process for the Cobalt Camp that can separate the cobalt from the silver and produce a cobalt product for the end users in the battery market now. We are also looking at using our process to recycle the old lithium ion batteries. We started the test work and we feel our process should be able to recover the cobalt from the used lithium-ion batteries. And that, to us, is kind of a long-term approach to recovering cobalt. And then when you come on line to mine and produce cobalt, the process will be available and operational. So you are able to recycle the cobalt, we call it a ‘green process that closes the loop’”

With this new processing technique, Castle Silver now has a relevant process for the entire Cobalt camp and the lithium battery industry as well. How does Frank feel his company is positioned amongst the other companies exploring for cobalt?

“Underground access at the Castle mine and our unique Re-2OX hydrometallurgical process to create high-purity cobalt powders for end-users in the battery sector have established CSR as the innovation, exploration and development leader in Canada’s richest cobalt-silver district.”

Screen Shot 2017-05-23 at 7.52.49 AMAs CSR.V prepares to drill and show off a timely metallurgical achievement, we have another interesting company to mention in light of cobalt investors interested in this new paradigm shift for the automobile industry from gas to electric powered.

Pala Investments, a private hedge fund headquartered in Switzerland, invests in development and production stage mines and mining companies, as well as products and services for the global mining sector. Pala and the Shanghai Chaos Fund, one of China’s largest commodity funds, stockpiled around 17% of last years global cobalt production, a strong, long move into this critical metal. Pala is now directly involved in a new company called Cobalt 27.

Cobalt 27 (TSXV: KBLT) is in the midst of raising $200 million, offering investors direct exposure to cobalt. The Company will initially hold physical cobalt material and several exploration-stage cobalt royalties, plus they are negotiating with cobalt producers and developers for stream acquisitions. From their long prospectus for this pure play cobalt investment vehicle:

“Cobalt 27 will have direct leverage to cobalt price appreciation as it will own physical cobalt, and seek to acquire cobalt streams, royalties, and direct interests in mineral properties containing cobalt from producers and developers….

…The cobalt market was in a deficit in 2016 for the first time since 2009, with growing supply deficits expected through 2020, according to Darton Commodities. During the last multi-year deficit in the cobalt market (2007-2009), the cobalt price exceeded US$50/lb. The Company believes cobalt offers the most attractive investment proposition in the battery metal sector, as it represents a significant portion of the EV battery by weight and its supply growth is expected to lag behind demand in the near term.”

Anthony Milewski of Pala Investment’s is coming on to run the company as Chairman and CEO. Justin Cochrane, formerly the VP of Corporate Development for Sandstorm Gold Ltd, will be Cobalt 27’s President and COO. Cindy Davis, a senior financial analyst at Marrelli Support Services, is the CFO. Directors include Anthony Milewski, Frank Estergaard, John Kanellitsas, Dr. Jonathan Hykawy and Nick French. Nice cast and great business model.

As for the other cobalt angles, well-run, capitalized cobalt juniors have a long runway ahead of them, and most of them will have a big learning curve to catch up to CSR.V in the Cobalt district of Ontario. Electric vehicle battery metals, and in particular cobalt, are set to shine according to Caspar Rawles, who commented on the price of cobalt: “Really it’s just upside potential, we don’t see any meaningful decrease in prices.” INN interview

Cobalt futures are not very liquid, and at $50,000 a contract it is not surprising that groups like Pala are venturing harcore into the streaming and royalty business model. Rather than speculating as to the short term price fluctuations, they are going all in with physical holdings, streaming and royalty deals with developers and producers of cobalt, de-risking a variety of issues that come with the exploration, development and processing of cobalt. Two very different companies on the TSX Venture, CSR and KBLT, and one critically hot metal, Co.

~Disclaimer~

This is not in any way investment advice nor any sort of stock recommendation. Please do your own due diligence and talk to a qualified investment advisor.

The contents of this article are for informational purposes only.  Nothing in this article, in any way whatsoever, should be considered implicit or explicit investment advice. Nothing contained herein is a recommendation or solicitation to buy, hold or sell any security. Note the inherent risks when investing in microcap stocks. Prior to making any investment decision, we recommend that you seek outside advice from a qualified and registered investment advisor.

Castle Silver Resources is a marketing client of an arm’s length party to one of the owners of the Stock Syndicate. One or more of the Stock Syndicate owners does own shares in Castle Silver Resources.

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