There is a massive opportunity for first-in investors in cobalt as major hedge funds start hoarding the physical metal to gain exposure, and this long-overshadowed resource is poised to be more explosive than lithium.
Analysts are already predicting a 500% deficit increase starting next year, and the tight supply figures have caused a panic to breakout now.
Major buyers of cobalt now find themselves scrambling to secure new supply as hedge funds such as Swiss-based Pala Investments and China’s Shanghai Chaos start stockpiling the metal because it’s a surefire way to gain exposure to the coming price surge. So far, these hedge funds have scooped up 17% of last year’s global production.
The electric vehicle (EV) revolution has made cobalt one of the most critical elements of our time. Cobalt makes up some 35 percent of the lithium-ion battery mix, but there isn’t enough new supply and what does exist flows through a very controversial and uncertain supply chain.
EVs have hit the mainstream and production is moving forward at breakneck speed. Along with this, we’ve got at least 12 battery gigafactories in the works—in addition to Tesla’s Nevada gigafactory that started production in January. All of them will be competing for cobalt supply that we don’t have. And more than half of what we do have comes from the Democratic Republic of Congo (DRC), where it is unethically mined by children.
(Click to enlarge)
With giant companies that include everyone from Tesla (NASDAQ:TSLA), Apple (NYSE:APPL) and Google (NASDAQ:GOOGL) to automakers Toyota (NYSE:TM), General Motors (NYSE:GM), and Ford (NYSE:F) all fighting over cobalt, nothing would be better—or more valuable—right now than an all-American, ethical source of the metal.
The dream team behind Scientific Metals has already hit a home run with lithium, when the panic over future supply drove prices up over 400%. Now it’s got its sights set on cobalt, and it’s a good bet because the price explosion looks set to be far bigger than lithium. In 2016 alone, Lithium rose 80%. Cobalt prices have already risen 70% in 2017—and this is just the start.
#1 The Cobalt Supply Panic Has Already Begun
If you thought lithium was the hottest commodity on the planet because of its role in powering our EV revolution, you would be right—almost. Cobalt is even more critical because lithium-ion batteries—despite their name—require more cobalt by weight. The difference this time around is that no one’s been paying attention to cobalt and while a flurry of new explorers got in on lithium at the right time, they ignored cobalt so this wide-open playing field makes for an amazing opportunity for first-in investors.
Now, EV and battery producers find themselves dependent on a supply chain that is already broken, bottlenecked and, in the future, might not even exist without new exploration to keep up with voracious demand growth year on year.
The battery industry is already using up some 42 percent of global cobalt production, while the rest is used in industrial and military applications. The competition to secure new supply lines is becoming extremely intense.
(Click to enlarge)
Tesla launched its $5-billion battery gigafactory in Nevada in January, and by the end of this year already it will have doubled the entire global battery production capacity. But that’s just this year. By next year, Tesla will be pumping out more batteries than the rest of the world combined.
Against this backdrop, we are also seeing phenomenal growth in EV production. Last year alone, it grew over 40%, with sales up more than 60 percent year on year. Between 2011 and 2016, this market grew 72% annually, and this year it should gain another 26%.
We’ve already seen a run on cobalt, and we’re just breaking out of the starting blocks. So a small-cap explorer like Scientific Metals could be a major beneficiary with its offering up of a pure cobalt play that is all-American, right at home and ethical.
Traders already see a “complete vacuum”, according to the Financial Times, so this is a golden opportunity for a savvy junior explorer like Scientific Metals.
#2 So Has the Hoarding …
Cobalt prices are already being pushed up by fundamentals, but also by speculators who are betting big on the supply vacuum.
As early as February, hedge funds started the run on cobalt, sending those companies who supply the EV and battery giants into panic over how to secure new shipments of the metal, according to a 23 February Financial Times article.
Since November, cobalt prices have rallied more than 50 percent, and this is only the beginning. Cobalt’s made impressive gains for 24 straight weeks.
(Click to enlarge)
It’s this amazing price that the hedge funds are trying to get exposure to, and the only way they can do it is by buying the physical commodity.
#3 An All-American Pure Play
The cobalt craze brings us right to the door step of Scientific Metals (TSX:STM.V; OTC:SCTFF), which in September moved to acquire Iron Creek, a pure cobalt play right in the heart of the Idaho Cobalt Belt, the most prolific cobalt mineralization trend in the U.S..
(Click to enlarge)
This property includes 30,000 feet of diamond drilling and a historic 1.3 million tons grading 0.59 percent of cobalt with encouraging indications of up to 10 million tons. Even better, it’s right next to the only cobalt play in the US that is ready to come into production soon, with an estimated 3 million-plus tons of the metal.
This means that Scientific Metals will be one of the first explorers to turn the US into a cobalt producing nation at just the moment that demand for the metal is hitting fever pitch. With one of only two pure play cobalt projects in the entire country, Scientific Metals is set to become the stuff of legend.
#4 Legendary Dream Team Leads Way For Another Metals Homerun
This could be the 5th home run in a row for Wayne Tisdale, the CEO of Scientific Metals.
Tisdale and his team at Intrepid Financial have in recent years created $2.7 billion in value by building and financing 5 companies in completely different industries—including a brilliant move on lithium.
Tisdale helped start Pure Energy in 2012, when the price of lithium was only around $5,000 per tonne, and it’s since spiked 450 percent. The company is now worth $65 million—and counting. He and his team also developed a successful gold play called Rainy River, which was worth $1.2 billion at its peak, along with a uranium homerun with Xemplar, which hit $1 billion.
Tisdale’s philosophy has worked time and again. He pinpoints industry trends, gets in early through smart and brilliantly timed acquisitions, and always puts a world class team in place to bring it home, fast and furiously.
With this track record, Scientific Metal’s pure cobalt play looks set to be another major success story.
#5 Cashed-Up to Advance Projects and Grab Major Attention
Scientific Metals is setting the pace here, and positioning itself to play a key role in a new cobalt-producing future for the U.S. The prolific Idaho Cobalt Belt is just the beginning: It’s already eyeing more acquisitions to expand these first-mover opportunities at a time when demand is set to explode over the next five years.
In the meantime, they are well-financed for this year’s exploration program, having already secured $3.5 million for development. But the management are also major stakeholders, with 35% ownership, with a strong focus on creating shareholder value.
By the end of this year, they hope to have proved up at least 10 million tons of cobalt resource, worth a potential $1 billion at today’s prices.
The end game? That’s simple: Become the largest pure play cobalt miner, advance projects towards production and sell to a major.
The lithium craze was just an appetizer. Cobalt is the main course here, with prices set to explode as the supply chain bends under immense pressure. Scientific Metals (TSX:STM.V; OTC:SCTFF) is entering this game early, carving out a position that could make it one of only two U.S. producers to corner this market domestically. This is the stuff of legend.
By James Burgess of Oilprice.com
**IMPORTANT! BY READING OUR CONTENT YOU EXPLICITLY AGREE TO THE FOLLOWING. PLEASE READ CAREFULLY**
PAID ADVERTISEMENT. This communication is a paid advertisement and is not a recommendation to buy or sell securities. Oilprice.com, Advanced Media Solutions Ltd, its owners, managers, employees, and assigns (collectively “The Company”) has been paid by a third party to disseminate this communication. This compensation is a major conflict with our ability to be unbiased, more specifically:
This communication is for entertainment purposes only. Never invest purely based on our communication. Gains mentioned in our newsletter and on our website may be based on end-of- day or intraday data. If we own any shares we will list the information relevant to the stock and number of shares here. We have been compensated by Scientific Metals Corp. to conduct public awareness advertising and marketing for [TSX:STM.V; OTC:SCTFF]. Oilprice.com receives financial compensation to promote public companies. This compensation is a major conflict of interest in our ability to be unbiased. Therefore, this communication should be viewed as a commercial advertisement only. We have not investigated the background of the hiring third party or parties. The third party, profiled company, or their affiliates will liquidate shares of the profiled company at or near the time you receive this communication, which has the potential to hurt share prices. Any non- compensated alerts are purely for the purpose of expanding our database for the benefit of our future financially compensated public awareness efforts. Frequently companies profiled in our alerts experience a large increase in volume and share price during the course of public awareness marketing, which often end as soon as the public awareness marketing ceases. The public awareness marketing may be as brief as one day, after which a large decrease in volume and share price is likely to occur. Our emails may contain forward looking statements, which are not guaranteed to materialize due to a variety of factors.
We do not guarantee the timeliness, accuracy, or completeness of the information on our site or in our newsletters. The information in our communications and on our website is believed to be accurate and correct, but has not been independently verified and is not guaranteed to be correct. The information is collected from public sources, such as the profiled company’s website and press releases, but is not researched or verified in any way whatsoever to ensure the publicly available information is correct. Furthermore, The Company often employs independent contractor writers who may make errors when researching information and preparing these communications regarding profiled companies. Independent writers’ works are double-checked and verified before publication, but it is certainly possible for errors or omissions to take place during editing of independent contractor writer’s communications regarding the profiled company(s). You should assume all information in all of our communications is incorrect until you personally verify the information, and again are encouraged to never invest based on the information contained in our written communications.
DISCLOSURE. The Company does not make any guarantee or warranty about what is advertised above. The Company is not affiliated with, any specific security. While the Company will not engage in front-running or trading against its own recommendations, The Company and its managers and employees reserve the right to hold possession in certain securities featured in its communications. Such positions will be disclosed AND will not purchase or sell the security for at least two (2) market days after publication.
NOT AN INVESTMENT ADVISOR. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. ALWAYS DO YOUR OWN RESEARCH and consult with a licensed investment professional before making an investment. This communication should not be used as a basis for making any investment.
INDEMNIFICATION/RELEASE OF LIABILITY. By reading this communication, you agree to the terms of this disclaimer, including, but not limited to: releasing The Company, its affiliates, assigns and successors from any and all liability, damages, and injury from the information contained in this communication. You further warrant that you are solely responsible for any financial outcome that may come from your investment decisions.
FORWARD-LOOKING STATEMENT. As defined in the United States Securities Act of 1933 Section 27(a), as amended in the Securities Exchange Act of 1934 Section 21(e), statements in this communication which are not purely historical are forward-looking statements and include statements regarding beliefs, plans, intent, predictions or other statements of future tense.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. Investing is inherently risky. While a potential for rewards exists, by investing, you are putting yourself at risk. You must be aware of the risks and be willing to accept them in order to invest in any type of security. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell securities. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results
CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR- OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.
All trades, patterns, charts, systems, etc., discussed in this message and the product materials are for illustrative purposes only and not to be construed as specific advisory recommendations. All ideas and material presented are entirely those of the author and do not necessarily reflect those of the publisher. No system or methodology has ever been developed that can guarantee profits or ensure freedom from losses. No representation or implication is being made that using the methodology or system will generate profits or ensure freedom from losses. The testimonials and examples used herein are exceptional results, which do not apply to the average member, and are not intended to represent or guarantee that anyone will achieve the same or similar results.
AFFILIATES. Some or all of the content provided in this communication may be provided by an affiliate of The Company. Content provided by an affiliate may not be reviewed by the editorial staff member. Our affiliates may have their own disclosure policies that may differ from The Company’s policy.
The information contained herein may change without notice.