Cobalt is the new blue gold
March 19, 2018
Ladies and gentlemen,
The price of cobalt has tripled over the last 18 months. It’s being dubbed the new blue gold thanks to both strong demand and a tight supply that continues to drive prices higher.
Large quantities of cobalt are needed in the batteries that power electric cars (EV). There is now fierce competition among auto makers, such a Volkswagen, Tesla, BMW and BYD. They are all vying for an early lead in this nascent market. Fuelling this competition further are plans by governments around the world to electrify road traffic and meet new global emission standards now in place.
Added to electric vehicle demand, Tesla is also aggressively marketing its Powerwall solution – a home battery that can supply more than seven days of continuous power during an outage.
Supply-side factors have also had a significant influence on price. The Democratic Republic of Congo (DRC) produces 53 per cent of all cobalt. This war-torn and politically unstable country is now starting to create a substantial bottleneck in global supply.
On a darker note, however, child labour practices in DRC cobalt mines are a greater concern. Apple and Tesla have already announced that they will only buy cobalt from ethical sources in the future. Both these factors are extremely favourable to North American cobalt mines and refineries.
Blackstone Resources is positioned well
We have a significant stake in First Cobalt, which has a substantial share of the North American market. It is the largest cobalt exploration company in North America today. The company controls over 10,000 hectares of prospective land and 50 historic mines, plus a mill. It is the only permitted cobalt refinery in North America capable of producing battery material. The company has also strongly pursued acquisitions to strengthen its position in the North American market.
All-share offer made for US Cobalt
First Cobalt has just made an offer to make an all-share acquisition of US Cobalt. The deal comes in at just under US$150 million, with an exchange ratio of 1.5 First Cobalt shares for each US Cobalt share. This planned acquisition is strategic, which should secure a strong supply of cobalt.
Prior to the offer, US Cobalt confirmed significant resources from it Iron Creek Project in Idaho. Following an impressive on-site inspection, First Cobalt’s management team believes that these expected levels will be comfortably exceeded.
The acquisition would allow First Cobalt to move into the cobalt-rich Idaho region. It is a district that is estimated to boast up to 20 million tonnes of cobalt ore with a 0.74 percent level of purity. This would be close to US$10 billion of value in metal at current market prices.
The Board of Directors