Question – Are you:
A metal investor?
Attracted to high-risk/high reward stocks?
Still breathing – and not in a coma?
Yes? Then you’ve probably heard of cobalt.
Here’s the story in a nut shell:
Cobalt is a critical ingredient in the manufacture of lithium-ion batteries. Sixty five percent of global cobalt supply currently comes from the DRC. The child labour problem is causing companies like General Motors (GM.NYSE), Apple (AAPL.NASDAQ), Toyota (TM.NYSE), and Ford (F.NYSE) – to look for North American supply lines.
Cobalt is the holy grail of resource stories
Surging global demand coupled with constrained supply is a potent combination.
One effective bullshit-detector for a supply-demand story is to monitor the spot market (sometimes referred to as the “physical market” or the “cash market”).
The above chart tells us that industrial end-users are buying cobalt in volume (possibly intending to hoard it) – against limited inventories – that’s running the price up.
So how do we make money on cobalt?
First Cobalt (FCC.V) controls over 10,000 hectares of prospective land and fifty historic mines located in the Ontario Cobalt Camp. Investors who bought in when we did, made a lot of money.
It’s trading at $1.08 with a market cap of $210 million and the FCC stock price has doubled since we first wrote about them.
In our opinion – there’s a lot more room to run.
But $1.08 isn’t everyone’s definition of “dirt cheap”.
So let’s have a look at 5 cobalt companies priced below .50 per share.
Cobalt Power Group (CPO.V)
Cobalt Power Group (CPO.V) has completed the purchase of four separate blocks of mineral claims owned or leased by Canadian Cobalt in the South Lorrain and Lorrain Townships.
“The price of Cobalt Power Group (CPO.V) ramped up after the company dropped news that Hochschild Mining (HOC:LON) has agreed to buy into the Canadian cobalt explorer for a minimum of US$500k.
The deal, which comes in no small part from the fact that CPO CEO Andreas Rompel worked for Hochschild for a lot of years, in Peru, Mexico and Chile, establishes Cobalt Power Group as a larger player than their (now) $8 million market cap would suggest.”
The 16-hole, 2306 m, Phase 2 drill program has been completed and the drill core has been logged, sampled, and shipped to AGAT Laboratories in Timmins, Ontario.
On February 13, 2018 CPO an agreement to acquire Ontario Cobalt Property Developers a privately held mineral exploration company which controls 14 mineral claims totalling 7,275 acres) of prospective mineral lands in the Cobalt Camp.
- Cobalt Power will become one of the largest landowners in the Cobalt and Silver Center camps of Ontario, holding over 28,862 acres.
- Ontario Cobalt claims are contiguous with both Cobalt Power Group and First Cobalt Corporation assets
- Geological setting of the Properties exhibits all of the critical features for Co-Ag mineralization in the region
- The Company is fully funded for 2018 and plans are underway for an aggressive 2018 exploration program.
CPO is currently trading at .23 with at market cap of $28 million.
Canada Cobalt Works (CSR.V)
Anchored by its past producing Castle mine and related infrastructure, plus its proprietary Re-2OX process for cobalt recovery, “Canada Cobalt” will be a vertically integrated operation designed to serve the broader northern Ontario Cobalt Camp and a rapidly growing battery sector searching for ethically sourced cobalt.
Frank Basa, CSR President and CEO, stated: “With Cobalt prices at 10-year highs, and the northern Ontario Cobalt Camp drawing increased attention, we’re entering exciting times for shareholders as we embark on various initiatives to build the ‘Canada Cobalt’ brand.”
Basa stated that CSR is not “subdividing, consolidating or otherwise altering its share capital in association with the name change.” The company has about $2 million cash in the bank now.
High-grade mineralization has been encountered in numerous chip samples:
- 1.8% cobalt, 8.6% nickel and 25.2 g/t silver (CSR-17-S03)
- 1.6% cobalt, 7.6% nickel and 32 g/t silver (CSR-17-S04)
- 0.81% cobalt, 5.9% nickel and 4.1 g/t silver (CSR-17-S01)
CSR is currently processing bulk samples using the company’s proprietary Re-2OX hydrometallurgical process to produce high purity cobalt for batteries. This process may also be useful in recovering cobalt from recycled batteries.
CSR is currently trading at .44 with a market cap of $27 million.
Boreal Metals (BMX.V)
The Guldgruvan deal is the 2nd cobalt project Boreal has picked up in the last month.
On January 16, 2018 BMX announced the execution of a definitive agreement with EMX Royalty for the acquisition of the Modum Project, surrounding southern Norway’s historic Skuterud Mine which was Europe’s largest and highest grade producer of cobalt though the nineteenth century.
According to the press release, the 2nd acquired property “contains the historic Los Cobalt Mine, one of the better known historic cobalt producers in the region.”
“Guldgruvan complements the previously announced acquisition of Modum, which combined further builds the foundation for Boreal’s strong base metal and cobalt exploration in Scandinavia,” stated Karl Antonius, President and CEO.
“Norway is the undisputed world leader on electric cars, run almost exclusively off the nation’s copious hydropower resource.”
Nearly a third of all new cars sold in Norway are plug-in models – either fully electric or a hybrid – and experts expect that share to rise to as much as 40% next year.
As an example of Scandinavia’s battery-forward policy, Northvolt AB will be building Europe’s biggest battery factory in Sweden.
The 2,383 Hectare Guldgruvan cobalt project is accessible year-round, with good infrastructure including paved roads, power, and skilled labour in nearby municipalities.
Boreal Metals’ focus on cobalt in Scandinavia is a good long-term play.
BMX is trading at .34 with a market cap of $17 million.
Global Energy Metals (GEMC.V)
Global Metals flagship project is “Millennium” – an advanced staged cobalt project with a large defined zone of cobalt-copper mineralisation which remains open at depth and along strike.
Hammer Metals completed a JORC resource estimate in 2016 reporting 3.1 million tonnes of Inferred Resources grading 0.14% Co, 0.34% Cu and 0.12 g/t Au.
Under Canadian reporting standards, this resource is considered “historic”. The 2016 JORC resource estimate completed by Hammer Metals Ltd. outlined a mineralised zone over a strike length of approximately 1.5 km.
To date the Millennium project area has been tested by only 63 drill holes (percussion, RC and diamond) for a total of 7,891 metres. Most holes have been drilled within 200 metres of surface, with few holes reaching to depths greater than 250 metres below surface. At present mineralisation remains open at depth along the strike extent of the JORC resource area.
Intercepts from December 2017 RC drilling include:
- 28 metres at 0.20% Co and 0.35% Cu from 104 metres
- 12 metres at 0.23% Co and 0.27% Cu from 127 metres
- 13 metres at 0.10% Co, 0.33% Cu and 0.17g/t Au from 91 metres
GEMC also plans to complete ten more diamond drill holes for an estimated 1,300 meters of drilling within the existing JORC resource area. The company anticipates that this will further define and upgrade known mineralisation in support of a new resource estimate that will be reported as a cobalt equivalent (“CoEq”).
GEMC is currently trading at .19 with a market cap of $6.7 million.
BKR has already reviewed its historic exploration and is now considering a drone survey to modernise project baseline data and to identify high-priority targets.
The 2,176-hectare Cobalt ford property was historically explored for base metals
Outcrop mapping in 1971-2006 detailed exposed rock formations in the area, revealed multiple sulphide mineralization occult. Cobalt values of 904.3ppm and 1,480ppm have been returned from rock sampling.
A drilling program was carried out in 2006 by Quinto Tech, focusing on the western half of the property.
The highest metal values in samples reported by Quinto Technology as a result of the drilling were 4.64% Ni, 2.37% Cu, 0.12% Co, 19ppb Pt, 110ppb Pd and 168ppb Au, over an undisclosed interval.
According to Berkwood promotional materials:
Berkwood is engaged in the exploration for commodities that enable the modern revolution in essential technologies. The Company is led by a team with collectively over 100 years experience and have been involved with numerous discoveries of producing mines.
Berkwood is currently trading at .20 with a market cap of $6.7 million.
Is the cobalt supply/demand imbalance story a load of bollocks?
It’s a valid question.
The same story was told about oil in 2008 – now it’s cheaper than craft beer.
This fall, Volkswagen (VLKAY:OTCPK) tried to secure a $59 billion cobalt contract for 150 gigawatt-hours of lithium-ion battery storage – about 30,000 tonnes per year (30% of total 2017 global supply).
VW was unable to find a supplier that could guarantee 5 years of cobalt at a fixed price.
Barring a technological revolution on the supply side (like fracking) we expect the cobalt spot price to keep rising – creating a tail-wind for well-run cobalt juniors outside of the DRC.
Full Disclosure: FCC, CPO, BMX, CSR and BRK are Equity Guru marketing clients, and we own stock. GEMC is not an Equity Guru marking client, but we own stock.