PALM BEACH, Florida, July 12, 2018 /PRNewswire/ --
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In the past 8 months, the electric vehicle conversation stopped being about whether or not Tesla Motors (NASDAQ:TSLA) had the ability to scale, and started being about how the legacy companies are going to supply the growing EV market that Tesla opened up. Audi, BMW and General Motors adjusting to put themselves in position to keep up with a changing auto market are causing the undersupplied cobalt market to undergo a shift of its own. Runaway cobalt price (+148% Trailing Twelve Months) is fueling an aggressive push to create new supply. In the first-ever deal of its kind, special purpose cobalt royalty & streaming company Cobalt 27 (TSX-V:KBLT) earlier this month purchased the rights to $300 million worth of cobalt byproduct from steel giant Vale-SA, who has forward-sold it to finance the expansion of their Voisey's Bay nickel-copper-cobalt project in Newfoundland. In what might be considered cobalt's move into the mainstream, Vale simultaneously did an identical streaming deal with established streaming company Wheaton Precious Metals for $370 million. Cobalt 27 was able to finance the transaction immediately with a $300M bought deal underwriting, as institutions recognize the price potential in an under-supplied cobalt market. While companies like First Cobalt, Pacific Rim Cobalt Corp. (OTC:PCRCF) (CSE:BOLT), Lithium Chile (TSX-V:LITH) (OTC:LTMCF) and Katanga Mining (OTC:KATFF) (TSX:KAT) continue to explore potential cobalt sources, the demand from automakers is expected to exceed the increasing supply.
The supply deficit in the cobalt market that is being brought on by the EV scale-up is causing a runaway cobalt price similar to the lithium supply crunch that came early on when the EV boom was just a market projection.
Lithium supply scaled up rapidly in the initial Tesla gigafactory hype because the price of lithium acted accordingly. Since lithium comes from brine operations with a relatively short discovery and development time, the Lithium price cycle reached a stasis quickly. The supply now exists at a price that the producers and buyers are happy with, and many predict the lithium supply crunch is mostly over. But lithium alone won't get these batteries made.
Depending on how they're made, battery cathodes can be over 60% cobalt by weight. Batteries only recently became the most common use for cobalt. Previously, the metal was mostly used in alloys. Those alloys aren't going away, and more batteries are going to take more cobalt. It's still unclear where all of that cobalt is going to come from.
Asian Markets Are The Largest EV Producers and Consumers
Government mandates and fuel price sensitivity have the Asian markets adopting full-electric and plug-in hybrid cars much quicker than American markets.
Facilities to handle all parts of the materials process are being built at an accelerated rate in all major manufacturing centres, but most notably in China. Chinese materials company Beijing Easpring recently commissioned a US $495MM battery materials plant designed to "ease the bottleneck," created by the explosive Chinese growth of EVs, including those made by Warren Buffett-backed BYD Auto. BYD surpassed Tesla last year to become the number one seller of EVs in the world. General Motors has already launched 10 electric and plug-in hybrid models in China, with ten more to come.
Further upstream in the supply chain, the largest cobalt producing mine in the world shuttered its cobalt circuit in 2015, and only brought it back online in Q4 2017, when it produced only 525 tons. The Komoto mine - in the middle of the volatile DRC - is owned by Katanga Copper (OTC:KATFF) (TSX:KAT), and continues to be the subject of an ongoing fight between Swiss mining giant Glencor and Israeli financier Dan Gertler. As the supply pinch tightens, capital is moving further up the risk curve in search of a less volatile source of feed.
The Hunt For Strategic Supply
To address the opportunity created by this localized development and price growth, the team from Pacific Rim Cobalt (OTCQB:PCRCF) (CSE:BOLT) selected the Cyclops property for advancement as part of a targeted strategy. The Cyclops Cobalt-Nickel Project, recently renamed for its close proximity to the Cyclops mountain range, is situated on the north coast of Papua Province, Indonesia, a country ranked among the largest hosts of nickel laterite occurrences in the world. The project's tidewater location allows for strategic access to China, the largest battery metals markets in the world. An economic cobalt deposit at a location a short distance from most of the world's operating battery production sites, along with most of the facilities being produced, would be a coveted asset. After raising $8.3 million, Pacific Rim Cobalt (OTCQB:PCRCF) (CSE:BOLT) CEO Ranjeet Sundher and his team are out to make Cyclops the cobalt project that the world needs.
The nickel-cobalt laterites in the Cyclops mountains on the north shore of Indonesia had been explored by the Dutch as early as the 1950s. Laterite projects like the Cyclops were originally valued for their nickel content. Cobalt being an afterthought, exploration occurred at the Cyclops in fits and starts over the years as the nickel price gyrated.
The aggressive sampling, mapping, geophysics, and drilling efforts that began in April and June of this year, respectively, at Cyclops is designed to ascertain the veracity and extent of the 37 million tonnes historical estimate that the previous operators had calculated at 0.11% Co and 1.31% Ni (at a 0.8% Ni cut-off grade) in the 1970s, please see the historical estimate section below for more details. A defined nickel-cobalt deposit on the north shore of Papua Indonesia would be meaningful to battery makers, metals traders and equities speculators who are all watching closely. The drilling program is ongoing.
The State Of The Cobalt Trade
Pacific Rim isn't the only company aggressively heading into Cobalt. The historical lack of dedicated exploration and development for cobalt and the sudden demand for the metal have created a popular trade, but access to it remains limited. There are a few previously active areas that mined cobalt as a byproduct being re-envisioned and re-opened, most notably First Cobalt's activity in Cobalt, Ontario. The company has just completed an acquisition of Idaho-focused US Cobalt, giving it exposure to both of North America's premier cobalt areas. At the production stage of cobalt equities, Katanga Mining has sustained investor interest, despite tremendous uncertainty surrounding the ownership and operational consistency of their flagship mine. Global Steel operator Vale-SA has effectively sold their cobalt exposure to Cobalt 27 (TSX.V:KBLT.V) and Wheaton Precious Metals to finance the Voisey's Bay expansion. This appears to be the action of a trade that is popular, buzzy, but not yet crowded. Before long, the average investor may come to understand that materials like cobalt are a critical component in the battery-powered ecosystem, and the next wave of investment opportunity will have started to form. Investors accumulating now are trying to get the jump on top of a growing investment trend, where the headlines are all about cobalt, just like investors rode the first battery trend with lithium stocks.
Pacific Rim Cobalt considers the cobalt and nickel tonnage and grade estimates contained herein to be historical estimates. The historical estimates are contained in the Summary Geologic Investigations, PT. Pacific Nikkel Indonesia 1969 - 1979 (Reynolds 1979). These historical estimates do not use categories that conform to current CIM Definition Standards on Mineral Resources and Mineral Reserves as outlined in National Instrument 43-101, Standards of Disclosure for Mineral Projects ("NI 43-101") and have not been redefined to conform to current CIM Definition Standards. These estimates were prepared in the 1980s prior to the adoption and implementation of NI 43-101. A qualified person has not done sufficient work to classify the historical estimates as current mineral resources and Pacific Rim Cobalt is not treating the historical estimates as current mineral resources. More work, including but not limited to, drilling, will be required to conform the estimates to current CIM Definition Standards. Investors are cautioned that the historical estimates do not mean or imply that economic deposits exist on the Company's project. Efforts to obtain any additional information regarding relevant historical work is ongoing, although there are no assurances that this original data will be found. Pacific Rim Cobalt believes that the historical estimates are relevant to continuing exploration on the project. For more information please refer to our technical report, filed on SEDAR on December 8, 2017 and available under the Company's profile at http://www.sedar.com.
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