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Invest Ahead of the Scramble for Cobalt

Written by Luke Burgess
Posted December 1, 2017 at 12:12AM

The hottest subsector of the electric vehicle market right now is blue...

Cobalt blue to be exact.

Cobalt is a metal you may be hearing a lot about. In the past week alone, the price of cobalt has jumped over 10%. For the year, prices have more than doubled.

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Cobalt is a silvery-bluish metal that's mostly used today to make specialized magnetic and high-strength alloys. But the EV revolution is rapidly changing this.

I'm sure you know the demand for electric vehicles is set to absolutely explode...

The IEA estimates the global electric vehicle stock will increase from 2 million in 2016 to between 40 million and 70 million by 2025. Its low projection is a 20-fold increase in demand over 10 years.

And I'm sure you know EVs depend on lithium-ion batteries to store their energy.

But the lithium-ion batteries used in electric vehicles aren't simply hunks of lithium with terminals. There are other key metals required to produce rechargeable EV batteries that are often overlooked.

Take a look at the word “lithium-ion” for a moment...

Ever wonder what the “-ion” of “lithium-ion” is?

Rechargeable lithium-ion batteries are named for their active ingredients. Inside each is a lithium compound that acts as the battery's cathode material. The most common lithium compound used today is lithium cobalt oxide, or LiCoO2.

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Stay with me here...

The cobalt in a LiCoO2 battery is the main active ingredient and allows for the ionic movement that enables the recharging process.

In other words, it's the cobalt in a rechargeable Li-cobalt battery that makes the battery rechargeable. The cobalt in a Li-cobalt battery is just as important as the lithium.

Battery chemists also use other metals such as manganese and nickel to make compounds that serve the same purpose. But lithium cobalt oxide remains the preferred compound today. Roughly three out of every four lithium-ion EV batteries contain cobalt... a lot of it.

On average, a single lithium-ion EV battery contains over 30 pounds of cobalt.

And with conservative projections of a 20-fold increase in global EV demand, forecasts show a whopping 4,500% surge in demand for cobalt between now and 2030.

The coming surge in demand has sent auto manufacturers scrambling to secure resources. But they've all run into a major supply hurdle.

Turns out the best place in the world to mine cobalt is the worst place in the world to mine anything: the Democratic Republic of Congo.

Over 50% of the world's cobalt resources are located in the DRC. And currently, the DRC accounts for over 50% of global production of cobalt. But, as you've probably already guessed, the country hosts a mountain of issues that constantly threaten stable mining output.

Geopolitical instability and corruption are commonplace. And key cobalt mines are frequently shut down. In fact, just last week a dispute between miners and the DRC courts halted supply from a single mine that provides about 4% of global cobalt supply.

But now the DRC cobalt industry is also under harsh scrutiny for child labor and human rights violations. According to UNICEF, as many as 40,000 children were working in mines across southern DRC in 2014.

It's a mess.

As you can imagine, all this is pushing investors to look elsewhere for cobalt resources in more mining-friendly countries such as Australia and Canada.

My colleague Keith Kohl is already ahead of the game, with several cobalt miners and explorers already in his portfolios with mining projects outside the DRC. One of his cobalt stocks is up nearly 30% in less than a week and still powering higher.

Keith recently put together an entire presentation on cobalt and gives the details of one of his favorite non-DRC cobalt stocks, which I think you need to check out now.

These types of geopolitically safe cobalt stocks are still flying under the radar... mostly because they're still really small companies. But that won't last. With cobalt prices flying and the EV market just now starting to pay attention to supply, these small companies won't be small long. This is something you need to move on today.

If you missed the big moves in lithium and want a second shot at EV wealth, check out Keith's most recent cobalt presentation now.

Until next time,

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Luke Burgess

follow basic@Lukemburgess on Twitter

As an editor at Energy and Capital, Luke’s analysis and market research reaches hundreds of thousands of investors every day. Luke is also the investment director of Angel Publishing’s new Secret Stock Files newsletter, which helps investors leverage the future supply/demand imbalance that he believes could be key to a cyclical upswing in the hard asset markets. For more on Luke, go to his editor’s page.

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