Investing in Nano-Fuels
Elon Musk is Going to Pour a Fortune into Cobalt
Is Tesla doomed?
Don't get me wrong; the company has some great value and is driving the lithium revolution...
But there are so many challenges ahead.
The largest, of course, is figuring out how to scale up production of its cars. Remember, more than 400,000 future customers have laid down their deposits for the Model 3, and I wouldn't be surprised to see another surge in pre-orders before the cars roll off the assembly line.
Then there's one incredibly profitable problem: the lithium supply Tesla hasn't completely secured yet.
That alone has caused a sudden surge in demand, ultimately pushing prices sky high.
And now the same thing is about to happen to another commodity, one that's in an even worse situation: cobalt.
Cobalt may be the lesser-known ingredient to Musk's success, but it's an equally important piece of Tesla's batteries.
This includes nickel-cadmium (Ni-Cd), nickel-metal hydride (Ni-MH), and lithium-ion (Li-ion), which have the highest energy densities of rechargeable batteries, making them idea for portable devices.
Yes, that includes all those new electric vehicles pouring into the market.
This “nano-fuel” is mostly used for battery cathodes to improve conductivity, stability, and reserve capacity in these three battery types.
According to the Cobalt Development Institute, Ni-Cd has the least cobalt, at only around 5% for high-performance types, followed by Ni-MH, with up to 15% cobalt.
Li-ion has the highest concentration of these three — and the highest capacity, to boot — at a full 60% of the battery's cathode material.
In a nutshell, roughly 41% of the world's cobalt is used for batteries, and the battery market has been the catalyst for cobalt demand surging 67% over the last 10 years.
And it's going to keep growing.
Yet demand isn't the problem...
To put it one way, cobalt production is... a little odd.
You see, it isn't just mined by itself like many major commodities. More often, it's a byproduct of copper or nickel production.
So it doesn't even have the advantage of easy access when — not if — more is needed.
That in itself is a danger to future supply.
But wait: there's more.
The biggest producer of cobalt is the Democratic Republic of the Congo. According to the U.S. Geological Survey, the vast majority of the world's production came from DRC in 2014: 56,000 tons compared to the next producer down, China, at only 7,200 tons.
Unfortunately, it's not a country that's very popular with business.
Its many and abundant natural resources should make it a haven for investors... but DCR is actually one of the poorest countries in the world.
What's more, it has been stuck in what the European Union calls, “an ongoing, complex, and multi-factor humanitarian crisis” for over 15 years.
And so not only are investors not lining up to do business there, but the business the country does get is under constant threat from social and political upheavals.
And that means the world's largest source of cobalt could be cut off at any point.
Talk about a scary opportunity.
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IF Tesla can ramp up...
IF a steady supply of lithium can be found...
And IF the world can keep — and increase — its cobalt production... then early investors in the booming battery field are set to make a fortune or two.
It's a lot of ifs, isn't it?
I think it's safe to say that most people are confident that Musk can deliver on the first, and the lithium revolution taking place in Nevada is helping to shore up Tesla's desperately needed lithium supply.
With the EV market already taking off, Tesla will have some competition securing its lithium supply, but that doesn't mean it's not within reach. Most of the world's biggest car and tech companies are hopping on the EV bandwagon in coming years.
As for that third "IF," that'll simply come down to a small group of elite miners.
And in such a limited supply market, any company that can meet the needs for either lithium or cobalt will offer individual investors like us decades' worth of gains.
Soon, I'll show you where to look to get in on the ground floor of this opportunity... Stay tuned.
Until next time,
A true insider in the energy markets, Keith is one of few financial reporters to have visited the Alberta oil sands. His research has helped thousands of investors capitalize from the rapidly changing face of energy. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital as well as Investment Director of Angel Publishing's Energy Investor. For years, Keith has been providing in-depth coverage of the Bakken, the Haynesville Shale, and the Marcellus natural gas formations — all ahead of the mainstream media. For more on Keith, go to his editor's page.
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