Momentum Public Relations
Blog: June 20 2018
Bloomberg New Energy Finance predicts that by 2040 55% of all new car sales and 33% of the global fleet will be electric.
Wheaton Precious Metals and Cobalt 27 sign streaming agreements for Voisey’s Bay cobalt
Continued demand seen for battery metals
Sometimes paradigm shifts begin to take place without you really noticing them. Last week when I was driving between Montreal and Ottawa I saw two electric vehicles and one of them was doing more than 120. When I visited a building on business one day I noticed that there were four electric vehicle charging stations. Earlier on in the year I noticed that a raft of recharging stations was being installed at the Fairview Mall in Pointe Claire.
Spotting two electric cars driving to Ottawa doesn’t amount to very much in the grand scheme of things except to say that I go to Ottawa fairly frequently and have never before seen a single electric vehicle on the 417. As a symbol of things to come those two EVs qualify as a harbringer of change.
Bloomberg New Energy Finance has predicted in a recent report that by 2040, 55% of all new car sales and 33% of the global fleet will be electric. It also predicts sales of electric vehicles increasing from a record 1.1 million worldwide in 2017, to 11 million in 2025 and then surging to 30 million by 2030 as they become cheaper to make than internal combustion engine vehicles. That 55% of the market by 2040, breaks down to 60 million vehicles.
In many cases air pollution is driving the shift from gas to electric, especially in China where Bloomberg forecasts the country will take a leadership role in EV production and purchase. By 2025 Bloomberg believes China will account for almost 50% of the EVs purchased globally, declining to 39% annually by 2030 as global demand picks up.
The report notes that the increase in EV demand will create a longterm demand for battery metals. These include: lithium; cobalt, graphite, manganese and nickel. Curiously, the report did not figure into account the rising demand for battery metals generated by utility scale battery farms that store electricity generated by wind, wave and solar energy.
Bloomberg paints a rosy picture for longterm battery metal demand and they are not alone. Perhaps the most interesting development in the battery market can be seen in the development of a company, Cobalt 27 Capital Corp., whose corporate strategy is based on stockpiling physical cobalt and creating royalty stream agreements with cobalt mining companies. Cobalt 27 has royalty stream agreements with four producing cobalt miners and eight exploration stage cobalt companies.
On June 11, 2018 Cobalt 27 and Wheaton Precious Metals signed separate royalty streaming agreements with Brazilian mining giant Vale to acquire a majority of the cobalt produced at Voisey’s Bay. Royalty streaming agreements were originally developed in the gold mining industry as a way for a major company to secure gold in exchange for financing gold exploration and in some cases both exploration and mine development.
Vale will use the capital raised, a combined US$690 million to finance its expansion at Voisey’s Bay, a project which had before this been put on hold. In the February 21st edition of Resource World, Peter Kennedy reports on a BMO Capital Markets report on battery metals that questions whether or not cobalt will retain its key position as a battery metal.
The thinking goes like this: The majority of the world’s cobalt is produced in the Democratic Republic of Congo, Kennedy quotes from the report, “No purchasing manager wants to be so reliant on the supply of a critical raw material from a single supply source, particularly one with a poor human rights track record and the threat of political instability.”
While this state of affairs and Tesla’s known desire for a North American supply change have jointly fueled the rush to explore and develop North American cobalt resources it may also be driving battery manufacturers to develop a lithium-ion rechargeable battery containing much less cobalt. In the near term BMO wouldn’t be surprised to see a doubling in cobalt prices. The report also notes that cobalt demand has grown from 40,000 tonnes in 2000 and is predicted to rise above 100,000 tonnes for the first time in 2018.
Any active investor is probably wondering, if they haven’t already decided, just what the best play will turn out to be in battery metals. Cobalt is like silver, it is usually found with other metals in the case of Voisey’s Bay, that metal is nickel. If you decided to bet on existing battery technology then a company like Cobalt 27 may very well be your ticket.
If you want to temper that exposure with gold and silver then Wheaton Precious Metals may be the company you are looking for.
On the other hand you may want to consider a company like SRG Graphite, (TSXV: SRG) which traded in the C$1.20 range on June 18th. SRG has an advantage over other battery metal stocks because it is in the process of exploring and developing deposits of three of the most important battery metals, graphite, nickel and cobalt.
While you can easily understand the value of cobalt and nickel in EV batteries graphite is a bit of a dark horse that is going to sooner or later win the Triple Crown because of what can be done with.
Well known as an industrial lubricant or the lead in lead pencils, graphite is an amazing material that will become increasingly important as it is used to develop new technologies.
British scientists have developed a graphite based coating that when applied to a building can be used to generate enough solar power to provide all the electricity the building needs to function, lights, heating and cooling.
Not being content with just being a power source the graphite coating can also change colours on demand. Because of its nature as a highly conductive material graphite is also at the foreground in nanotechnology. Simply put graphite is the metal of the future.
SRG has a 100% owned property in the Republic of Guinea, West Africa where it is developing two separate deposits, the first is the Lola graphite deposit, which at 8.7 km long and on average 370 meters wide is one of the largest in the world. A recent mineral resource estimate on the Lola project shows a measured and indicated resource of 12.2 million tonnes grading 5.6% graphite and an inferred resource 2.1 million tonnes grading 6.1%.
The second is the company’s nickel/cobalt/scandium deposit, Gogota, is located on the same mining claim as Lola. A recent NI 43-101 shows that Gogota has an inferred resource of 44.9 tonnes of mineralized material grading 1.28% nickel for 573,040 tonnes of contained nickel, 0.13% cobalt for 59,560 tonnes of contained cobalt and 29.4 grams per tonne of scandium for 1.17 tonnes contained scandium.
For an investor, buying SRG really provides the opportunity to hedge your bets in the battery metals market. If longterm demand for cobalt weakens because of new battery chemistries that require less cobalt, the graphite and nickel deposits are there to pick up the slack. And then there is the unknown role that graphite will play as a supermaterial in the future to consider.
This blog does not constitute investment advice. Investors should perform their own due diligence when buying shares in a company. In the interests of transparency, SRG Graphite is a client of Momentum PR.