Published on March 21 2018

Speculate on This Obscure Metal Before It’s Too Late

By Justin Spittler, editor, Casey Daily Dispatch

It’s an all-out land grab.

Companies are shelling out hundreds of millions of dollars to one of the world’s most sought-after resources. But it’s not oil… gold… or even water.

I’m talking about cobalt.

Cobalt is a key industrial metal. It goes into computer chips, mobile phones, and lithium-ion batteries.

Until recently, very few people cared about cobalt. Miners didn’t even seek it out. It was mostly a byproduct of copper and silver mining.

But those days are over. Now, companies like Apple, Samsung, and BMW are paying top dollar for it. Miners are doing the same.

In fact, we just saw a blockbuster deal in the cobalt space…

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• Last week, First Cobalt bought U.S. Cobalt for $116 million…

First Cobalt is a cobalt miner based in Canada. It’s also the world’s only cobalt “pure play.” This means that it mines cobalt exclusively.

First Cobalt acquired U.S. Cobalt in an all-cash deal. It exchanged 1.5 First Cobalt shares for every one share of U.S. Cobalt. That represents a 62% premium to U.S. Cobalt’s share price at the time of the deal.

That tells you how badly First Cobalt wants to secure a large cobalt supply. But we’ll see a lot more deals like this in the coming months.

I’ll explain why in a second. And I’ll tell you why right now is the time to speculate on cobalt. But let me first tell you why the world’s running so low on cobalt.

• We’re in the early innings of an electric vehicle (EV) revolution…

Regular readers know what I’m talking about. If you’re new to the Dispatch, here’s what you need to know.

In short, demand for EVs is soaring. And these vehicles require far more cobalt than traditional vehicles.

That’s because cobalt’s a key ingredient in the lithium-ion batteries that power EVs. In fact, the typical 60-kilowatt EV car battery contains around eight kilograms (18 pounds) of cobalt.

Below, you can see what impact EVs have had on the price of cobalt.

Cobalt’s gone berserk. Its price is now up 309% since its February 2016 low.

Normally, markets adjust after these kinds of explosive moves. Miners raise production. Supply catches up with demand. This brings prices back down to earth.

But that hasn’t happened with cobalt. And there’s a simple reason for this.

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• The global cobalt supply is extremely lopsided…

About two-thirds of the world’s cobalt comes from the Democratic Republic of Congo (DRC).

That’s a major problem, according to the International Speculator team:

The DRC has been relatively stable for the past 10 to 15 years, but it has a long and recent history of extremely bloody conflict and wars. The DRC is also ground zero for the uproar over “conflict minerals.” This makes cobalt supply extremely susceptible to disruptions.

To make matters worse, the DRC just declared cobalt a “strategic” mineral.

Its government did this for two reasons. Number one, it thinks cobalt is critical to the country’s economic, social, and industrial future. Number two, it’s worried about running out of cobalt.

Here’s a quote from Jean Nkunza, advisor to the DRC Prime Minister:

We need to make enough money before we run out of these minerals so that is why they are strategic to the country…

We have to make sure for the next 20 years we make money from these minerals because demand is going to be so high. It’s going to continue to grow and we are not going to stop raising the royalties on these minerals.

In other words, the DRC just admitted what Dispatch readers have known for months.

• The world is headed for a major cobalt supply crunch…

That’s why First Cobalt paid a steep premium to acquire U.S. Cobalt. And it won’t be the last time something like this happens…

In fact, Agnico Eagle Mines reportedly received multiple offers for one of its silver-cobalt mines from interested buyers. So, it’s dusting off the facility for a possible sale.

Canadian resource company Sherritt International was also recently approached by investors interested in its cobalt production. And Vale SA, one of the world’s largest miners, is also putting one of its cobalt facilities in Canada up for sale.

Pretty soon, the average investor will start reading about these cobalt takeovers everywhere. When that happens, cobalt will become too big to ignore.

Mom-and-pop investors will follow the “smart money” into cobalt. That will push its price even higher.

You’ll obviously want to be ready for that. So, consider speculating on cobalt miners if you haven’t already.

First Cobalt is one way to do this.

Alternatively, International Speculator editor Louis James and his team recently recommended a world-class miner that’s highly leveraged to the price of cobalt. Not only that, this company’s cobalt project is located in the United States. That makes it one of the safer ways to speculate on this megatrend.

You can learn more about this company by signing up for International Speculator, our advisory focused on resource stocks with massive upside. Click here for details.

Regards,

Justin Spittler
Tulum, Mexico
March 21, 2018


Reader Mailbag

Today, readers respond to Monday’s guest essay: Trump’s Tariffs Could Start a Real War:

It appears that tariffs will not be good for either country and will likely hurt the US more. Depending on the school of thought, we will likely see a loss of jobs and higher prices as a result. Because of egos, we could also see another confrontation costing the US’ extremely high debt to rise to another unaffordable high. I have built a portfolio including gold, silver, and mining stocks to hopefully provide protection for my family.

—Windell

You should do some homework before you talk of "real war." Read Graham Allison's book Destined for War. Then you can write about avoidance rather than suggesting the worst case. Constructive journalism is sorely missing in this troubling time.

—Michael

I believe buying precious metals, even copper, is the best way to go. Copper is priced low, but it is used in many, many ways. Gold, silver, and copper—buy now!

—Gerald

If you have any questions or suggestions for the Dispatch, send them to us right here.


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