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 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


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


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


•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.


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

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.


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

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 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


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


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

 February 02, 2015
Simon Moores: Expect Supply Chain Focus for Megafactory Metals
    Publisher: Cobalt Investing News
    Author: Charlotte McLeod


Simon Moores: Expect Supply Chain Focus for Megafactory Metals

Simon Moores of Benchmark Mineral Intelligence is a fixture on the graphite scene, and also comments frequently on the cobalt and lithium spaces. Resource Investing News was lucky enough to catch him at Cambridge House International's 2015 Vancouver Resource Investment Conference to get an update on all three commodities.

He commented on whether he sees low oil and gas prices impacting the electric vehicle market, also touching on the likelihood of Tesla Motors (NASDAQ:TSLA) using natural graphite at its soon-to-be-constructed gigafactory. "Whilst natural graphite has cost advantages and has a lower carbon footprint to the synthetic material, at the end of the day they need to get the raw material first and foremost, and if there isn't enough supply at the right price, then Tesla will have to use synthetic," he said.

In closing, he touched on what investors can expect from graphite, lithium and cobalt in 2015. "What I would expect is more focus on the supply chain situation," he said, noting that the emergence of battery megafactories will put pressure on supply of the metals. "Whether that will turn into investment for these companies is another question --- usually people are sluggish to react. Investors, the buyers of minerals, they only react when they see a specific problem, and they generally don't react before that problem."

To read the full article please click here to visit

 January 19, 2015
Stocks to Watch: Formation Metals Inc, Hudsons Bay Co, Essential Energy Services Ltd.
    Publisher: Winston View
    Author: Jarad Winslet


Excerpt from

Stocks to Watch: Formation Metals Inc , Hudsons Bay Co , Essential Energy Services Ltd

Formation Metals Inc. (TSE:FCO) ended the trading session with a gain of 5.0000% or 0.005 points. After commencing the session at 0.105, the stock maintained a fairly thin range. During the quiet session, the stock hit 0.105 on the upside and 0.095 on the downside before culminating at 0.105. The total number of shares traded stood at 143,597. The previous close of the shares was registered at 0.1. The 52-week high of the share price is 0.27 and the 52-week low of the stock is 0.07. A difference of 61.11% from the 52-week high suggests that bulls would have to work hard to take the price to new highs. The trading currency is in CAD.

Hudsons Bay Co (TSE:HBC) suffered a minor setback as the shares lost 1.03% or 0.25 points. During the trading session, the price hit a ceiling of 24.26 and took support from the floor value of 23.87. In this session of profit booking, the shares closed at 24 with the number of shares traded hitting 141,844. The counter has a 52-week high of 25.38 and the yearly floor price, i.e. the 52-week low is 15.53. The company has a 30-day simple moving average of 23.99 and the 60-day simple moving average is registered at 22.24, according to the most recent information available. The trading currency is in CAD.

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 January 13, 2015
Cobalt Shortage Put Brakes on Electric Car
    Publisher: Wall Street Daily
    Author: Tim Maverick


Cobalt Shortage Put Brakes on Electric Car

Wall Street is climbing aboard the electric car bandwagon. It's being encouraged by investment banks like UBS, Citigroup, and Deutsche Bank, all of which have put out glowing reports in recent months about the future of electric cars.

The Deutsche Bank report, for example, said that electric vehicle sales (including hybrids) would hit 9% of total vehicle sales in 2020 and 14% in 2025. In 2014, such vehicles represented about 4% of total sales.

One key driver to that rosy future, the bank said, would be the release of the Tesla Motors (TSLA) Model III. This vehicle will be a mass market model that will use low-cost batteries produced by Tesla's Gigafactory, which is currently under construction in Nevada.

When that happens, global production of these batteries will nearly double. And all of these batteries will need lots of lithium, graphite, and cobalt. I examined the supply situation for lithium and graphite in prior articles, so it's time to examine cobalt.

Supply-Demand Cobalt Blues

About 40% of current cobalt demand comes from the battery industry for products such as smartphones, laptops, and of course electric cars. According to Simon Moores of Benchmark Mineral Intelligence, cobalt demand from the battery industry alone could rise 17% from 2013 levels. That would be about 7,000 metric tons more per year.

In addition, Cobalt Investing News quotes Fortune Minerals (FT.TO) CEO Robin Goad as saying the next biggest use of the metal (at 19%) is for superalloys like those used in jet engines and wind turbines. And both of those markets are growing rapidly, too.

Because of the nature of cobalt, it's normally harvested as the by-product of mining for other metals, such as copper or nickel. In fact, 55% of cobalt production comes from nickel ores and another 35% from copper ores. But because cobalt is so closely tied with those metals, if mining for nickel or copper drops, so will cobalt production.

The world's leader in cobalt production is the strife-torn Democratic Republic of the Congo. It supplies about 55% to 60% of the world's cobalt. The two biggest miners of cobalt there are Freeport McMoRan (FCX) and Lundin Mining (LUN.TO).

Roughly 43% of cobalt refining is located in China. But U.S.-based OM Group (OMG) sold its refining business there in 2013 to Freeport, Lundin, and the Congo's stated-owned metals and minerals trading company.

Any problems in the Congo and China will definitely affect the players building battery mega-factories, namely LG Chem and Foxconn Technology.

Even if things go smoothly, the business intelligence firm CRU Group says that the global cobalt surplus is quickly being 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 the cobalt environment changes, so will the battery market.

Where Will Tesla's Cobalt Come From?

Tesla has already planned to get around overseas supply hitches by stating that it wants to source all of its raw materials from North America. But therein lies a potential problem...

The U.S. Geological Survey put 2013 cobalt production in the United States at only 6,500 tons and Canada at just 8,000 tons.

And 2017 -- the year CRU predicted there would be a global cobalt shortage -- is around the time that the Gigafactory is supposed to kick into production. Most of the miners interested in expanding North American cobalt output are junior mining companies that have been under tremendous financial pressure due to investors and Wall Street banks' aversion to mining endeavors. Nearly all of the major banks hear the words "mining" and will walk away from making any loans, no matter how rich the deposit.

This makes it questionable as to whether many North American junior producers will even be around in 2017 to meet Tesla's needs.

This realization is already having an effect on the price of cobalt.

Cobalt Prices Speeding Up

In its latest cobalt outlook, CRU points out that strengthening fundamentals in 2014 led to the first annual price increase since 2010. More price rises in the months ahead seem to be baked into the cake.

But investing directly in the cobalt market in North America is tough to do safely since, as I mentioned, most of the companies involved in cobalt are so small.

But that isn't stopping some companies from trying to capitalize on the coming rise in demand.

One example of a small company looking to feed Tesla's hunger for cobalt is Formation Metals (FCO.TO). It's looking to exploit the Idaho Cobalt Project, a primary source of high-purity cobalt in Idaho that was mined from the 1900s to the 1970s.

A larger company mining cobalt in North America is Vale S.A. ADR (VALE) through its Inco nickel subsidiary. This could also be another option as a large company would not be as vulnerable.

If an investor wishes to dip a toe into the market, I would suggest you do your due diligence on any of the speculative cobalt miners, like Formation, since the risk is high.

And "the chase" continues,

Tim Maverick

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 January 07, 2015
Cobalt prices strengthen as year-end pressure to sell subsides
    Publisher: MetalBulletin
    Author: Fleur Ritzema


Excerpt from the MetalBulletin Article

Cobalt prices strengthen as year-end pressure to sell subsides

Cobalt prices began 2015 on a stronger note, recovering slightly from a Christmas dip which had resulted from year-end producer pressure to sell.

Low-grade cobalt rose to $13.90-14.75 per lb on January 7, from $13.90-14.50 per lb previously. High-grade prices climbed to $14-14.85 from $13.90-14.70 at the end of 2014. Most saw the price dip at the end of last year as a sign of temporary sales pressure. Trading volumes remained low, but prices were higher in general than those seen at the very end of 2014... ...Meanwhile, the market continues to mull the impact of potential supply threats in 2015 such as ENRC possibly stopping production at Chambishi over issues of unpaid tax refunds in Zambia, as well as the anticipated ban this month on exports of DRC concentrates. An update on this ban being implemented or delayed has yet to be announced.

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