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Ian Jenkins

Ian Jenkins

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Cobalt Prices To Rocket As Tech Giants Scramble For Supplies

cobalt mine

Pay close attention to this cobalt chart. Demand could be about to surge from 2k tonnes today... to over 300k tonnes in 2030. That’s a 14,900% increase in demand.

This demand boom is driven by the electric vehicle revolution and a massive supply disruption coming out of Africa.

 

(Click to enlarge)

The Democratic Republic of Congo supplies some 60 percent of the world’s cobalt—a desperately sought after metal that is the driver of our electric vehicle (EV) boom and the fodder of battery gigafactories popping up all over the world.

But this claim to fame is obscured by a much darker side of the DRC – namely that it’s in the middle of a violent uprising and it’s been using inhumane child labor to mine the precious metal. DRC’s cobalt is the ‘blood diamonds’ of this decade.

Buyers are under growing pressure to give up conflict cobalt and find new sources, but the timing is tough – with major automakers and battery manufacturers scrambling to secure supplies of cobalt.

North America has an answer to this, with a ‘cobalt rush’ ensuing in a place whose name says it all: Cobalt, Ontario.

With political instability, war and working conditions that have everyone using conflict cobalt under major scrutiny, miners are coming back to this North American venue in droves.

One little-known company, Quantum Cobalt (CSE:BVQ; OTC:BRVVF), has three projects in the heart of this ‘cobalt rush’ venue. It’s moving fast on exploration, with impressive past-producing mineralizations, and it’s poised to earn its place with a new type of cobalt that is safe, ethical and politically stable.

Here are 5 reasons to keep a close eye on Quantum Cobalt (CSE:BVQ; OTC:BRVVF) at a crucial moment when cobalt prices seem to be going in only one direction:

#1 The New Cobalt: It’s North American

Right in the heart of Ontario’s cobalt belt, Quantum Cobalt (CSE:BVQ; OTC:BRVVF) has the Nipissing Lorrain Cobalt Project, which has in the past produced over 1,6500 tons of the critical metal.

 

(Click to enlarge)

Canada is already one of the world’s biggest producer of cobalt, but it’s only been producing about 6 percent of supply, along with China. Both have been sidelined by the lure of African cobalt. But African cobalt is becoming increasingly shaky, and it’s a supply line that is no longer reliable.

Canada is now ramping up exploration and development, and much of this is happening in Cobalt, Ontario.

Only two years ago, according to one local geologist speaking to Canadian media, “if you had a cobalt property, you couldn’t give it away. All of a sudden, within six months, everything changed.”

What’s changed is that we are using so much cobalt that it’s forced a look at the origins, and that scrutiny is leading consumers away from the DRC.

Even with conflict cobalt, we’re still looking at a potential 20 percent gap in supply by 2025.

So the market is betting big on new cobalt suppliers, and there’s no better place to be than Ontario’s ‘Cobalt Belt’, where Quantum Cobalt has three projects with promising exploration upside.

The Rabbit project is just 55 kilometers north of Ontario’s prolific Cobalt district, with historic work returning an assay of 8.76 percent cobalt.

The Kahuna Cobalt-Silver property, covering 77 claims over 1,200 hectares, has also seen mineralization of cobalt discovered in past work.

According to the company, the cobalt mineralization in this region is striking. Past production of five tonnes of material was reported to be an unusually high grade of 22 percent cobalt. That’s impressive when you consider that most projects are deemed valuable with as little as 0.05 percent cobalt, says CEO Greg Burns.

The company has mobilized field crews to carry out first-pass exploration on both of these properties, and we expect rapid news flow on prospecting, geologic mapping, geochemical mapping, geochemical surveying and sampling to locate and delineate mineralized structures.

Fortunes were made here in silver more than a century ago. Now fortunes are about to be made in cobalt.

#2 Supply and Demand: Gotta Love the Math

Cobalt makes up some 35 percent of the lithium-ion battery mix. And with 2 million EVs already produced, and numbers rising fast, this critical element is in short supply.

(Click to enlarge) 

At a price of about $60,000 per metric ton right now—cobalt is the most expensive of all battery metals. And the scramble is on for manufacturers to secure their own cobalt pipeline.

Tesla leads the way, planning to pump out 500,000 EVs a year, and every other major car maker has announced a definitive shift to electric.

• General Motors (NYSE:GM) will launch 20 EV models by 2023
• Renault will double its EV offerings in the next five years
• Germany’s Volkswagen plans to invest more than $24 billion in zero-emissions cars by 2030, producing 3 million EVS a year by 2025.
• VW Group (Volkswagen, Audi, Porsche) plans to invest a whopping $84 billion in EV development (over half going to battery production).
• Ford will release 13 new EV models by 2023.
• Daimler (which owns Mercedes-Benz) is planning 50 models by 2022.
• Volvo is going all electric by 2019 and anticipates selling one million EVs by 2025.
• Renault, Nissan and Mitsubishi, collaboratively, plan to have 12 EVs by 2022.

And battery gigafactories to support these ambitious production targets are popping up all over the world.

The global lithium-ion battery market—of which cobalt is a critical element—will reach $77.42 billion by 2024.

China will render supply even tighter.

Right now, China is the largest consumer of cobalt in the world. China is by far the largest market for plug-ins, and it’s also the largest producer.

Last year alone, 507,000 EVs and PHEVs were sold in China--a 53 percent increase from 2015, and almost double the number sold in Europe and triple the number sold in the U.S.

In 2016, Chinese cobalt consumption rose by 5.3 percent year-on-year, hitting 45.900 tons—equal to over 44 percent of all global consumption. From this year to 2021, China is expected to see a 12 percent increase in cobalt consumption, on the back of EV and battery growth.

#3 China, China, China

Big automakers may be playing catch-up with Tesla, but it’s China that’s the real beast, and it alone will seriously challenge global cobalt supplies. We knew this before, but now it’s becoming even more clear.

Right now, China is the largest consumer of cobalt in the world. In 2016, Chinese cobalt consumption rose by 5.3% year-on-year, hitting 45,900 tons—equal to over 44% of all global consumption. From this year to 2021, China is expected to see a 12% increase in cobalt consumption, on the back of EV and battery growth.

Cobalt spot prices have seen a 150% price surge this year, thanks to the China-led EV growth spurt, and China leads the way with super restrictions on conventional vehicles to crack down on pollution. China is the largest market for plug-ins, and it’s also the largest producer. It’s not just about passenger EVs: It corners the market on commercial EVs and even electric buses.

(Click to enlarge) 

Last year alone, 507,000 EVs and PHEVs were sold in China--a 53% increase from 2015, and double the number sold in Europe and triple the number sold in the U.S.

Even more lucrative for the fantastically tight cobalt supply equation is the fact that China—the largest auto market in the world—produced 28 million vehicles last year and is expected to produce 40 million by 2025. Because of tight restrictions on conventional cars, the bulk of these are going to have to be EVs.

According to Wood Mackenzie, demand for cobalt in EV batteries alone is expected to grow fourfold by 2020 and 11-fold by 2025.

One of the biggest beneficiaries in the EV supply chain will be cobalt miners, and particularly those smaller, new entrants who are developing new supplies that are safe and ethical like Quantum Cobalt Corp. (CSE:QBOT; OTC:BRVVF)

#4 Big Institutional Backing for Veteran Explorers and Value-Creators

Jerry Huwang, a Quantum Cobalt director, is an instrumental player in Energold Drilling Corp., a leading drilling solutions company servicing the mining and energy sectors in the Americas, Africa and Asia. Internationally recognized for social and environmental approach to drilling and operating 270 rigs in 24 countries worldwide, Jerry brings a wealth of knowledge and expertise in exploration and drilling.

CEO Greg Burns, Director of Mergers and Acquisitions at Capital Investment Partners—a multi-billion-dollar fund out of Australia—has lead multiple large-scale deals, including the development of Coalspur Mines into a billion-dollar market cap company at one point.

Quantum Cobalt is also backed by big institutional money, most notably that of Hayward, arguably the most respected institution in Canada. Haywood will be advising on financing and mergers and acquisitions, and it’s already a cleaning house for 4 Canadian dealers with more than CAD$5.5 billion in assets under administration.

#5 Ontario Loves the Supply Squeeze

The shift is comprehensive. It’s complete. The only thing missing? Cobalt. And investors expect what CNBC calls “inexorable” growth in the EV industry to generate a major supply squeeze for cobalt.

Everyone is scrambling to secure supply, and Cobalt, Ontario, is poised to emerge as a key player.

Volkswagen has just moved to secure long-term supplies of this vital battery component, seeking a 10-year secured pipeline beginning in 2019, according to Reuters.

Volkswagen alone, Reuters estimates, will need more than 150 gigawatt hours of battery capacity every year by 2025 to support its EV plans. It’s enough cobalt for just one carmaker to be labeled one of the largest procurement projects in history. In fact, the total order volume is over $58.7 billion at today’s soaring cobalt prices.

Cobalt spot prices have seen a 150 percent price surge this year.

According to Wood Mackenzie, demand for cobalt in EV batteries alone is expected to grow fourfold by 2020 and 11-fold by 2025. By 2021 already, the supply gap is expected to reach 12,000 tons, according to Research and Markets.

So, with cobalt demand set to surge 700% by 2020... and 14,900% by 2030...

The biggest beneficiaries in this wild market will be smaller, new entrants developing ethical supplies. Right now, that means North America, and Ontario’s Cobalt Belt.

Sitting in the heart of this cobalt belt and surrounded by other fast-moving cobalt miners, Quantum Cobalt (CSE:BVQ; OTC:BRVVF) appears to be undervalued in relation to its peers, and it’s got fast-moving exploration boots on the ground.

Honorable mentions:

Global X Lithium ETF (NYSEARCA:LIT) has been around for 7 years, but it’s not a stunning stock story like Tesla. What it is, however, is a safer bet on lithium. There’s not as much to lose here. Year-to-date, LIT is up over 25%, and they remain steady.

This fund has more than $262 million in assets, and it tracks the Solactive Global Lithium Index of companies that engage in lithium mining, refining and battery production. And it gives you exposure to Tesla, as well as to miners like FMC Corp.

General Motors (NYSE:GM) is a household name. GM was born at the turn of the 20th century and has been a leading innovator in the automotive industry ever since. Even though it’s been surpassed in market cap by Tesla (of all companies), it is still the furthest ahead of the Big 3 car makers from Detroit in terms of EVs and self-driving cars.

Recently, GM acquired Cruise Automation—a self-driving car company, and it seems determined to forge ahead even faster to play catch-up with the future. Additionally, GM is a leader in the booming electric vehicle market. As countries across the world begin to pass regulations on combustion engines, GM stands to gain significantly as an early adopter in the EV game.

Fortune Minerals (TSX:FT) is another player in the cobalt space. Operating in Canada’s Northwest Territories, Fortune is eyeing status as a major Canadian producer of battery-grade cobalt chemicals--but it’s also got copper and gold bismuth upside. And it’s getting a boost from the government in terms of mining infrastructure.

Fortune’s modest market cap and low buy in make it a great stock for investors looking to get a piece of the electric vehicle revolution. The company’s value has increased significantly over the past year but it hasn’t yet reached its peak.

Ballard Power Systems (TSE:BLDP; NASDAQ:BLPD) Ballard develops and produces hydrogen fuel cell products for markets such as heavy-duty motive, portable power, material handling and transportation

Ballard’s stock price jumped a whopping 27% in September as the company announced a new way to manufacture fuel cell batteries, reducing the need for platinum in its production process by some 80%.

Ballard expects to start producing the new fuel cells at the end of this year.

While Ballard looks at bit expensive compared to its peers, the stock should be on investors’ radars as this is one of the most exciting fuel cell stocks.

Turquoise Hill Resources (TSX:TRQ; NYSE:TRQ) is a mid-cap Canadian mineral exploration and development company headquartered in Vancouver, British Columbia. Its focus is on the Pacific Rim where it is in the process of developing several large mines

The company mines a diversified set of metals/minerals including Coal, Gold, Copper, Molybdenum, Silver, Rhenium, Uranium, Lead and Zinc. One of the fortes of Turquoise hill is its good relationship with mining giant Rio Tinto.

Going forward, Turquoise’s success at the giant Oyu Tolgoi project in Mongolia will be crucial to boost its lagging share price.

Fortune Minerals (TSX:FT) is another player in the cobalt space. Operating in Canada’s Northwest Territories, Fortune is eyeing status as a major Canadian producer of battery-grade cobalt chemicals--but it’s also got copper and gold bismuth upside. And it’s getting a boost from the government in terms of mining infrastructure.

Fortune’s modest market cap and low buy in make it a great stock for investors looking to get a piece of the electric vehicle revolution. The company’s value has increased significantly over the past year but it hasn’t yet reached its peak.

RNC (TSX:RNX): While investor attention is about to refocus on zinc, it’s possible that nickel is being overlooked, and while this stock has been a recent top decliner, if nickel demand growth is overlooked, RNC could be a good stock to hold.

RNC's principal assets are the producing Beta Hunt gold and nickel mine in Western Australia, the Dumont Nickel Project located in the established Abitibi mining camp in Quebec and a 30% stake in the producing Reed copper-gold mine in the Flin Flon-Snow Lake region of Manitoba, Canada.

RNC’s stock price has lagged since July, but a recent uptick in nickel prices could revive this stock once again.

By Ian Jenkins

**IMPORTANT! BY READING OUR CONTENT YOU EXPLICITLY AGREE TO THE FOLLOWING. PLEASE READ CAREFULLY**

Forward-Looking Statements

This communication contains forward-looking information which is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ from those projected in the forward-looking statements. Forward looking statements in this release include: that cobalt demand will increase in the future, and potentially by 14,900% by 2030; that cobalt supply will not be able to catch up to future increases in demand; that one of the biggest beneficiaries in the EV supply chain will be cobalt miners and, specifically, new entrants that develop new supplies that are safe and ethical; that cobalt prices could go even higher than current levels; that rapid news flow on prospecting, geologic mapping, geochemical mapping, geochemical surveying and sampling to locate and delineate mineralized structures can be expected from Quantum Cobalt Corp. (“Quantum Cobalt”); and that this year will be the year in which cobalt leaves Africa and is relaunched in Canada. Risks that could change or prevent these statements from coming to fruition include: that cobalt demand will not increase, as expected, in the future; that cobalt supply will be able to catch up to future increases in demand; that one of the biggest beneficiaries in the EV supply chain will not be cobalt miners or that new entrants developing new supplies that are safe and ethical will not benefit from the EV supply chain; that cobalt prices will not go higher than current levels; that rapid news flow on prospecting, geologic mapping, geochemical mapping, geochemical surveying and sampling to locate and delineate mineralized structures will not be forthcoming from Quantum Cobalt; and that this year will not be the year in which cobalt leaves Africa and is relaunched in Canada. These forward-looking statements are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. The forward-looking statements contained in this communication reflect the current expectations, assumptions and/or beliefs of the writer based on information currently available to the writer. In connection with the forward-looking statements contained in this communication, the writer has made assumptions about: future increases in cobalt demand; the ability of cobalt supply to catch up to future increases in demand; the biggest beneficiaries in the EV supply chain, going forward; future cobalt prices; Quantum Cobalt’s future news flow; and the fact that this year will be the year in which cobalt leaves Africa and is relaunched in Canada. The writer has also assumed that no significant events will occur outside of Quantum Cobalt’s normal course of business. Although the writer believes that the assumptions inherent in the forward-looking statements are reasonable, the forward-looking statements are not a guarantee of future performance and accordingly undue reliance should not be put on such statements due to the inherent uncertainty therein. The forward-looking information contained herein is given as of the date hereof and the writer assumes no responsibility to update or revise such information to reflect new events or circumstances, except as required by law.

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Leave a comment
  • mothman777 on November 15 2017 said:
    I am just thinking, the water-powered car engine technology, fully proven already in Japan and the US, that has been shelved for no good reason, might yet be brought into mass production when they inevitably decide that nuclear power plants to provide power for electric cars and other purposes are just too harmful to the environment. What would the need for cobalt be then? Would water-powered cars still need cobalt? See 'Hydrogen cars - Japan's water-powered revolution?'

    'Hydrogen fuel cell cars creep up — slowly — on electric vehicles'

    'WATER POWERED CAR – IT DOESN’T MATTER IF IT’S FROM YOUR TAP, BOTTLED OR LAKE'

    Of course, some electricity is still required to first split the hydrogen and oxygen atoms, but that itself can be generated by using water-powered energy devices, and such devices could be in the vehicle, with the process maybe being initiated by on-board solar panels, or just a battery, into which vehicles could load the electric energy necessary to initiate the process of splitting the water in the same way electric cars are currently loaded, but now from large scale water-powered electricity generating plants, the initial electrical supply for which comes from large scale solar panel arrays, or similar, by external cable, and that would still obviate the necessity for nuclear power plants. In any case, once the process is initiated, any water-powered engine will be able to generate it's own electricity to carry on the process of splitting water.
  • Don Mahony on November 17 2017 said:
    I cobalt will still be in demand using hydrogen powered vehicles because the electricity will be send through a battery to act as a buffer.

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