I’ve talked about “Base Metal Mania” here before. But there’s one that could take the cake in bonkerdom.
It has a silvery blue color in its pure elemental form, and the salt of this metal is even bluer. That’s why it’s been used for thousands of years as a blue dye in pottery, glass and ceramics.
Recently, it’s snagged the attention of investors. Not just because of its industrial applications (like alloys used in things like turbine blades) …
… but because it’s soared 25% over the last six months alone.
I’m talking about COBALT.
Along with its many uses, cobalt happens to be an essential trace element for human health. For example, it’s found in the center of Vitamin B12. And it’s needed for red blood cell formation and neurological fitness.
Cobalt’s unique properties means it’s difficult to substitute with alternative materials. Not only in medical diagnostics, pharmaceuticals and the fermentation process …
… but also in batteries, notably for electric vehicles (EVs).
With the rise of EVs, lithium-ion batteries have become crucial for car manufacturers. And cobalt is one of the most important ingredients for these innovative batteries. Its high melting point and ability to keep its structure at very high temperatures is what prevents these batteries from overheating and exploding.
Not a pretty picture as you drive down the highway!
Cobalt is so important for technological advancement that in 2011 it was recognized as “critical” in the E.U. and “strategically important” in the United States.
And because Benchmark Mineral Intelligence expects cobalt demand to increase FOUR-FOLD by 2023 …
… now could be the best time to invest in the blue metal.
Here’s four possible ways to play this trend.
1. Amplify Lithium & Battery Technology ETF (NYSE: BATT).
This ETF provides investors the best exposure to all the materials involved in the battery process including lithium, nickel, manganese, graphite and of course cobalt. Some of the largest positions are Lithium Americas Corp. (TSX: LAC.TO), Sumitomo Metal MNG and Umicore China. The portfolio is heavily invested in lithium and nickel with a 30% weight for each. But cobalt isn’t far behind at 26%.
Another option is to invest in individual miners. The next three picks are some of the top ones available to U.S. investors …
2. Glencore PLC (OTC: GLCNF)
One of the world’s leading producers of cobalt by a long-shot, this Swiss-based company reported a production of some 46,300 metric tons in 2019.
Glencore produces the metal mainly as a by-product of copper mining in the Katanga province of the Democratic Republic of Congo and as a by-product of nickel mining in Australia and Canada.
They are also one of the largest recyclers and processors of cobalt-bearing materials, such as used batteries.
Plus, its stunning 143% rise from last March could be just the beginning my friend!
3. Vale S.A. (NYSE: VALE)
This Brazilian miner produced a total of 4,376 metric tons of cobalt worldwide in 2019. Vale produces cobalt as a by-product at nickel mines in Ontario’s Sudbury Basin, where six underground mines produce mainly nickel, but also copper, cobalt, PGMs, gold and silver. The company’s Thompson Complex, located in Manitoba, also produces cobalt, although again, nickel — another soaring commodity I’ve talked about — is the primary product. A third location is Voisey’s Bay in Labrador.
Additionally, Vale operates the Goro open-pit mine in New Caledonia.
Vale’s performance in 2020 was stunning, rising 158% from its March lows. And 2021 could be just as stunning!
A less risky play …
4. Wheaton Precious Metals Corp. (NYSE: WPM)
The company entered into “streaming” agreements with miners to buy a set amount of production at a specific price … providing certainty for mining companies for taking on the geopolitical risk of regulations, social unrest and delays in mine development.
After focusing exclusively on silver, Wheaton has diversified into gold, palladium and now cobalt. The company was part of a group that invested $690 million in Vale’s Voisey’s Bay mine. That will help Vale finish a $1.7 billion expansion in 2021. The streamer will then be able to purchase 950 MT of cobalt per year.
That doesn’t sound like much, especially compared to Glencore’s output. But if the stream materializes — as it is expected to do in 2021 — it would be worth an additional $30 million in operating cash flow every year!
Oh, and this stock has pulled back along with the precious metals. So, this could be the perfect time to grab some shares.
All the best,
Sean
