Before you start investing in cobalt, prospective investors should hear what Peter Clausi, or “Captain Cobalt”, has to say about the sector. Clausi’s professional life centers around cobalt and increasing shareholder value, and he satisfies these ambitions through CBLT, Inc. (TSXV:$CBLT), which used to be called Green Swan Capital Corp.
Most investors are aware of the success that the lithium-ion battery sector has endured as of late. This success is mostly due to the new electric vehicle market being one of the top drivers in the demand for these batteries. However, these same investors are not aware that the main ingredient in these lithium-ion batteries is cobalt. Shocking, right?
Aside from nickel, aluminum, manganese and lithium, cobalt is one of the main metals used in large quantities to create these lithium-ion batteries. So, the question that remains is, why does Clausi have a bullish attitude when it comes to cobalt?
Most of the problems seen in the cobalt sector stems from the fact that the supply of the metal is constrained. The number one problem, however, is that cobalt is quite rare. Some might even argue that cobalt is more like rare earths than conventional metals which is what investors work with more.
In regards to mining, cobalt almost never occurs in a high enough array for primary mining. As a result, most of the globe’s cobalt supply comes as byproducts of other mining. For instance, more than 97% of the globe’s cobalt supply is produced as byproducts of either copper or nickel mining. Additionally, cobalt can be found with gold and molybdenum.
There are only a small quantity of “cobalt mines” around the world that are either in production or undergoing construction. Therefore, no matter how fast demand increases there can only be, at present, a muted response on the supply side of the equation. Here’s the truth of the matter: mining companies will not spend millions of dollars creating new copper and nickel mines just to remove the small percentage of cobalt, as it is very rarely found.
Coming from an economic perspective, markets such as this are known as “inelastic” when it comes to price. What does this mean? Well, no matter how high the price of cobalt rises, accumulative supply will only increase very slowly.
In light of recent months, cobalt prices have been increasing. These prices are now pushing $26 per pound, making this more than double the price in 2016. As of right now, the cobalt market is heading towards supply shortfall, which means that there are no factors standing in the way of obtaining larger gains.
Junior mining companies (the majority are Canadian) are attempting to meet the future supply gap by looking for new sources of cobalt. Clausi reported that, “Canada is the best place in the world to find and produce cobalt in an ethical transparent supply chain. It has history, infrastructure, mining wisdom, trained labor, and well-known mining laws.”
Like any exploration for a metal, searching for cobalt is a time-consuming process. This means that cobalt exploration projects should commence as soon as possible as it is extremely important.
CBLT’s first cobalt accomplishment was the acquisition of the Copper Prince property in Sudbury, Ontario. If you’re a mining investor, you probably know that the Sudbury area is a famous location for base metals mining. So what does the short-term forecast look like for the Copper Prince property in regards to exploration? Well, according to Clausi, “last year we ran a ground exploration program followed by a successful short drill program in November, showing continuity of mineralization throughout the targeted area. This summer CBLT intends to track some interesting geology from Ed’s Watering Hole to the east, with drilling possibly taking place in the fall.”
Following the acquisition of Copper Prince, CBLT has obtained a number of properties, such as the Dryden Cobalt property on August, 29, 2016, the Otto Assets on February 21, 2017, and the Chilton Cobalt property in the Grenville Province on February 28, 2017.
It’s important to note that all three land packages mentioned above are in the infancy stage. Stage 1 of exploration at Chilton Cobalt property has now been finished and the plan is to now shift the focus to CBLT’s two properties in Sudbury and Gowganda. The acquisition of Gowanda has forced the company to reconsider its near-time goals.
Sampling at Bloom Lake in Gowganda showed high-grade analysis of silver (219 g/t Ag to 603 g/t), copper (11.0% to 14.7%) and cobalt (0.3% to 0.9%). Furthermore, one drill hole at the United Reef in Gowganda created an intercept of 1,250 g/t Ag over 3.0 meters. As a result, CBLT believes that Gowganda exploration is a priority. “We expect a lot of strong news from Gowganda this summer,” says Clausi. “The Bloom Lake prospect will receive more attention than the others, but we intend to carry out a first phase of exploration on all our Gowganda assets this summer.”
Acquisitions such as the ones mentioned above are clearly working for the company, which is why CBLT disclosed a $1 million private placement in April so they can do more of these acquisitions. This, however, turned into an un-brokered placement within a matter of hours after a shareholder stated that they would like to fund most of the financing.
Currently, more than half the globe’s cobalt supply comes directly from the Democratic Republic of Congo. This, as one might expect, is a big problem. Why? Because the DRC is known for political instability and corruption. In March, Apple disclosed that they would no longer be buying DRC cobalt output, while Amnesty International is planning to boycott DRC cobalt. Therefore, investors are left wondering; what does this mean for cobalt prices or cobalt stocks?
Featured Image: cbltinc.com
