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June 4, 2015 | Category: Cobalt News
Critical Metals Trends: Bullish on Cobalt
By Teresa Matich - Exclusive to Cobalt Investing News
The 2015 CanVest conference in Vancouver featured a lively panel discussion on critical metals trends.
An exert from within the document highlights the panel's bullish attitude towards cobalt.
Bullish on cobalt
In terms of specific metals, Berry stated that he was the "most bullish on cobalt" due to a potential lack of reliable supply.
"About 85 percent of the cobalt that is used today comes from the Democratic Republic of Congo (DRC)," he said, noting that there are plenty of challenges in that country, including infrastructure challenges. More importantly, for users such as Tesla (NASDAQ:TSLA) more supply will be needed.
"They're going to have to find a lot more cobalt and itt�?s going to have to come from a much more reliable source," he said.
Moderated by Gwen Preston of Resource Maven, the panel included Frank Holmes of US Global Investors (NASDAQ:GROW), Marin Katusa of Katusa Research, John Kaiser of Kaiser Research and Chris Berry of House Mountain Partners and the Disruptive Discoveries Journal.
Preston noted that the title of the talk could be taken in one of two ways; one could look at critical metals and what the trends are in those, or general metal trends and what is critical about them.
Certainly, the panelists covered a wide range of topics, and there was even a spirited digression into the topic of private placements. However, overall, there were plenty of useful takeaways for critical metals investors.
Lack of price transparency
When asked about the importance of following price trends, Berry noted that theree�?s �?very little price transparency,,�? when it comes to metals like lithium, graphite and scandium.
As an example, he cautioned investors that prices seen in individual deals might not be representative of wider prices. �?Just because a graphite producer and a refractory producer do a deal for 20,000 tonnes of a certain flake size at a given price, doesnn�?t mean that thatt�?s what the price is,,�? Berry said. �?thatt�?s just the price that they agreed upon..�?
He advised investors to �?keep a general eye on price trends,,�? but added that he wouldnn�?t necessarily try to gauge the direction those trends were headed in.
Berry spoke about how itt�?s helped him to keep track of macro trends in urbanization, and noted that theree�?s still plenty of growth emanating out of Asia, which could spark a need for more critical metals.
>�?These plans for electrification and these plans to transform [China's] economy form one thats less infrastructure focussed and more consumer focused are dependent on reliable supplies of these niche metals,,�? he said, �?and it looks increasingly likely that these niche metals, be it lithium, cobalt or graphite are going to come from other countries aside from China..�?
The importance of end-users
For Marin Katusa, it was important to keep end-users in mind when looking at critical metals. �?When you start investing in a sector ask �?who is the end user? What is the actual market end??�? Follow the people more so than the sector,,�? he said.
For example, while he stated that thorium is interesting theoretically, he argued that itt�?s �?not going to happen,,�? because uranium reactors produce plutonium as a byproduct, which helps build nuclear weapons arsenals.
Katusa admitted that he uranium sector hasnn�?t been the greatest lately. However, he stated that hee�?s still had some success with Uranium Energy Corp (NYSEMKT:UEC), noting that the CEO had �?doubled his share price in the last 40 days..�?
Bullish on cobalt
In terms of specific metals, Berry stated that he was the �?most bullish on cobaltt�? due to a potential lack of reliable supply.
>�?About 85 percent of the cobalt that is used today comes from the Democratic Republic of Congo (DRC),,�? he said, noting that there are plenty of challenges in that country, including infrastructure challenges. More importantly, for users such as Tesla (NASDAQ:TSLA) more supply will be needed.
>�?Theyy�?re going to have to find a lot more cobalt and itt�?s going to have to come from a much more reliable source,,�? he said.
The importance of zinc
For Kaiser, zinc was most important to consider. �?zinc is the biggest one to focus on because China has been the biggest zinc producer for the past couple years,,�? he said, noting that China has dominated zinc production since 1980 and that no new mines have been developed as of late.
>�?Wee�?re looking at zinc in a couple of years being at $2,,�? he said, �?and not like in 2007 �? This is going to be structural pricing change in zinc..�?
Stock picks
Berry first looked to the majors for his top picks, stating that an immediate increase in cobalt production would have to come from one of the majors. He pointed to Freeport McMoRan (NYSE:FCX), one of the largest cobalt producers in the world, and similarly pegged Chilee�?s SQM (NYSE:SQM) as a lithium play.
On the junior side of things, he said �?itt�?s all about strategic relationships..�? In that light, he reiterated his interest in (TSX:LAC), given its relationship with Korean steelmaker POSCO regarding that companyy�?s proprietary lithium extraction technology.
Katusa picked Brazil Resources (TSXV:BRI) and Focus Ventures (TSXV:FCV), stating that hee�?s a large shareholder and reporting issuer for both companies. �?Itt�?s not a critical metal, but its absolutely critical,,�? he said, speaking to phosphate and Focus Ventures. �?The phosphate market is controlled by 3 companies, and with all the organic certified foods moving forward, you want direct application phosphate rock..�?
Holmes didnn�?t mention critical metals specifically, but had an interesting idea for looking at junior mining stocks. He advised investors to visit the sites of major royalty companies such as Franco Nevada (TSX:FNV) and to �?look at the junior companies that they give their good housekeeping seal on..�?
Finally, Kaiser has long been a big fan of scandium, and he mentioned it here again, explaining how niobium production rose to meet latent demand and how he sees a similar scenario on the horizon for scandium. He picked Robert Friedlandd�?s CleanTeQ (ASX:CLQ) Holdings and Scandium International Mining (TSX:SCY), which he owns, as two scandium stocks to watch.
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.
Related reading:
Chris Berryy�?s Case for Opportunity in Energy Metals