Before I start, I am obliged to remind our viewers that this is not advice only general commentary from my extensive research in this area.
Cobalt, alongside nickel and copper, is a critical component of lithium-ion batteries. These batteries are found in everything, from smartphones to electric vehicles. The upward shift in electric vehicles (EV), especially from Tesla, caused the demand for lithium-ion batteries and thus cobalt, to surge in the past couple of years. Prices for cobalt were rising steadily from 2016 to 2018 and peaked at $123.3 per kilo in 2018. However, now cobalt prices have decreased, currently sitting at AUD $46.82 per kilo (23rdAugust 2019). So why have cobalt prices fallen?
Firstly, the demand for electric vehicles sparked a cobalt mining frenzy in 2018. In turn, mining companies pre-emptively increased their supply of cobalt, thus causing prices to rise. However, the evolution toward electric vehicles has not taken off yet. Secondly, the political instability and use of child labour within the Democratic Republic of Congo, a country who supplies 60% of the world’s cobalt, has further contributed to the declining prices.
So, what can young investors do now? Due to the current global volatility of cobalt and the temporary delay in the electric vehicle evolution, it would not be wise to invest directly in cobalt through futures (futures will be explained in a later article). Instead it would be best if you looked to invest in the stocks of those companies within the cobalt – battery or mining sector.
The investing strategy to be used for all these companies is, buy low, and sell high. The following companies are, in my opinion, some of the most promising businesses to invest in within the cobalt – mining sector.
CBLT is a Canadian mineral exploration company. CBLT have acquired safe and healthy cobalt/gold mining properties throughout Canada, especially in Ontario. CBLT, under the guidance of CEO Peter M Clausi, has placed these mining properties under merger and acquisition (M&A) activity. Ultimately, increasing profits for their shareholders.
Global Energy Metals (TSXV; GEMC) are sourcing cobalt from top tier mining jurisdictions worldwide. These include the Millennium Cobalt Project in Australia (Queensland), the Werner Lake Cobalt mine in Ontario (Canada) as well as early exploration in Nevada (America). GEMC’s diversification of cobalt supply in stable countries has significant upside potential in preparation for EV demand. CEO Mitchel Smith’s confirmation of mining progress in Australia and Canada makes this company one to watch.
It would help, that readers check out cobalt mines/electric car companies in China. Primarily, due to China accounting for 65% of the world’s lithium-ion battery and the government wanting to produce a minimum of 2 million EV cars in 2020.
To conclude, do not be discouraged by the decrease in cobalt prices this year. Due to the current and forecasted appetite for technology, lithium-ion batteries, and electric cars, it does not seem like the demand for cobalt will slow down in the future. Ultimately, driving cobalt prices up in the long term (2020 and beyond) and providing significant upside potential in the cobalt – electric vehicle sector.
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The information above should not be taken as financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
Written by associate Patrick Mcloughlin of YIG.