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Investing in Cobalt 2018

Written by Luke Burgess
Posted December 12, 2017 at 9:35PM

It doesn’t matter whether or not you believe in climate change...

It doesn’t matter if you care about reducing your carbon footprint...

It doesn’t matter whether or not you even care about the environment at all...

Odds are the next brand-new car you buy is going to be an electric vehicle or some kind of electric hybrid.

Why?

Because they’ll simply be more affordable to operate.

In 2015, global electric vehicle sales topped 1 million. Last year, that figure doubled. And new registrations of electric vehicles are expected to reach a new record for 2017.

The IEA expects the global electric vehicle stock to continue rapidly growing to range between 9 million and 20 million by 2020. By 2025, the agency anticipates worldwide deployment of 40 million to 70 million.

As a result, the global lithium-ion battery market is also expected to proliferate. According to research by Grand View Research, Inc., the global lithium-ion battery market is expected to grow at a whopping 17% CAGR between 2016 and 2025 to reach a nearly $100 billion market.

But, as we’ve talked about before, these lithium-ion batteries aren’t simply solid hunks of lithium. An essential component of lithium-ion batteries is another metal: cobalt.

Every lithium-ion battery contains three basic parts:

  • Anode
  • Electrolyte
  • Cathode

lithium ion battery 12%2F11

The anode in a lithium-ion battery is generally made of graphite. The electrolyte is lithium salts. But the cathodes in lithium-ion batteries have varying formulas. And among the best and most affordable cathode formulas requires significant amounts of cobalt.

As a result, cobalt is expected to play a more prominent role in the global automotive market going forward. According to Benchmark Mineral Intelligence, 75% of lithium-ion battery cathode capacities are expected to contain some volume of cobalt by 2020.

The price of cobalt has increased more than 140% in the past 12 months to over $34 per pound. But as demand for the metal increases, auto manufacturers are likely to run into supply problems

You see, the best place in the world to mine cobalt is perhaps the worst place in the world to mine anything: the Democratic Republic of Congo.

More than half of the world's cobalt reserves are located in the DRC. And the country is currently responsible for over 50% of global production of cobalt. But, as you've probably already guessed, the DRC is home to many issues that constantly threaten stable mining output.

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

My colleague Keith Kohl is 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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