Published on June 07 2018

This Unstable Country Could Trigger an Explosive Cobalt Rally

By Justin Spittler, editor, Casey Daily Dispatch

The world’s cobalt supply is in trouble.

You see, demand for this metal is exploding right now. Miners can’t dig it out of the ground fast enough. In other words, supply can barely keep up with demand.

If this continues, we could see serious disruptions in global cobalt supply. There could even be a major supply crunch.

If that happens, cobalt prices will soar even higher. And cobalt mining stocks, which are leveraged to the metal’s price, could shoot through the roof.

I’ll explain why this could soon happen in a second. But let me first say a few words on cobalt.

• Cobalt is a key ingredient in lithium-ion batteries…

These batteries power the smartphone in your pocket. They also power electric vehicles (EVs)… and that’s why cobalt is now one of the world’s most sought-after resources.

Regular readers know exactly what I’m talking about. If you’re new to the Dispatch, let me bring you up to speed. In short, demand for EVs is soaring.

A few years ago, this market barely existed. There were just a few hundred EVs in the world. Only the rich drove them.

Today, there are around one million EVs in the world. And that number grows by the day.

In fact, analysts estimate that there will be 27 million EVs on the road by 2027. This means that the EV market is poised to grow 27-fold over the next decade.

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• Now, commodities experience these kinds of booms all the time…

Normally, when demand for a metal explodes like this, miners dig more of it out of the ground. Supply catches up with demand. Prices come back down to earth.

But that’s going to be difficult with cobalt. And there’s a simple reason for this…

• The global cobalt supply is extremely lopsided…

Just look at this chart. It’s a breakdown of the global cobalt supply.

You can see that the Democratic Republic of the Congo (DRC) dominates the market. It accounts for 60% of the world’s cobalt supply.

That’s a problem.

You see, the DRC isn’t exactly the most stable place on the planet. The country has a long history of bloody conflicts and wars. It’s also ground zero for “conflict minerals,” which can create public relations nightmares for those who do business there.

But those aren’t the only reasons to be concerned about the global cobalt supply.

• The DRC passed a new mining law in March…

This law forces foreign mining companies to pay higher taxes and royalties to the DRC government.

And it’s especially bad for companies that mine cobalt. That’s because the DRC just declared cobalt a “strategic” resource.

It did so because, again, cobalt demand is skyrocketing. Here’s a quote from Jean Nkunza, an 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 that, 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.

As a result, foreign mining companies must now pay a 10% royalty on the cobalt they mine in the DRC. That’s up from 2% previously.

In other words, it just became a heck of a lot more expensive to mine cobalt in the DRC.

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• International mining companies aren’t happy about this…

They’re trying to work out a friendlier deal. But I wouldn’t count on that happening.

You see, the DRC government understands a couple of things. Number one, we’re in the early innings of an EV revolution. So demand for cobalt isn’t going to let up anytime soon.

Number two, the government realizes how much leverage it has over the global cobalt supply. Remember, three-fifths of the world’s cobalt comes from the DRC. So it can get away with milking foreign mining companies.

Of course, miners realize how unstable the global cobalt supply is right now. So they’re looking elsewhere for cobalt. And many new cobalt deposits have been discovered recently. But a lot of that new production won’t go online for a few years.

In other words, I believe that we could see major disruptions in the global cobalt supply chain. If that happens, demand for cobalt could outstrip supply.

And I’m not the only Casey analyst who thinks that the stage is set for much higher cobalt prices, either.

• Dave Forest thinks that “cobalt is going to be the world’s best-performing commodity”…

Dave is our in-house resources guru and editor of International Speculator. He’s a professional geologist with 20 years of experience in the oil and gas, environmental, and mining sectors.

Here’s what he said recently about the global cobalt supply:

That kind of concentration of a metal within one nation has triggered some of the biggest commodities bull markets I’ve seen during my career… for example, rare earth elements—used in the manufacturing of cell phones and other high-tech devices. Like cobalt, the majority of rare earth elements are produced in just one country: China.

That became an issue in 2010 and 2011, when China suddenly and unexpectedly banned the export of rare earth elements.

Buyers globally were left with virtually no supply. And the resulting scramble to secure the metals drove prices of some rare earth elements up as much as 40-fold in less than a year.

It was a spectacular melt-up. Rare earth elements stocks had an equally stellar run, rising over 1,000% within months, in many cases.

Opportunities like this don’t come around often.

• Unfortunately, betting on cobalt isn’t as easy as it sounds…

There isn’t an ETF that tracks the price of cobalt. There also aren’t many pure-play cobalt mining stocks out there.

So I suggest that you follow an expert if you want to profit off of higher cobalt prices. And that’s where Dave can help…

He and Casey Research founder Doug Casey have a three-part blueprint for finding the best mining stocks on the planet. And they’ve recently recommended a small cobalt play set to soar in the months ahead.

In their brand-new report, The Cobalt Blueprint: How to Earn 86,900% Gains From America’s Next “Super Metal,” they lay out the full details on this company, including how much they think it will be worth, when to buy, and what to look for as this cobalt story unwinds.

You can learn more about this opportunity—and how to access their report—right here.

Regards,

Justin Spittler
Cusco, Peru
June 7, 2018


Reader Mailbag

Today, a reader offers an interesting perspective on our recent Dispatch, “Why You Can’t Ignore Italy’s Political Crisis”…

It is important to point out that Banco Sabadell, a very large Spanish bank, has 40% of its fixed interest investments in Italian government bonds. In the likely event of Italy defaulting on its government bonds, it would appear that Banco Sabadell will collapse.

Why should we in Britain worry? Well, Banco Sabadell wholly owns TSB Bank, so all deposits at TSB would have to be retained by the liquidators to pay creditors of Banco Sabadell. TSB is a very large British bank, with millions of depositors. They sure are going to be really annoyed when the TSB ATMs “go dark.” I am amazed that there appears to be a conspiracy of silence in Britain about this danger to British depositors.

—Steve

As always, let us know your thoughts, including any suggestions you may have for the Dispatch, right here.


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