Cobalt Blues (What a TrainREKT)…

by FI Fighter on January 8, 2019

in Cobalt Updates

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A most humbling year, 2018 was for many sectors… Outside of cryptocurrencies, perhaps no other sector got trainREKT as bad as cobalt…

2018 started off auspiciously enough with the “key ingredient” found in lithium-ion batteries catapulting to new heights, blasting through $40/lb, with many thinking $50/lb was just around the corner (and imminent).

Well, let’s just say per usual, what everybody was expecting to witness, never materialized…

Instead, cobalt had a crash landing, and right now, as we speak, we’re barely holding a hair above $20/lb

Momentum in cobalt and cobalt mining stocks was lost for a variety of reasons, but perhaps none more damaging than the following type of headlines, which dominated the mainstream around summer of last year…

From Auto Blog.

“Soaring prices” along with too much dependence on the unstable/dangerous/scary Democratic Republic of Congo, has led many to believe that it will only be a matter of time before cobalt is phased out and replaced entirely in the lithium-ion supply chain…

However, like most things, that’s probably easier said than actually done…

If we just follow the roadmap of major battery heavyweight CATL, we can see that even in one of their roadmap slides, they are showing that the “current formula” of NCM (Nickel, Cobalt, Manganese) cathodes w/ graphite anodes are probably gonna stick around in the short/mid-term… at least until around 2025, when maybe solid-state batteries will be ready for prime time to start replacing lithium-ion as the dominant battery technology.

From Electrive.

Still, cobalt will most likely still be needed even in 2025 (and beyond)…

From First Cobalt.

From Bloomberg.

Anyway, while the fear is running rampant, the following decimation has taken hold of the cobalt mining stocks, and it doesn’t look like it’s abating anytime soon…

Here’s a 1 year chart depicting the horrendous performance of some “leading” (into the ground) cobalt names…

Quite frankly, this BLOODBATH looks like overkill to me and has exceeded (to the downside) what I thought was possible, particularly at the start of last year when everything looked so damn promising (BRIGHT GREEN and super rosy).

But that’s how the game goes, much of the time…

Gotta remember never to get too greedy, and it’s imperative to book profits and take chips off the table whenever you’re up big on your speculations…

Anyway, I don’t think cobalt is going to be rendered obsolete anytime soon, and you know it’s kind of silly… If cobalt remains in the $20/lb range, well, so much for that whole “soaring prices” fear, which may mean that it becomes much less imperative for the industry to work aggressively to phase out this critical component…

 

Yes, I realize the retail speculator really doesn’t have a clue how complicated/complex/pain in the ass battery tech really is, and probably lives in fantasyland where they think cobalt can be tossed aside and swapped out over a long weekend, or something crazy like that…

 

Realistically, that’ just not gonna happen… Electric vehicles (EVs) aren’t anywhere near mainstream yet, and it’s BIG TIME risk at this juncture to even consider switching from a “time tested and proven” technology like lithium-ion for something that’s non-proven outside a lab setting/environment… Nobody wants a black eye associated with another “exploding battery” type of fiasco on their hands, so I just think the stakes are too high for there to be a monumental shift away from using cobalt, right now…

 

No question, battery tech will improve exponentially over the years, that’s bound to happen… but even technology needs time to develop, mature, and pass insanely stringent Q&A testing before it gets released to the masses…

 

Right now, cobalt is essential for thermal stability

From First Cobalt.

So, even if the industry continues to stick to “time tested and proven” lithium-ion technology but decides to reduce its cobalt usage by switching over to 8/1/1 (80% nickel, 10% cobalt, 10% manganese) formula for NMC cathodes… cobalt will still be in the equation. Sure, the concentration of cobalt will drop for each lithium-ion battery produced, but the sheer volume of aggregate cobalt (across all cathode types + industries requiring cobalt) needed caused by a hyper-growth story should more than offset any concentration losses experienced by each individual unit…

As highlighted in RED below, because cobalt is a relatively scarce mineral (byproduct of nickel/copper mining, primarily), and the CAPEX needed to bring online super low-grade nickel laterite projects (e.g. Ardea Resources; ARL.AX) is so exorbitant, I’m really having a hard time seeing supply being able to ramp up readily to meet upcoming demand…

From First Cobalt.

 

Nuff said…

 

No, I’m NOT saying now is the time to rush in and buy these stocks like mad, but I’d definitely keep an eye out for opportunities b/c in all likelihood, cobalt and these battered cobalt mining stocks will probably experience another run up again… Sometime in the next few years as this EV paradigm shift really starts to gain traction.

 

Happy Hunting!

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