Billionaire club making a Cobalt run

The demand for battery metals have been heating up, in line with the timeline for the green transition. We now have members of the billionaire club entering the fray: with the likes of Bill Gates, Jeff Bezos, and Michael Bloomberg placing their bets on possible ore bodies containing cobalt, copper, lithium, etc. The latest target is Cobalt in Greenland:

In an effort to simultaneously save the planet and turn a profit, an enterprise funded by—among others—a swashbuckling half-trillionaire group that includes Bill Gates, Jeff Bezos, and Michael Bloomberg has set its sights as far afield as Greenland, whose citizens may eventually embrace such lucrative pursuits too.

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The cobalt that today remains unmined at KOV—one of Gertler’s largest remaining interests in the DRC—is worth more than $39 billion. The metal has become a critical component in the global transition to a greener future, a reality reflected in its soaring price: $29,000 per metric ton in July 2020; by the time this story went to print in late March, $82,000 per ton. Most lithium-ion batteries depend on cobalt, and everything from iPhones to Teslas depends on those batteries. One analytics firm estimates the worldwide market for electric vehicles and consumer electronics will drive cobalt demand at least three times higher by the end of this decade.

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Another catalyst that will further fuel the run on “battery metals” are oil prices. A casual look at the gas pump for most of us, and at oil spot price below, shows us that the need for alternatives has never been higher.

TradingView Chart

Battery metals are still under-supplied, and demand has been increasing. EV sales have been booming:

Sales of electric vehicles (EVs) are booming. First-quarter results are in, and they rock. Despite supply chain issues and higher upfront costs, the auto industry reports strong performances in EVs, with Ford announcing a growth rate of 139%, Volkswagen of 65%, and Tesla TSLA -9.1% — an increase of 81%.

This demand has been fuelled by rising oil prices, proving some evidence of an inverse correlation between oil and battery metals:

The recent strong performance of EV sales is believed to be due to consumers’ concerns over high oil prices and tax incentives.

While copper has pulled back a bit, cobalt has continued to perform.

billionaire cobalt copper

The case for copper remains strong, considering electric vehicles use anywhere from 3x to 16x more copper than internal combustion engine vehicles. This, combined with the sanctions on Russia, would make a reasonable argument in favour of an increase in copper prices.

As a reminder to readers, Canada and the US have both pledged resources to develop local sources of critical metals. CNBC has also coined the term MIFTs i.e. Metals Important for Future Technology:

How to play this:

Much like the billionaire club, we are bullish on battery metals such as cobalt and copper. One of our picks is GZD, who recently closed $1.6M financing and have outlined their plan to drill their Greenwood and Robocop property in South East BC.

Their Robocop property lies on the Purcell Supergroup, which has played host to past-producing stratabound Copper-Cobalt mines. Robocop has shown high grades of both copper and cobalt. Cobalt is extremely valuable in the production of electric vehicle batteries. It is an expensive and rare component, of which more than 65% of the global supply originates from the Democratic Republic of Congo. Robocop has had sample grades like 1.41% Cu, 0.62% and 0.134% Co, 1.19% Cu, with silver credits.

GZD is trading at an extreme discount at 9 c. While this is above the closing price of 6 c when our report was published, our research shows this stock to be worth at least 15 c using conservative estimates. It’s also important to note both copper and cobalt were trading at a lower price, meaning it is very reasonable to assume the target price may now be 18 c or 20 c.

You can read our full report here: https://www.tsxvresearch.com/research/gzd-cobalt-copper-tsxv/

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