Palisade Research - Wed, Dec 13, 2017

Cobalt 27 Closes $85M Financing To Pave Way For Streaming As Cobalt Surges 12% In 1 Week

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Cobalt 27 Closes $85M Financing To Pave Way For Streaming As Cobalt Surges 12% In 1 Week

Cobalt 27 Capital Corporation (CVE:KBLT) made a bold push this week in becoming Canada's first battery metals focused streaming company.

Having already completed the largest mining IPO in Canada since 2012 in June 2017, KBLT announced an $85 million "bought deal" last Thursday lead by TD Securities and had BMO, Scotia and Haywood as Co-Leads.

It gets better. . .

The deal was oversubscribed.

What are they going to do with the $85 million?

They're going to buy more cobalt.

And this is a very important move. . .

One of the Hottest Commodities of 2016

Did you know that the price of cobalt exploded last year?

Seriously, it really took off.

In fact, it outperformed all of its peers. . .

bar chart of various metals' 1-year percentage price performance

I know what you're thinking.

"What caused this crazy spike in the price cobalt?"

There are three reasons. . .

  1. Growth in smartphone sales - smartphone batteries are still the main use for cobalt.

  2. Global cobalt mine supply dropped 2.7% since last year - stressing the current cobalt deficits further.

  3. The Electric Vehicle (EV) revolution is starting.

It boils down to this: when you think cobalt, you need to think batteries.

And over the coming years, especially as EV demand goes parabolic - so will cobalt's use.

bar chart of cobalt demand uses broken down from 2014 projected to 2025

To put this in perspective, back in 2000, batteries only made up 16% of total cobalt consumption.

Today, batteries account for 55% of it.

What makes cobalt with lithium-ion so important in batteries?

That's because. . .

  • They are lightweight

  • The lifespan of the battery is long

  • Short recharge times

  • A high density of power from a small amount of space

These reasons have made cobalt-containing lithium-ion-based batteries crucial for smartphones, tablets, and electric vehicles.

It's no surprise why cobalt demand has grown over the last decade. . .

bar chart of annual percentage cobalt demand growth from 2002 projected to 2025

And with the huge growth in EV production inevitable, demand will take off.

But getting more cobalt supplies is becoming a serious question

BMO Capital Markets wrote the following. . .

"The potential cobalt constraint on EV growth is clear, and is gaining wider acceptance. This process has been accelerated by Volkswagen's notable failure to secure long-term cobalt supply. . ."

Do you know where most of the world's cobalt comes from?

The Democratic Republic of the Congo (DRC).

By a long shot. . .

bar chart of world cobalt production broken down by country

With so much of the worlds cobalt production coming from a single source is worrisome.

Not to mention the DRC is not the most stable of countries. . .

All it takes is one thing to go wrong there and the supply of such a critical metal - cobalt - could dry up.

Vehicle makers and smart phone producers can't risk this happening. It's already been difficult enough to get the supplies of cobalt they need for the long term secured today.

That's why these reasons will push cobalt prices much higher to bring other new supplies from around the world online.

This is what we love when investing in a commodity. . .

Growing demand plus diminishing supplies equals higher prices.

And that's why we have just the stock for you to take advantage of the coming cobalt boom. . .

Cobalt 27 Capital Corp. (CVE:KBLT)

KBLT is a pure play on cobalt.

Actually, it is one of the only major ways to position yourself for a rising cobalt price.

Their strategy is really simple that we love it.

"Buy cobalt at these low prices. Hold it until prices dramatically rise. Sell at a huge profit."

Here some highlights. . .

  • Cobalt 27 purchased an additional 800 metric tons of cobalt, and now owns nearly 2,960 metric tons of cobalt

  • Cobalt 27's physical holdings give the company access to inventory financing that can be used to acquire streaming assets

  • Cobalt 27's balance sheet is now among the strongest battery metals pure play companies

Cobalt 27 was even able to out maneuver Volkswagen, Tesla, Unimcore, Panasonic, and other major industrial players to get their hands on physical cobalt.

But there is another unique strategy KBLT is deploying. . .

They are buying streaming contracts from cobalt producers.

And because of their massive physical cobalt assets, they have access to cheap funds and lines of credit.

Management has talked about ways of creating huge shareholder value. . .

One creative option they have mentioned is. . .

  1. Use their assets to secure a stream with a cobalt producer.

  2. Generate cash from the streaming agreement.

  3. Return cashflow back to shareholders through dividends

And because of the company's huge physical stockpile, this makes them relatively lower risk since they actually have cobalt on hand.

For all these reasons, KBLT is the best way to profit from the inevitable cobalt boom.

Palisade Global Investments Limited holds shares of Cobalt 27. We receive either monetary or securities compensation for our services. We stand to benefit from any volume this write-up may generate. The information contained in such write-ups is not intended as individual investment advice and is not designed to meet your personal financial situation. Information contained in this report is obtained from sources we believe to be reliable, but its accuracy cannot be guaranteed. The opinions expressed in this report are those of Palisade Global Investments and are subject to change without notice. The information in this report may become outdated and there is no obligation to update any such information. Do your own due diligence.

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