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 April 08, 2015
Cobalt Prices Surge 5.5% on Chambishi Shutdown News
    Publisher: MetalBulletin
    Author: Fleur Ritzema

 
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MetalBulletin.com - April 8, 2015

Excerpts from the MetalBulletin Article

Cobalt prices surge 5.5% on Chambishi shutdown news

Cobalt prices surged by more than 5% on Wednesday March 8 after news of a shutdown at one of the world's biggest operations provided a shot in the arm for the previously languishing market.

High-grade prices hit $12.50-13.95 from $12.05-12.95, after sellers hiked their offer prices.

Chambishi is the world's biggest cobalt metal producer, selling large volumes of broken cathodes to Asia, the USA and Europe.

Over 1,000 tonnes of metal are expected to be affected by the temporary closure, but market sources speculate that the shutdown could continue for longer. Producers, noted a reluctance to offload ahead of potential moves higher. "We're confident that the market has changed to an upward trend. In addition, we don't have enough material to be sold in the spot market for the time being.

To read more, Sign up for a Free Trial Metal Bulletin Membership or follow on Twitter @metalbulletin

 
 April 02, 2015
ENRC News of Chambishi Shutdown Brings Cobalt Bulls Hope of Price Floor
    Publisher: MetalBulletin
    Author: Fritzema@metalbulletin.com

 
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MetalBulletin.com - April 2, 2015

Excerpts from the MetalBulletin Article

ENRC news of Chambishi Shutdown Brings Cobalt Bulls Hope of a Price Floor

Cobalt's losing streak may have continued this week, but an imminent shutdown at Chambishi brought talk of a floor, and potential price rises, in weeks to come.

....ENRC plans to stop production of Chambishi cobalt metal for three months, as it builds up stocks of sulphide ore, market sources told Metal Bulletin this week. Production of more than 1,000 tonnes of metal is expected to be affected by the shutdown in Zambia, and about 700 people will be put on temporary leave, sources said.

...the company is expected to be out of the spot cobalt metal market for the time being, and will look to meet its long-term demands with stored metal.

All eyes in the cobalt market were on ENRC during Metal Bulletin's mid-week pricing calls. The news of the metal production curtailment was welcomed by the bulls, who have suffered greatly this year after prices were smashed by oversupply and weak spot demand.

"I imagine the news will have some influence," one quoted trader said. "Those who had offers on the table will probably take them, and others will raise their prices. We'll be looking to raise prices."

Another trader stated, "The bears will be off to hibernate," This is the cheapest cobalt is going to be for five years." ... "In the next month, it could go to $15, and I wouldn't be surprised if $18 is tested this year and $20-25 next year," he said.

The trader pointed to strengthening demand from the battery sector, with Tesla's expansion in the electric vehicle market likely to drive up cobalt demand in the long -term.

A producer also highlighted the gap in supplies that was at stake. "Chambishi produces 10% of the world supply of metal. If that's disappearing overnight, it's going to have a big impact," he said.

To read more, Sign up for a Free Trial Metal Bulletin Membership or follow on Twitter @metalbulletin

 
 March 27, 2015
Investing in Cobalt Stocks - Three Stocks for the Cobalt Bull Market
    Publisher: Energy & Capital
    Author: Keith Kohl

 
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Investing in Cobalt Stocks - Three Stocks for the Cobalt Bull Market

(Panasonic, Freeport-McMoRan and Formation Metals Inc.)

Excerpt from Energy & Capital's Editorial - March 27, 2015

Keith Kohl writes:

Regular readers of Energy and Capital know our editorial often focuses on two commodities: oil and natural gas.

And that's for good reason...

As far as investment goes, oil and natural gas are two of the biggest moneymakers in the world.

But today I want to take a different approach.

Mind you, I'm not saying oil and gas are bad investments (they're set up to see huge gains this year, actually), but I feel I wouldn't be doing you justice if I didn't mention the latest commodity I have my eye on.

The truth is, I might be the only one with eyes on it based on what I see in the financial press these days.

Anyway, if you're reading this editorial on a laptop or tablet, you use this commodity...

If you watch television, it powers your remote, and if you have smoke detectors in your house (I hope you do), it keeps them ready to warn you if there's a fire.

You probably already realize I'm talking about batteries. But there's a crucial commodity that goes in each of these types of batteries that has dipped into very valuable territory on the open market.

And while many investors and analysts, including myself, are discussing lithium --- which is also used in batteries --- I'm talking about a commodity that is just as important but that hasn't stuck in popular opinion, for whatever reason.

That commodity is none other than cobalt.

And if you haven't been paying attention to the cobalt market, you're sorely missing out on an incredible opportunity for growth and diversity in your portfolio.

Prices Look Bullish

Cobalt is predominately used in alloys because of its strength and ability to resist corrosion, so, naturally, most of the mined cobalt is used in metallurgy for things like gas turbines and jet engines.

However, cobalt has several other uses including chemical catalysts, gamma radiation, porcelain production, pigmentation for paint and glass, and, of course, batteries, which is why I like it as an investment.

Like I mentioned before, cobalt is an important component of both nickel-cadmium batteries --- which are commonly found in children's toys and smoke detectors, among many other things --- and lithium-ion batteries.

Lithium-ion batteries give cobalt its most bullish upside because they're the gold standard of rechargeable batteries throughout the world.

They're used in your phone, laptop, tablet, and --- if you happen to have one --- Tesla Model S electric car.

Most of the world's cobalt comes from the copper belt in the Democratic Republic of the Congo and Zambia, where mining is huge business.

Companies dig up cobalt all over the world, as you can see in the map above, but 55% of it comes out of the Democratic Republic of the Congo (DRC).

And political unrest in the African nation creates supply squeezes that affect cobalt prices greatly.

Since the late 1990s, various rebel groups fought civil wars against the government, and the price spike you see in the chart between 2005 and 2009 can be attributed to what's known as the Kivu conflict.

I won't bog you down with the complex geopolitical details, but it's safe to say that strife throughout the nation caused serious damage to the mining industry. The resulting supply squeeze pushed prices above $50 per pound.

As the Kivu conflict ended in 2009, though, you'll see the price begin to drop along with the global recession and stay relatively close to current levels around $12.50 per pound.

This price presents us with an opportunity to buy cobalt at what could be its lowest price for a long time.

You see, tensions are flaring once again in the DRC, as countrywide protests against president Joseph Kabila broke out earlier this year. There's no telling if these protests could lead to more civil war and violence, but if they do, it could create another serious supply squeeze for cobalt.

Of course, a potential civil war is not a reason to invest in cobalt; rather, the metal is becoming so prevalent that it only makes sense to buy now.

Ways to Play Cobalt

I mentioned earlier that Tesla uses cobalt in its lithium-ion batteries for its Model S...

As far as cobalt is concerned, the construction and planned capacity of Tesla's massive "Gigafactory" in Reno, Nevada shows a bullish future for the commodity.

Tesla uses cobalt in its batteries because it provides a much better driving range, while other companies like Nissan and Fisker use different, less effective metals.

Once the factory starts producing around 2017, it wouldn't be a surprise to see other carmakers purchase their batteries from Tesla to get in on the electric car market, which is consistently growing.

However, I wouldn't suggest an investment in Tesla at this point because the stock price is so high. Instead, I like Panasonic (OTC: PCRFY) because shares are just $13, and the company already partners with Tesla on its batteries.

Not only that, but Panasonic makes lithium-ion and nickel-cadmium batteries for other applications, too.

Of course, if you're looking for a more direct play on cobalt, I would suggest Formation Metals (TSX: FCO). Although the company only trades for about $0.15, its mines aren't in the DRC, which means it will garner a higher price for its cobalt if there is a supply squeeze due to political unrest.

But I understand if a penny stock makes you queasy, so I also suggest Freeport-McMoRan (NYSE: FCX).

The company's shares trade under $20, it pays a 6.8% dividend, and it is diversified with other metals and projects besides cobalt.

I suggest you keep your eye on the cobalt market and these three companies in particular as lithium-ion batteries take over the rechargeable electronics market.

Until next time,

Keith Kohl

Follow Keith on Twitter: @KeithKohl1

To read the full editorial on the Energy and Capital website please click here

 
 March 25, 2015
The Megafactories are Coming
    Publisher: Benchmark Mineral Intelligence

 
THIS IS NOT AN OFFICIAL COMPANY NEWS RELEASE
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Benchmark Magazine launches first edition as complimentary download:

The Megafactories are Coming

Benchmark Mineral Intelligence has launched its first magazine issue which is free to download. The quarterly publication is part of an annual Membership that specialises in critical minerals and metals, disruptive technology and emerging markets.

This first issue is a battery special and includes:

• The Battery Megafactories are Coming
• Tesla Gigafactory Demand Revisited
• Battery Raw Material Review
• Exclusive interview with SQM's new CEO
• Upstream and downstream news analysis
• And more...


Excerpts from the 68 page publication:

"Tesla Motors, LG Chem, Boston Power and Foxconn are building battery super-plants that will come on-stream in the next three years. The new supply could revolutionise how we source and use energy, creating a once-in-a-century disruptive event."

"A global race is on to build the world's biggest battery plant. For what would have sounded like fantasy only a year ago, some of the world's major corporations are now vying to become the next leading producer of lithium-ion batteries."

"The battery industry is the largest market for cobalt producers, accounting for over 40% of total demand in 2014."

"At capacity Tesla's Gigafactory will require 5,000-7,000 tonnes of battery grade cobalt material. Last year, the industry produced 80,000 tonnes of refined product of which 30,000-35,000 tonnes was battery grade material. This equates to an increase in battery demand of 20% from one consumer alone."

To read the full complimentary edition please click here to subscribe

For queries and further information please contact: smoores@benchmarkminerals.com

 
 March 24, 2015
Where Will the Graphite, Lithium and Cobalt for the Battery Revolution Come From?: Simon Moores
    Publisher: Streetwise Reports - The Gold Report
    Author: Kevin Michael Grace

 
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Following the lead of Tesla Motors, LG Chem, Foxconn and others are racing to build megafactories to build batteries for electric cars. Yet even now the world supply of graphite, lithium and cobalt needed to supply these factories is insufficient. In this interview with The Mining Report, Simon Moores, managing director of Benchmark Mineral Intelligence, explains that we can soon expect healthy prices for all three metals, but the juniors that will succeed in the market must first and foremost learn to meet the needs of the end users.

The Mining Report: You have said, "Electrification of transport will not succeed unless the world has cheap, abundant, longer-lasting batteries." What are the obstacles to obtaining such batteries?

Simon Moores: There are a number. The first is the scaling of battery supply. The megafactories will be needed to drive down costs significantly. Tesla Motors Inc. (TSLA:NASDAQ), LG Chem Ltd. (051910:KSE; LGCLF:OTCPK), Boston-Power Inc., Foxconn Technology Group and, most recently, Chinese electric vehicle producer BYD (1211:HKSE) have all announced plans to build them. Meanwhile majors like Samsung SDI have announced significant expansions of existing operations. The battery industry is preparing for a surge in demand and its next phase of growth.

But these megafactories will need assured quality raw materials, which is the second obstacle. The third is the security of supply for raw materials. This last obstacle is overlooked at the moment, as the battery industry is taking it as a given they will have supply as needed. But when megafactories come on line, demand will soar. Therefore, supply visibility all the way upstream to the mine is crucial to their success. This is what Benchmark specializes in.

TMR: How does the oil price collapse affect current and future demand for battery power?

SM: This is the question everyone's asking. Without a doubt, a halved oil price has a negative impact on those consumers who want electric vehicles (EVs) in order to save money on gasoline. To be honest, though, the success of Tesla raises the question of how many people are buying EVs for economic reasons today.

Regardless of the short-term effect, I don't think the oil price collapse will have a long-term impact. I see internal combustion engines and EVs as fundamentally different technologies. Once EVs mature, they will be far more efficient and software-driven than cars powered by internal combustion engines. I actually believe that you will get to a stage where a remote software upgrade will improve the cars' performance. You are already seeing this with Tesla. Once you reach this stage, the vehicles will actually improve over time---in essence, cars will no longer be a depreciating asset.

TMR: Would you say that Tesla has a fundamentally different target audience than Toyota Motor Corp.'s (TM:NYSE) Prius?

SM: Definitely. The Prius was created and priced for the mass market from day one. At the time "green" and "cool" did not go hand in hand, so many early Prius owners had to live with an eco-label. The car has since proven to be one of the most economical and best overall models on the road. People now have forgotten about the fact that it is a hybrid and it has been accepted in today's world.

TMR: Tesla is committed to ethical cobalt sourcing, which would rule out supply from the Congo. But the Congo, which currently supplies 55% of world cobalt, is not included in the Dodd-Frank restrictions on critical metals. So we can expect that country to continue to supply the battery industry, yes?

SM: Correct. The Dodd-Frank legislation only applies to the U.S., and it only says that public companies have to report where they source conflict minerals from, i.e., tin, tantalum, tungsten and gold. It is not a trade ban. We really think cobalt wasn't listed because it would have caused significant disruption to what is a niche but important market.

But with such a large proportion of supply coming from one country, and no major secondary options on the same scale, the majority of the battery industry has little choice but to use material sourced here, usually via the refineries based in China.

TMR: What are the alternatives to Congo for cobalt?

SM: It's important to understand that 60% of the world's cobalt-refining capacity is in China. There are environmental and supply restrictions and problems all the way along the supply chain for cobalt because it has been neglected for a generation, as have so many other critical minerals. Now the upsurge in the battery market has forced the world to confront these problems.

There aren't many cobalt companies out there. It's easier to find graphite and lithium as they are not rare minerals, so there's more of these companies listed. Cobalt, and certainly primary cobalt deposits, are much more difficult to find.

TMR: Which juniors are poised to benefit from the rush to find non-African supply?

SM: There are currently three companies based in North America: Global Cobalt Corp. (GCO:TSX.V),Fortune Minerals Ltd. (FT:TSX) and Formation Metals Inc. (FCO:TSX). All three are focusing on developing cobalt assets but out of all three major battery raw materials to date, cobalt has been the most overlooked.

But investors have an information problem. You can't get very reliable data out of the Congo, and this makes it difficult to evaluate these projects on an economic basis. That said, the fact that there are few options for new sources plays strongly into the hands of those juniors developing projects on a supply security basis for North America.

To read the full interview on the Gold Report website please click here

 
 March 19, 2015
Cobalt Metal Price Hits the Bottom in China
    Publisher: Asian Metal

 
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Cobalt Metal Price Hits the bottom in China

BEIJING (Asian Metal) 19 Mar 15 - Cobalt metal prices have kept stable at RMB207-210/kg (USD15.1-15.30/lb) in recent ten days in china and most participants believe that the prices have hit the bottom with the proof of more deals in the market recently.

A source from a smelter in South China with an output of around 200tpm told Asian Metal that the smelter holds on RMB210/kg (USD15.3/lb) for its cobalt metal this week after it reduced the price form RMB213/kg (USD15.5/lb) last week. "Impacted by the sliding price in the international market, we lowered the price last week, " said the source, "but we won't reduce the price further though somebody still tries to put the price down."

Meanwhile, the smelter has received a batch of renewed orders from the fixed clients in recent days. "We don't believe the price will go down further, and the export price is also unchanged at around USD13.0/lb," added the source.

A source from a major Chinese smelter with an output of around 3,000 tons last year confirmed that the smelter maintains the prices of cobalt metal at between RMB208/kg (USD15.1/lb) and RMB213/kg (USD15.5/lb) this week, the same as that of last week. "We won't follow others to reduce the price further, at least for the coming one or two weeks," said the source.

The source even believes that the cobalt metal price has hit the bottom in China. "Cobalt ore price is steady and the supply is not sufficient." said the source. "I just don't understand why they lowered the price continuously over the past month."

To read the full article please click here to visit Asian Metal - (Guiding the World Metal Market)

 
 March 15, 2015
How Volkswagen Thinks It Will Undercut Tesla On Battery Cost
    Publisher: Seeking Alpha
    Author: Anton Wahlman

 
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Summary
•Volkswagen believes it has reached parity with Tesla in terms of battery cost, and should do even better going forward.
•The company's battery modules can contain cells from any battery cell maker, including LG, Samsung and Panasonic.
•These modules can also contain either flat/square cells, or cylindrical cells just like Tesla.
•The Tesla investment case seems to rest heavily on the belief that Tesla will have a battery cost advantage going forward.
Volkswagen is investing $107 billion in developing new models over the next five years, and the company says that electrification is its #1 technology priority.

Ever since Tesla's (NASDAQ:TSLA) Model S successfully entered production in 2012, one of the central issues in the company's investment story has been whether it can sustain a battery advantage over the competition. Volkswagen (OTCQX:VLKAY) invited me to a set of meetings to hear its side of the story, as told by the overall R&D boss, Heinz-Jakob Neusser, and Audi's (OTCPK:AUDVF) R&D boss, Ulrich Hackenberg.

First of all, what do I mean by Tesla having had a battery advantage over the competition? It's not in dispute in the industry that Tesla so far has productized an electric car with the highest amount of battery capacity per unit of weight, volume and dollar.

If Tesla can maintain this battery advantage as it moves to a lower-priced car 2017-2018 and beyond, ranging from $35,000 to $60,000, such an advantage could potentially overcome the company's lack of scale in producing the rest of the car, and could therefore make Tesla into a far more relevant automaker than it is today.

In my conversations with Volkswagen's management, I was struck by how much it seems to agree with Tesla and its CEO Elon Musk about the future of the electric car. For example:

•Volkswagen believes a shift to electric cars is the biggest paradigm shift in the automobile business over the next decade .

This is interesting, because it also acknowledges that in the near term, demand remains quite low. Volkswagen has not released total plug-in electric car sales numbers, but it's not difficult to figure them out by using public records and the company's own isolated statements.

Volkswagen's production of one model alone, the eGolf, is now approximately 30,000 per year annualized. In addition to the eGolf, Volkswagen also offers the eUp and Golf GTE in some markets. Audi has the A3 eTron, and Porsche (OTCPK:POAHF) offers three models. Later this year, the VW Passat GTE and the Audi Q7 eTron enter production. Volkswagen is the middle of launching 40 plug-in electric models for the near term.

To support this massive investment program, the company is allocating a portion of its $107 billion investment budget over the next five years to various forms of electric cars. Coincidentally with the $107 billion of investments, Volkswagen operates 107 plants around the world, including 18 in China alone, where it sold 3.7 million cars in 2014.

•In terms of the battery technology debate, Volkswagen agrees with Tesla that the shape of the battery cells essentially doesn't matter. The differentiation will be in other technology choices, such as chemistry, packaging, thermal management, software and so forth.

So far, from what I can gather from shareholders, the bull view of Tesla's prospects seems to have rested on two broad assumptions about the relative battery choices:

•Tesla's choice of purchasing cylindrical battery cells from Panasonic (OTCPK:PCRFY) is somehow, in and of itself, giving Tesla an advantage in terms of yielding more capacity per unit of weight, volume and dollar - even for the long term.
•Tesla's competitors are somehow religiously opposed to cylindrical batteries, instead preferring flat/square battery cell formats.
Volkswagen denied that either of these two assumptions are true: The company agrees with Tesla that the format choice is essentially a wash, and it has been preparing to use cylindrical batteries side by side with flat/square batteries.

The other factor that Tesla's bull case rests upon is the economics of scale from Tesla's big building under construction in Nevada. In this building, it will cooperate with its anchor tenant, Panasonic, to further reduce the cost of producing batteries. How will Volkswagen meet the challenge of such a large industrial effort?

Volkswagen's strategy to undercut Tesla on battery cost is this: It has standardized on a module size - think, a shoe box - into which battery vendors such as Panasonic, LG (OTC:LGEAF) and Samsung (OTC:SSNLF) can fit either flat/square battery cells or cylindrical ones such as the ones Tesla has been using.

This interchangeability, therefore, gives Volkswagen the ability to simply play out the battery vendors against each other without having to redesign the car's hardware. On any given day, Samsung, LG and Panasonic will be willing to sell any of two standardized battery sizes (cylindrical and flat/square) for a different price. At this point, Volkswagen can effectively conduct a "reverse auction" among the suppliers, in order to secure the lowest price.

This kind of commoditization - not unlikely that we have a very liquid spot price for oil that's traded - would be impossible if the parts weren't interchangeable. Of course, you can always redesign the car based on a new battery, but that takes years and costs huge amounts of money.

Rather, Volkswagen will undercut Tesla on battery cost because it does not put everything on one card, by investing billions of dollars into its own factory whose product has to remain the most technologically competitive, as well as operate at the highest level of capacity utilization in order to be competitive. Volkswagen figures it can consistently pay a lower price per kWh by constantly playing all the battery vendors against each other: Let THEM (the battery cell vendors) make the investment in capex, while WE (Volkswagen) always get the lowest price, thanks to competition.

This is no different than Volkswagen avoiding making its own tires. It would simply not make any sense to vertically integrate this technology.

In addition to undercutting Tesla on battery CELL cost, Volkswagen will also have it own production of the entire battery PACK. Volkswagen believes it has a reasonable chance to be competitive with the cell vendors, once you go to the pack level. It has its internal battery pack factory that competes with the external cell suppliers, such as LG, Samsung and Panasonic. To see how flexible Volkswagen's production is, let's look at three current examples: •eGolf and eUp: Panasonic cells, but Volkswagen makes the battery pack. •Golf GTE: Panasonic makes both the cells and the entire pack. •Passat GTE: Samsung cells, but Volkswagen makes the battery pack.

In a separate interview, Audi CTO Hackenberg dropped a bomb by confirming how flexible this Volkswagen battery strategy is. He said that the all-new Audi R8 eTron, which Audi expects to have a range of 280 miles, has a battery pack that consists of 52 modules containing a total of 7,488 cells. In other words, 144 cells per module.

7,488 cells in total. You know what that means, folks. It means that Audi is using the same cylindrical cells as Tesla, even though the vendor in this instance is Samsung, not Panasonic.

It's no wonder that the overall battery statistics of this car, the R8, are therefore similar to Tesla. The capacity of the battery pack is similar, the kind of cells used is similar, the weight per kWh is similar, and the range is similar.

The difference is that while Audi uses this Samsung cell today, it is not wedded to what it would be producing in its own battery cell factory, had it been in Tesla's shoes. Audi can switch to LG and Panasonic, and switch from cylindrical to flat/square battery cells, if the battery cell price fluctuates in its favor. It's harder to do that if you own your own factory for which you have paid billions and have to run at close to full capacity utilization in order to be competitive on cost.

Finally, Volkswagen emphasized that the industrial economics of producing all flavors of a car - gasoline, diesel, hybrid, plug-in hybrid and fully electric - totally integrated on the same assembly line are huge. With demand for electric car being both small, uncertain and highly fluctuating in the near term, allocating a specific car and production line to a low-volume electric car is simply a recipe for losing your shirt.

Volkswagen is engineering almost all of its cars to be made with all of these powertrain combinations going forward. There will be a plug-in hybrid and fully electric version of almost every single nameplate under the VW umbrella. Volkswagen already offers more plug-in electric models than any other automaker, and it should soon be at 40 different plug-in electric models.

The one area where Volkswagen does not want to take as a direct and active role in the electric car food chain is the charging network. While it dabbles in small initiatives here and there, it basically wants to stay out of it. It wants other entities, such as gasoline stations, parking garages or other independent service providers, to deal with electric car infrastructure.

The rationale for this is that it does not want to saddle the buyer of a plug-in electric car - who basically is charging only at home and/or at the office - with the cost of building out the infrastructure. It would add to the price of the car, and Volkswagen aims to be the low-cost leader.

While I agree that in the long run, car companies ought not be involved in charging infrastructure build-out, I disagree about the short term. To ensure the best possible customer experience in these nascent electric car days, I think it would be wise for the automaker to take a very active and direct role in funding this civil engineering project. It does not need to last for too many years. After a few years, it can be sold to an independent party - sort of like what happened to Orbitz in the airline industry. But it needs the automaker's far more robust push in these early days.

Conclusion

Volkswagen believes it has eliminated Tesla's battery advantage, and this will play itself out as the new models roll out in the coming years, starting with the Audi R8 eTron in 2015 and the upgraded VW eGolf shortly. By 2018, this strategy will be in full bloom. By making battery modules with interchangeable cells, Volkswagen can play Panasonic, LG, Samsung and others against each other, ensuring the lowest cost at all times. Then, producing the fully electric and plug-in hybrid cars on the existing assembly lines assures the lowest cost for these cars overall.

To read the full article please click here to visit SeekingAlpha.com

Seeking Alpha Disclosure: Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks. Additional disclosure:
At the time of submitting this article for publication, the author was short TSLA. However, positions can change at any time. Volkswagen paid for airfare, lodging and meals to enable this first-hand report. The author regularly test-drives cars provided by many of the major automakers, including Volkswagen.
 
 February 23, 2015
President's Letter to Shareholders
    Publisher: Formation Metals Inc.

 
THIS IS NOT AN OFFICIAL COMPANY NEWS RELEASE
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Formation Metals Inc. - President's Letter to Shareholders



February 23, 2015

Dear Shareholders,

As we approach our February 28, 2015 fiscal year end, we would like to take this opportunity to provide an overview of the positive developments that have taken place at Formation Metals Inc.

Our Principal Focus
Most importantly, advancement continues on the Company's flagship project, the Idaho Cobalt Project (ICP). With a restructured and refocused management team, the decision was made to look at other potential opportunities at the ICP to maximize shareholder value. In addition to the ICP's known potential to produce high purity cobalt metal suitable for applications in the super alloy sector, what quickly became apparent was the project's potential to produce a cobalt chemical suitable for the rapidly growing battery market.

Diversified Strategic Plan to Optimize ICP Product Potential
The projected increase in the near and long term demand for cobalt is being driven in large part by tremendous growth in the global use of portable electronics and electric vehicles where cobalt is a key component used in rechargeable batteries. To better position ourselves to meet this growing demand, we have commissioned Samuel Engineering, Inc to manage the preparation of a Preliminary Economic Assessment (PEA) and feasibility level metallurgical test work on the project to explore the viability of producing battery grade cobalt chemicals. We are pleased to report that we are expecting the results of the PEA to be released in a matter of weeks and it is our expectation that this report will demonstrate that the ICP has the potential to produce battery grade cobalt chemicals. The PEA is intended to demonstrate and further optimize the ICP's diversified product potential. In addition, we continue to maintain an extensive database on the production of high purity cobalt metal suitable for the super alloy sector.

The completion of our PEA and the completion of feasibility level metallurgical test work are two key steps towards achieving our goal of securing financing for the remainder of construction required to commence production.

Rechargeable Lithium Ion Battery Demand Steadily Increasing
An interesting fact about lithium ion batteries is that cobalt is a key component of these batteries, and in many, it is the primary component. A lithium ion battery, typically used in the several billion portable devices in use worldwide, such as mobile phones, contains many more times the amount of cobalt than lithium by weight. Electric vehicles (EV's) also use cobalt in their batteries where cobalt content ranges from 9% to 20%.

The use of cobalt in batteries has grown at a rate of 7.6% per year over the five years prior to 2013 and batteries currently account for 42% of total world cobalt consumption. Some analysts have forecast that by 2020 cobalt's use in battery applications alone will be greater than the entire world market for refined cobalt in 2013. (Source: Darton Commodities Limited, 2014). According to market research firm CRU, the cobalt market is expected to be tight due to a robust demand and absence of a definitive project pipeline. CRU also believes the market will be in a deficit position by 2017. Our ICP is the only near term, primary cobalt deposit in the United States with all the necessary approvals required for construction and with an approved Plan of Operations.

Worldwide Cobalt Demand Increasing
One of the more exciting developments in the cobalt sector was the announcement in September 2014 by a large California based electric vehicle manufacturer regarding its intention to build the world's largest rechargeable battery factory (the Gigafactory) in Nevada. While this development spurred renewed interest in the cobalt market, it also acted as a catalyst for other vehicle manufacturers to announce plans for their own new electric vehicle production.

The US $5 billion Gigafactory is estimated to produce the equivalent of all the electric vehicle and grid storage batteries currently produced worldwide. The manufacturer has indicated its intention to source raw materials for the factory as locally as possible and the ICP, being located in the western United States and proximal to the Gigafactory, offers a unique potential supply of ethically sourced, environmentally sound, conflict free cobalt for US consumers.

Cobalt Price on an Upward Trend
Cobalt continues to be in the news. We believe that the supply demand fundamentals are becoming more favourable exhibiting an overall upward trend in price. The chronic political unrest in the Democratic Republic of Congo (DRC), the largest global supplier of cobalt is also affecting this trend. Any disruption or decline in copper mining in the DRC could lead to a corresponding decline in world cobalt supply. Our ICP, unlike the DRC, lies in a politically stable environment and is not affected by disruptions in mining operations that produce cobalt as a by-product of either copper or nickel mining.

Fiscal Prudence
Early last year the Company took proactive, preemptive measures to preserve the Company's strong cash position, streamline operations and significantly reduce general and administrative expenses. With a healthy cash position ($4.9 million as at November 30, 2014) and no debt, we have sufficient working capital to fund planned operations based on our current budget. In addition, the ICP's mine and mill site have been diligently maintained to ensure that the requirements of all the permitting agencies have been met and all necessary permits remain in good standing.

The Company Moving Forward
We believe our company is in an excellent position to capitalize on the growing demand for cobalt, in particular battery grade cobalt chemicals. Our ICP offers unique potential for North American consumers to secure an ethically sourced, environmentally sound, conflict free supply of battery grade cobalt chemicals, mined safely and responsibly in the United States.

We will be attending the Prospectors, & Developers Association of Canada Conference (PDAC), which is held in Toronto from March 1 to March 5. If you are in the Toronto area, please stop by and visit us at booth 2416A to meet management and discuss our plans moving forward.

If you would like further information or to sign up for email updates please contact us at 604-682-6229 ext. 228, or please email us at dmann@formationmetals.com.

This will be an exciting year ahead and on behalf of the management team at Formation Metals Inc., I want to thank you, our shareholders, for your continued support.



J. Paul Farquharson
President & C.E.O.


________________________________________

This letter contains "forward-looking statements" within the meaning of applicable Canadian securities legislation. Generally, forward-looking statements can be identified by the use of forward-looking terminology. Forward-looking statements are based on assumptions and address future events and conditions and are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking statements. Assumptions include that the Company will be able to file a new NI 43-101 compliant technical report before the end of February 2015 and the risks and uncertainties include that such a new technical report will not be filed by the end of February 2015 or at all. Assumptions on the future growth in demand for cobalt are based on independent sources whose assumptions and risks are unknown and actual results may be materially different from those expressed or implied by such forward-looking statements. Further information regarding risks and uncertainties which may cause results to differ from those contained in forward-looking statements are included in filings by the Company with securities regulatory authorities and are available at www.sedar.com. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The Company does not undertake to update any forward-looking statements that are contained herein, except in accordance with applicable securities laws. The statements contained in this letter in regard to Formation Metals Inc. that are not purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including Formation Metals Inc.'s beliefs, expectations, hopes or intentions regarding the future. All forward-looking statements are made as of the date hereof and are based on information available to Formation Metals Inc. as of such date. It is important to note that actual outcome and the actual results could differ from those in such forward-looking statements. Factors that could cause actual results to differ materially include risks and uncertainties such as technological, legislative, corporate, commodity price and marketplace changes.

 
 February 04, 2015
Short Q&A: Tony Southgate, Cobalt Production Manager, ENRC Marketing
    Publisher: Argusmedia.com

 
THIS IS NOT AN OFFICIAL COMPANY NEWS RELEASE
- FOR THE INFORMATION OF SHAREHOLDERS AND INTERESTED PARTIES ONLY -

Ahead of February's NiCoMo 2015 conference, we got in touch with speaker Tony Southgate, Cobalt Product Manager at ENRC. In this short Q&A we spoke to Mr.Southgate about:

The role of China in the cobalt market and the impact of the slowdown - How the aerospace and battery sectors have influenced the landscape of the cobalt market - The impact of copper prices on the cobalt industry - The evolution of the cobalt market and defining events

An excerpt from the report:

Argus: There has been much talk about increased orders from the aerospace and battery sectors changing the landscape of the cobalt market. Do you see this as realistic and, if so, when do you see it happening?

TS: We are already seeing the effect of increased orders from aerospace and battery sectors. The overall healthy nature of these two end-uses is giving consumers the confidence to lock in more volumes in 2015 on a long-term basis. The demand picture for Cobalt over the next 2-3 years is widely viewed as being robust, and the only concerns are on the supply side.

To read the short Q&A with Tony Southgate click on image below...

About Argus

Argus is an independent media organisation with over 700 full time staff. It is headquartered in London and has offices in each of the world's principal commodity centres. Its main activities comprise publishing market reports containing price assessments, market commentary and news, and business intelligence reports that analyse market and industry trends.

Argus is a leading provider of data on prices and fundamentals, news, analysis, consultancy services and conferences for the global crude, oil products, LPG, natural gas, electricity, coal, emissions, bioenergy, fertilizer, petrochemical, metals and transportation industries. Data provided by Argus are widely used for indexation of physical trade. Companies, governments and international agencies use Argus information for analysis and planning purposes.

Argus has 20 offices globally, including London, Houston, Washington, New York, Calgary, Rio de Janeiro, Singapore, Dubai, Beijing, Tokyo, Sydney, Moscow, Astana, Riga and other key centres of the commodity industries. Argus was founded in 1970 and is a privately held UK-registered company.

 
 February 03, 2015
Sherritt International - Massive Upside As Cobalt Prices Revert
    Publisher: Seeking Alpha

 
THIS IS NOT AN OFFICIAL COMPANY NEWS RELEASE
- FOR THE INFORMATION OF SHAREHOLDERS AND INTERESTED PARTIES ONLY -

Just as the China demand story sent cobalt prices soaring 300-1000%, global adoption of electric vehicles should create a similar pricing environment.

Cobalt Has Already Experienced a Major Structural Upheaval

Today the main source of cobalt is as a by-product of copper and nickel mining. The copper belt in the Democratic Republic of the Congo and Zambia yields most of the cobalt mined worldwide. Although the majority of the worlds cobalt supply is originally sourced from the DRC, only a fraction of this is actually refined within the country itself. Primary export markets for DRC's production are China, Finland, Zambia and Belgium. Here, these materials are either refined into cobalt metal or into downstream chemical products or specialty materials.

Along with other major metals, China has become the single largest cobalt consumer in the world, sending cobalt production volumes skyrocketing. As can be expected, prices also dramatically readjusted with blossoming demand, with supply largely bottlenecked to high risk countries such as the DRC (source: U.S. Geological Survey).

Following a short but intense period of industry consolidation fewer than ten producers account for over 80% of China's total refined cobalt output. Having little cobalt resources of its own, China imports over 90% of its cobalt raw material requirements from the DRC.

While Lithium Gets Most of the Press, Cobalt Should be a Major Beneficiary of Electric Vehicle Adoption, Setting the Stage for Yet Another Structural Shift for the Metal

Current prices for cobalt are around $35,000/t. Prices have generally moved up with demand over the past 30 years but have shown volatility due to supply risks in major cobalt producing countries. Just as the China demand story sent cobalt prices soaring 300-1000%, global adoption of electric vehicles should create a similar pricing environment.

Cobalt cathode chemistry is the product of choice for applications requiring thin, flexible and high energy density batteries (e.g.. Li-ion batteries). According to data compiled by Navigant Research, electric vehicles have the potential to more than double cobalt demand over the next 20 years. Already, demand for rechargeable batteries in laptop computers, tablets, mobile phones and other portable electronics have been major drivers of global cobalt consumption over the past decade. Electric vehicles should provide the next leg of this long-term growth story.

Business intelligence firm CRU Group believes that the current global cobalt surplus will be quickly eaten up and the market will be in a deficit by 2017. The firm's senior consultant Panos Kotseras wrote in a report issued in December, "The cobalt market is expected to become tight due to a combination of robust demand and absence of a concrete project pipeline."

As One of the Major Global Producers of Cobalt, Sherritt International Has Significant Upside

Sherritt International (OTCPK:SHERF) has two major JV's that product cobalt: their Moa JV and their Ambatovy JV. Sherritt has a 50/50 partnership with General Nickel Company S.A. of Cuba (the Moa Joint Venture) and a 40% indirect interest in two companies (together the Ambatovy Joint Venture) that own a significant nickel operation in Madagascar. Both of these JV's produce Cobalt as a by-product of Nickel mining.

As mentioned, cobalt demand is expected to almost triple over the next 20 years, with electric vehicles supplying ~50% of demand by 2035 from a nearly 0% base. Should prices readjust to reflect this demand shift (as cobalt prices have historically done), the additional EBITDA generation would be exceptionally meaningful for Sherritt.

A reversion of cobalt prices back to their historical highs would add an additional ~$75m in EBITDA assuming flat production volumes. At it's current valuation (6.3x Adjusted EBITDA), this would imply roughly 74% upside from an increase in cobalt prices due to rapidly growing demand.This however may underestimate the true share price appreciation potential of another dramatic rise in cobalt prices. Over the last period of rapidly rising prices (2002-2007), Sherritt's share price rose ~400%. Given that the Electric Vehicle story should be less volatile than fluctuating Chinese demand, this impending growth driver for cobalt could provide a more stable demand floor with similar price action upside.

With the collapse in cobalt prices stemming from the financial crisis, now may be an extremely attractive time to enter an investment with long-term secular growth drivers at a depressed valuation.

To read the full article please click here to visit SeekingAlpha.com

 
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