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 May 29, 2015
President's Letter to Shareholders
    Publisher: Formation Metals Inc.


Formation Metals Inc. - President's Letter to Shareholders

May 29, 2015

Dear Fellow Shareholders,

In our last Letter to Shareholders we provided an overview of the 2015 fiscal year which focused on the many positive developments the Company had experienced throughout the year. As our 2015 Annual General Meeting on June 25th is fast approaching, we want to take this opportunity to provide our shareholders with a corporate development update as well as invite you to attend the meeting. Enclosed are the related meeting and voting proxy materials, please feel free to contact us if you have any questions. Your ownership in the Company is important, we encourage all our shareholders to vote.

It has been quite an exciting year for your Company. We are optimistic about the future of the cobalt markets and how a substantial increase in cobalt demand, particularly from the battery sector, could positively impact our Idaho Cobalt Project (ICP). Last month we announced positive economics in our Preliminary Economic Assessment (PEA) which is a significant milestone in the advancement of the ICP towards feasibility and production. We believe that the decision to shift from producing high purity cobalt metal to cobalt sulfate positions our Company and its shareholders to capitalize on the expanding battery sector.

Robust Economics and Revenue By-Products
The PEA's economic model resulted in a post-tax NPV of US$113.45M and an IRR of 24.07% using an 8.5% discount rate and 35% corporate tax rate. The report is based on an underground mine with a target production rate of 800 tons per day with a weighted average annual production of 2,771,000 lbs of cobalt, 4,533,000 lbs of copper and 3,600 oz of gold over a 12.5 year mine life with an estimated pre-production period of 21 months utilizing a 0.25% cobalt cut-off for stope design. Please visit our website to view the full SEDAR filed PEA Technical Report.

The PEA has demonstrated the ICP's diversified product potential. The base case revenue stream for all its products over the life of mine (LOM) is approximately US$983M of which the majority, US$690M, is attributed to cobalt sulfate. In addition to cobalt sulfate, the ICP will produce copper concentrate and gold metal with a value of approximately US$100M over LOM and a significant amount of saleable by-products for the agricultural industry, namely copper sulfate and magnesium sulfate. Over the LOM, the ICP will produce approximately US$140M worth of copper sulfate and approximately US$55M of magnesium sulfate. We are currently in the investigative stages of pursuing potential off-take agreements for all the ICP products.

The positive results of the PEA and recommendations from our independent engineering consultants have given our Company a clear mandate to move the ICP towards feasibility. The results from ongoing metallurgical test work suitable for a feasibility study are expected in our second fiscal quarter (August 31, 2015). Current quotes are being assessed for project advancement and marketing campaigns are being organized and scheduled.

2015 Cobalt Development Institute Conference (CDI)
We recently had the opportunity to present an update on the ICP to the members of the Cobalt Development Institute at the annual conference held this year in Toronto. The CDI conference is the only exclusive cobalt conference in the world and is always well-attended by world cobalt industry experts.

CDI Conference - Supply Deficit Looming Sooner than Later
A new cycle of undersupply in cobalt "is about to begin" (CRU consultant Peter Searle)
Our presentation was well received and there was much excitement about our new ICP product, cobalt sulfate heptahydrate and the potential for the ICP to be the only new, near term primary producer of cobalt in the United States. Conference presenters were almost unanimous on the potential for increasing cobalt prices due to the increased demand from the expanding battery sector (representing 42% of all cobalt consumed). Cobalt as a technology enabling metal, is critical in supporting the global innovation platform and the green agenda being followed by many countries and companies. Sentiment at the conference was upbeat with cobalt market experts predicting that the anticipated cobalt supply deficit will occur in 2016 as opposed to the previous estimate of 2017 (source: CDI 2015).

And it All Started Early Last Year...
As has been stated in numerous publications in particular, Benchmark Mineral Intelligence "The excitement in the battery sector escalated last year with Tesla Motors' announcement of building the world's largest battery factory, the "gigafactory".

The news sparked a revival of interest in companies supplying the raw materials for the lithium ion batteries such as cobalt, lithium and graphite as the gigafactory being built in Nevada has the potential to double the current world lithium ion battery production thereby doubling the demand for the raw materials required."

Since Tesla's announcement there has been an additional five new battery factories planned and under construction. This is expected to substantially increase the demand for raw materials such as cobalt which will drive the supply into deficit much sooner than the previously predicted 2017. As reported by Simon Moore of Benchmark Mineral Intelligence, "The lithium-ion battery megafactories are coming and they will require a substantial new supply of raw materials. While these megafactories will have more negotiating power in their contracts for industrial metal sourcing, they will not be able to create this supply out of thin air." As Mr. Moore states, "Tesla has already stated that they intend to source their raw materials as locally as possible whereas over half of the world's cobalt supply originates from the Democratic Republic of the Congo. This creates an interesting dynamic and playing field". A playing field we believe our company and our ICP is well positioned to participate in.

We believe we are in the midst of a "positive perfect storm".

We have no long term debt and we have a solid cash position.
We have a new team,
We have a new product and
We have a unique commodity which is in strong demand.

The ICP, being located in the western United States and proximal to the Gigafactory, offers a unique potential supply of ethically sourced and environmentally sound cobalt for US consumers.

If you would like further information or wish to sign up for email updates please contact us at 604-682-6229 ext. 228, or please email us at All 2015 AGM materials have been posted on our website.

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.

Signed "J. Paul Farquharson"

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

The ICP remains the sole, near term, fully environmentally permitted, primary cobalt deposit in the United States.

E.R. (Rick) Honsinger, P.Geo., Vice President of the Company, is the Qualified Person as defined by National Instrument 43-101 who has supervised the preparation of this letter and has approved its contents.

The Company cautions that the PEA discussed in this letter is preliminary in nature, and is based on technical and economic assumptions which will be evaluated in further studies. The PEA is based on the current (as at March 10, 2015) ICP estimated resource model, which consists of material in both the measured/indicated and inferred classifications. Inferred mineral resources are considered too speculative geologically to have technical and economic considerations applied to them outside the scope of a PEA. The current basis of project information is not sufficient to convert the mineral resources to mineral reserves, and mineral resources that are not mineral reserves do not have demonstrated economic viability. Accordingly, there can be no certainty that the results estimated in the PEA will be realized. In addition, this letter contains "forward-looking statements" within the meaning of applicable Canadian securities legislation. Statements in this letter pertaining to projected revenues and cash flows, quantity and grade of mineralized materials, estimated mineral prices and the continued expansion of the market for battery grade cobalt chemicals are forward-looking statements. These 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. Many of the assumptions respecting projected revenue, cash flow and quantity of mineralized materials will be set out in detail in the Preliminary Economic Assessment. Such projections are and will inevitably always be dependent on assumptions about future mineral prices and development costs which will be subject to fluctuation due to global and local economic conditions. This letter also contains forward-looking statements respecting the growing demand for battery grade cobalt chemicals, which demand may or may not continue to grow depending on consumer habits and technological developments. 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 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.

 May 25, 2015
The CDI Conference: What We Learned About the Cobalt Market
    Publisher: Metalbulletin
    Author: Linda Lin

Excerpts from the MetalBulletin Article

The CDI Conference: What We Learned About the Cobalt Market

Sentiment at the CDI conference this month was upbeat amid anticipated supply shortage. Here is a summary of what we learned.

  1. Most market participants expect higher cobalt prices before the end of this year. Major traders see prices at $13.5-15 per lb if Chambishi Metal resumes production at the end of June, and at $14-16 per lb if the closure lasts longer.
  2. Closure at Chambishi may last for "at least" three months and may last longer than expected, according to sources. Some market participants are predicting a permanent shutdown of the operation.
  3. China's cobalt metal imports have been low this year, with ENRC not supplying on long-term basis due to the closure at Chambishi. Ambatovy meanwhile is selling robust volumes around the world.
  4. Jinchuan Group is planning to reduce its cobalt metal output by around 16% to 3,200 tonnes this year, according to an official heading Jinchuan's nickel and cobalt operations.
  5. China's cobalt consumption is expected to rise by 13% to about 4,300 tonnes this year, according to an Antaike analyst.
  6. Battery makers in South Korea and Japan have both reported solid demand from the automobile sector, with one Japanese major company expecting a surge of 70% for battery demand in the next two years.
  7. To read more and see the full list of 10 items learned at the 2015 CDI Conference, Sign up for a Free Trial Metal Bulletin Membership or follow on Twitter @metalbulletin

 May 21, 2015
Cobalt is About to See New Cycle of Shortage
    Publisher: Metalbulletin
    Author: Linda Lin

Excerpts from the MetalBulletin Article

CDI Conference: Cobalt is about to see a new cycle of shortage, CRU says

A new cycle of undersupply in cobalt "is about to begin", thanks to steady growth in the battery sector, according to CRU

"Demand [for cobalt] especially from rechargeable batteries and super alloys will continue to be robust in the medium term. Meanwhile, supply growth will plateau as recently commissioned copper and nickel operations reach capacity," CRU consultant Peter Searle told delegates at annual conference of CDI in Toronto this week.

As a result, cobalt prices are expected to reach "$20 per lb level" by the 2020s, according to Searle, as he predicted the cobalt market turns to deficit from surplus from around 2016 onward.

Cobalt demand has been growing and is expected to grow at more than 5% per year, mostly owing to contribution from the chemical sector, during the period of 2000-2025.

Among main consumers, battery currently accounts for about 43% of global cobalt consumption in 2015, compared with a ratio of 26% in 2006, according to Searle.

Meanwhile, growth in mine production is projected to slow down to nearly zero around 2019, in contrast with a growth of as high as nearly 40% seen in 2010, he said.

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

 May 07, 2015
Tesla Batteries Already 'Sold Out' Through Mid-2016
    Publisher: Cobalt Investing News
    Author: Theresa Matich


Tesla Batteries Already 'Sold Out' Through Mid-2016

During Tesla Motors' (NASDAQ:TSLA) first-quarter conference call on Wednesday, there was still plenty of excitement over the company's recent announcement of its new suite of rechargeable batteries.

While the electric vehicle manufacturer put out 11,160 vehicles in Q1 to beat its guidance by 10 percent, Tesla's new battery business was also a big focus for many who asked questions on the call.

CEO Elon Musk stated that response to the battery announcement has been "crazy off the hook," with 38,000 reservations for the Powerwall and 2,500 reservations for the higher-capacity Powerpack. Since Powerpacks are meant to be used by utilities or for heavy industrial uses, Musk noted that each reservation is likely for at least 10 units, while those reserving Powerwalls have probably been asking for more than one unit as well.

"There's no way that we can possibly satisfy this demand this year," Musk said. "We're basically sold out through the middle of next year, in the first week."

While there was still plenty of talk over Tesla's financial performance and the rollout of its new Model X vehicles, Tesla Energy has certainly stolen the spotlight for now. Here are a few more highlights from Wednesday's call:

  • Increasing capacity? --- "Given the very high demand that we're seeing for Tesla Energy products, we're actually trying to figure out if we can go from our current production target ... in our Nevada plant to maybe 50 percent more than that, or even higher," Musk said. "The sheer volume of demand here is just staggering. We could easily have the entire gigafactory just do stationary storage."
  • Enter manganese --- While many expect Tesla to use a NCA (nickel-cobalt-aluminum oxide) cathode in its new suite of batteries, that won't necessarily be the case. Musk noted that there are two distinct applications for the batteries --- backup power and daily cycling --- each of which have very different chemistries. "The backup-power chemistry is quite similar to the car, which is like a nickel-cobalt-aluminum cathode. The daily cycling ... is nickel-manganese-cobalt, so there's quite a lot of manganese in there."
  • SolarCity (NASDAQ:SCTY) rejection --- SolarCity has said that it will not use the 7-kilowatt-hour Powerwall model, which is optimized for daily cycling, and Musk agrees that using the battery would be more expensive than utilities in the US, at least in most cases. However, he added that the battery makes more sense in other regions, such as Europe.
  • Apple (NASDAQ:AAPL) --- Another interesting point that's gained traction is Musk's response to questions about Apple entering the electric vehicle business. The CEO stated that he would welcome Apple's participation in the sector, but when asked whether he is worried about engineers at Tesla being poached by Apple, said he isn't worried. In fact, he suggested Tesla has recruited something like five times the amount of people from Apple as Apple has taken from Tesla within the past year or so.
  • To read the full article please click here to visit

 May 03, 2015
What Does the Tesla Battery Announcement Mean for Lithium, Graphite and Cobalt?
    Publisher: Cobalt Investing News
    Author: Theresa Matich


Simon Moores: What Does the Tesla Battery Announcement Mean for Lithium, Graphite and Cobalt?

Last Thursday night, Tesla Motors (NASDAQ:TSLA) announced the details of its new line of residential and business-scale rechargeable batteries under the banner Tesla Energy, marking a massive shift for the company.

True to form, Tesla CEO Elon Musk has set a lofty goal with regards to the batteries. He shared his hopes that Tesla's line and others like it will help the world shift away from fossil fuels by facilitating the storage of energy generated from sources like wind and solar.

However, there wasn't much talk about supply-chain specifics --- i.e., how much lithium, graphite and cobalt will be needed for all those batteries. With that in mind, Resource Investing News got in touch with Simon Moores of Benchmark Mineral Intelligence to talk about how Tesla's new batteries may affect the markets for those metals.

A nice surprise

For Moores, the biggest surprise from Thursday night's announcement was the cost of the batteries. He noted that the cost of Tesla's home-use battery, the Powerwall, was expected to come in at over $10,000. That's well above the actual cost of the battery, which is set at $3,000 for the 7kWh model and $3,500 for the 10kWh model.

In the same vein, Moores said that the second thing that stood out was the scalability of the battery systems. "That was really clever from Tesla ... they're making it really easy," he said.

Of course, the $3,500 price tag will still be a price barrier for many, a point conceded by Peter Rive, CTO of SolarCity (NASDAQ:SCTY). "I don't believe this product in its first incarnation will be interesting to the average person," he told the Associated Press.

Still, Moores stated that Tesla has done a good job of addressing that issue. "I think there's always a barrier there because it's such a new thing. Not a new technology, but a new concept ... so people have nothing to compare it to," he said. "The cost is very low still. I think Tesla really got in aggressively on the price in order to start immediate adoption."

No word yet on pricing for Tesla's higher-capacity 100kWh Powerpack batteries, which were also announced on Thursday.

Lithium, graphite and cobalt needed

Of course, the question on every critical metals investor's mind is "how much lithium, graphite and cobalt will the batteries use?" According to estimates from Benchmark Mineral Intelligence, the answer is "a lot." "Tesla hasn't 100 percent confirmed they're the same batteries used in their cars, but they pretty much are," Moores said, "so they will contain a lithium and cobalt cathode --- a NCA (nickel-cobalt-aluminum oxide) cathode --- and graphite as well."

Benchmark expects that to produce each Powerwall, 16 kilograms of synthetic graphite (or 16 kilograms of spherical graphite derived from 40 kilograms of flake graphite concentrate), as well as 12 kilograms of lithium hydroxide, will be required. For the Powerpacks, Moores said those amounts will increase 10 times (about 160 kilograms of graphite and 120 kilograms of lithium). In other words, they'll need slightly more than the amounts of lithium and graphite currently used in Tesla's Model S.

Given those numbers, if demand for the batteries takes off as Musk expects, it could mean big things for critical metals demand. Moores said that while there are enough raw materials in the ground to support Tesla's battery revolution, the key question will be whether there's enough processing capacity and know-how to make battery-grade products.

"The battery-grade products are specialist products. They're not commodities," he pointed out. "There's a lot of expertise that goes into processing these raw materials before they can be used in batteries, and the question is, where does that reside?"

Currently, much of that processing capacity lies in China, Japan and South Korea. Still, Moores noted that China is still "fairly new to the lithium game" and that it still relies heavily on importing raw materials. "There is room in the lithium market," he said, especially for companies aiming to go beyond raw materials to create more specialized products.

Higher demand, higher prices

Increased demand will have implications for lithium, graphite and cobalt prices as well. "You've got increased demand from batteries, which we're already seeing, and that's without gigafactory demand. And more importantly, there's other megafactories being developed in China," Moores said. "When you have such a heavily skewed market on the demand side with little change on the supply side, prices are only going to go one way."

While that might sounds like good news, Moores argued that price volatility isn't actually good for the industry. It can prevent long-term planning and investment, leaving end users without supply and leading to substitutions in the market, as happened to some extent in the rare earths industry. However, Moores isn't worried that what happened with rare earths will happen with lithium, graphite or cobalt.

"There is potential for prices to go higher than they've ever been, but ... I think lithium ion is too far gone. It's too commercialized now," he said, speaking to the possibility of substitution in the near future. "Regardless of the bad news they might get now and again, for whatever reason, it's the most trusted form of battery. For that reason, it's here to stay for a long time, in my opinion."

What does it all mean for juniors?

Still, Tesla hasn't said much about supply agreements for lithium, graphite and cobalt. While Moores suspects the company may need stockpiles ready for its gigafactory by the end of this year, he suggested that Tesla could also continue to source its cells from Panasonic (TSE:6752). "They need to lock up the right volumes of raw materials, and I think they're not going to do a deal unless it's right for them," he said.

When asked whether lithium companies in Nevada will have an advantage in terms of securing supply agreements with Tesla, Moores said that they have an edge by virtue of being on the company's doorstep. However, he stressed that it's more important to consider whether such companies are able to economically produce the right grade of lithium. "The key word is economic, because Tesla is going to be negotiating hard on these contracts," he said. "They want the best deal."

Western Lithium (TSX:WLC), Pure Energy Minerals (TSXV:PE) and Dajin Resources (TSXV:DJI,OTCMKTS:DJIFF) are located in Nevada, along with Rockwood Lithium (now owned by Albemarle (NYSE:ALB)), which controls the only producing lithium operation in the US. Tesla has previously said that it plans to source all raw materials for its gigafactory from North America.

In any case, Tesla's announcement has certainly injected some fresh excitement into the critical metals space. Investors will be keeping an eye out for more developments from the company.

To read the full article please click here to visit

 April 20, 2015
Strength Remains in Cobalt Market on Anticipation of Supply-Driven Tightness
    Publisher: MetalBulletin
    Author: Fleur Ritzema

Excerpts from the MetalBulletin Article

Strength Remains in Cobalt Market on Anticipation of Supply-Driven Tightness

Strength remained in the cobalt market last week, as sellers set their sights higher on an anticipated shortfall due to Chambishi's absence from the spot market.

Sellers felt little pressure to offer aggressively last week, although buyer demand was flat towards the end of the week, sources said.

ENRC's Chambishi operation this month confirmed reports by Metal Bulletin that production of cobalt would stop for three months as a result of feed problems.

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 the rumour mill was in overdrive last week, as the market speculated about whether the stoppage would last longer than planned, after Tony Southgate, head of the ENRC's cobalt book, was understood to have resigned.

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

 April 15, 2015
Chris Berry on Cobalt: The Great Enabler in the Battery Race
    Publisher: InvestorIntel for Investors
    Author: Chris Berry


Cobalt - The Great Enabler in the Battery Race

Excerpt from InvestorIntel - April 15, 2015

Chris Berry writes:

With an increasing amount of attention focused on metals used in batteries, several issues have become clear. First, the metals used and resulting chemistries are all over the map implying there is no clear winner. Second, the amount of a metal used in a battery isn't as important as is the cost to procure it. Third, a general lack of transparency in pricing clouds the overall potential opportunities.

Given these challenges, it's a wonder anyone would care at all about the Energy Metals, but it has become increasingly clear that the demand is there. One metal in particular which offers interesting answers to the above issues and deserves more careful study is cobalt.

The USGS puts the total mined production for cobalt at 112,000 tonnes (though refined cobalt production is lower). However, there are numerous downstream cobalt compounds including chlorides, carbonates, and powders used in various applications. This diversity of demand is very important as the metals markets struggle with oversupply. With the overall market demand for cobalt growing at an estimated 6 to 7% per annum, driven primarily by the battery business which uses cobalt chemicals and the aerospace business which uses high purity alloys, the demand story is sound.

The supply side is more of an open question, but industry sources have indicated that the oversupply that is plaguing many of the metals also exists in cobalt. The key question here then is when will the balance tip and a new equilibrium emerge? The current cobalt price would seem to reinforce the oversupply thesis and my own estimates indicate that prices will remain range bound in the intermediate future. That said, one of the real keys to analyzing the cobalt market involves not looking at the metal itself, but other external factors which can influence price and therefore usage. It's no secret that cobalt is, by and large, a byproduct. Approximately two thirds of cobalt production is directly related to copper production, slightly less than one third is related to nickel production, and the remainder (less than 5%) is the result of primary cobalt operations. Given that reality, it seems that both positive and negative catalysts for the copper and nickel markets should be more scrutinized than those only in the cobalt space. As an example, forecasts of slight oversupply in copper heading in to the second half of this year will weigh on cobalt pricing.

Additionally, with the battery business such a large and growing source of demand for cobalt chemicals, particular attention should be paid to Asia-based battery manufacturers such as LG Chem, Sony, Panasonic and GS Yuasa to name a few. These are among the companies who collectively promise to determine the future trajectory of metals demand, in particular for cobalt. In short, Tesla isn't the only game in town. This was reinforced by an exceptional article on Bloomberg yesterday which focused on several smaller aspirants in the battery race. Though cobalt wasn't explicitly discussed, the article reinforced the fact that there are multiple chemistries and players in the battery space. This healthy competition can only help lower costs in what is currently a $50 billion per year industry and growing.

Much of cobalt's appeal concerns the perceived need for a reliable source and supply chain as roughly 50% of global mined production comes from the DRC and the lion's share of refined cobalt comes from China. The real opportunity in cobalt lies in the lack of a longer-term pipeline of projects that can fill any supply gap in several years time....

To read the full editorial on the InvestorIntel website please click here

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


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


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


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

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