Palisade Research - Fri, Oct 28, 2016

The Mania For Cobalt Has Begun

If you are here, you are among the first investors aware of what will likely be the most extreme bull market within the mining sector in the next 12 months.

That of course is cobalt - a metal in such high demand that the world can no longer keep up with consumption. And this deficit will only increase because of the electric vehicle revolution.

chart of projected cobalt supply and demand

On the supply-side, cobalt is walking a dangerous tight rope. The smallest hiccup has the potential to derail the entire global supply chain.

98% of cobalt supply is a by-product of copper and nickel, meaning it is an afterthought for many producers. In 2015, when Glencore shuttered its Katanga mine in the Democratic Republic of Congo due to low copper prices, it also removed 3% of the world's cobalt supply. Had Glencore decided to suspend its Mutanda operation in the DRC as well, there would have been a 13% decline in global cobalt supply!

Furthermore, 60% of cobalt is produced from the DRC, a politically corrupt country know for its instability. In fact, in 2008, the country placed a moratorium on cobalt exports which resulted in a price spike from $15/lb to $50/lb. Today, cobalt is trading at $13/lb. With the upcoming election in the DRC already wreaking havoc, could a similar spike result?

And don't forget about China, a country with zero domestic resources, yet accounts for 40% of consumption! And in true Chinese fashion, they are buying mines. Most recently, a state-owned company acquired Freeport's share of the Tenke Fungurume Mine, which accounts for over 12% of the world's cobalt.

There is a huge lack of primary cobalt production worldwide and an unhealthy reliance on geopolitically risky jurisdictions for supply.

We have found TWO of the best companies to leverage the coming supply crunch, located in North America. In fact, we helped put one together! For your free 20-page cobalt primer, including two of the most undervalued cobalt companies, click here!

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