Breakaway Research provides independent of stockbrokers and commissioned research reports on Junior Australian cobalt Mining ASX listed companies. Our company research reports analyse the current financial and technical information of the company, presenting the findings in an informative, straightforward format, accessible to both current and potential investors.
Commissioned Research on Cobalt Companies listed after article below...
(Extracted from the Breakaway Mining Research Weekly Subscription Newsletter "Cobalt Excitement" written by Dr Stephen Bartrop, extended extract located in blog, click here>>)
Late last week (23rd February 2017) the Financial Times alerted the world to the cause in the recent run in the cobalt price. The article was titled “Electric-car makers on battery alert as hedge funds stockpile cobalt" and outlined that in a bold wager on higher prices, half a dozen funds, including Switzerland-based Pala Investments and China’s Shanghai Chaos, have purchased and stored an estimated 6,000 tonnes of cobalt, worth as much as $280 million, according to the investors, traders and analyst sources. The report highlights that the stockpile is equivalent to 17% of last year’s production of the metal.
Readers will know that bullish demand forecasts are emanating from its use in Lithium batteries where increasing demand is forecast from Chinese electric-car makers, Elon Musk’s Tesla and other electric car manufacturers. CRU has forecast a supply deficit in 2017 by 900 tonnes and followed by demand growth of 20% pa for the next five years. The electric car industry which itself experienced a 41% production increase in 2016, accounts for half the annual consumption.
Breakaway Research has monitored the steady but unusual increase in the cobalt price over the last few weeks which has appeared to be driven by speculation rather than real demand and confirmation that this has indeed been driven by fund speculation provides that explanation. Interestingly, during the 2003 – 2008 resources boom, the accumulation of physical commodities accounted for a significant portion of the commodity price increases experienced then and enhanced the returns for investors on stocks leveraged to these rising prices.
Hence, many fund investment strategies involve identifying tangible underlying supply/demand imbalances in a particular commodity and then taking a long position to capitalise on this imbalance. The consequence of this positioning can be to accelerate the price increase beyond what would normally be expected but then the price tends to soften when this investment is completed and/or identified in the market.
Tech metals including metals involved in batteries are in demand and particularly when a number of these metals are sourced from countries with a high sovereign risk or China. In the past we have researched lithium and approximately a decade ago, recognised that lithium supply was unlikely to match the demand that would emerge from electric cars and scooters (under StockResource research banner).
What are the implications? We like the outlook for cobalt as outlined below, it is a key component of Li-Co batteries. However cobalt is also a by-product of nickel mining (particularly nickel laterites) as well as some copper mines. Hence as base metal prices like nickel and copper increase, it will stimulate new production in these base metals and which will lead to increased cobalt supply. We believe that investment therefore needs to be directed at resilient multi-commodity projects and the presence of cobalt as a by-product should be viewed as a ‘bonus’ to project returns rather than sole reason for the investment....
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