Companies mentioned in this article:
- Tesla Inc (Nasdaq: TSLA)
- Apple Inc (Nasdaq: AAPL)
- Pacific Rim Cobalt Corp (OTCQB: PCRCF)
- Cobalt 27 Capital Corp (OTCQX: CBLLF)
- Vale S.A. (Nasdaq: VALE)
There has been no shortage of coverage for Tesla Inc (Nasdaq: TSLA) since the grand opening of the company’s Gigafactory in Nevada on July 29, 2016. Elon Musk continues to dominate headlines with his antics, ranging from the now infamous “funding secured” Tweet to his apparently smoking a joint with Joe Rogan on national TV. Not one for being shy, more recently he stated his disrespect for the SEC, once again thrusting himself into the limelight.
Celebrity status aside, the key narrative of the Tesla super-story is the pace in which the world is switching from a carbon based energy paradigm to a renewable one. Even major oil and gas companies have begun investing into “the shift” to ensure a foothold into this massive transformation taking place.
This mega-trend has triggered a brand new gold rush – however it’s not gold that multinational companies and governments around the world are coveting this time around. It’s a different mineral all together – one that holds the key to the future of renewable energy and the electric vehicle revolution.
There is significant profit to be had for investors paying attention to the “story behind the story”.
The modern investor needs to pay attention not only to the rapid rate of acceleration towards an electric and renewable future, but to what is actually behind it – the moving parts and raw materials required to drive this global initiative forward.
This is where the real money is made. It’s the story behind the story where billions of dollars are being invested by power players around the globe to secure their share of what we’re going to talk about in this article.
Electric vehicles, solar energy, wind farms, and an endless array of electronics permeating society all depend on a common component – the humble battery. But it’s not batteries that are going to create vast wealth for an average investor like you and me.
Every battery, whether for an electric vehicle, a smartphone or a solar power energy storage unit, requires raw mineral resources to store energy in an efficient and safe manner. Along with nickel and copper, batteries cannot function without lesser known elements such as lithium, cobalt and manganese.
China is the largest “Gigafactory” in the world.
Demand for batteries, and the metals required to produce them, has been soaring – particularly in China, which is leading the globe, by far, in electric vehicle sales and a renewable energy drive unlike anything the world has seen.
Chinese policymakers have made a big bet that electric vehicles will fundamentally disrupt the 130-year-old automotive industry, and Beijing has spent tens of billions of dollars to ensure that the country emerges as the undisputed global leader.
After four years of planning, Tesla has just announced that it is breaking ground on it’s $5 billion “Gigafactory 3” in Shanghai, underscoring China’s leading role in the global battery production race.
If you have not been following this story, modern investor, perhaps it’s time you start. Erik Prince Jr, notoriously known for founding private security firm Blackwater, and transforming it into the largest such company in the world, has recently announced the launch of a private $500 million fund focused entirely on battery metals.
He is joining the ranks of battery sector giants such as CATL and Beijing Easpring, multinational mining companies Sumitomo and Vale, as well as funds such as Swiss based Pala Investments, all investing fortunes in preparation for the impending wave of demand for battery metals, particularly cobalt.
Of the battery metals mentioned, cobalt has been labelled a “critical” or “strategic” element, due to it’s precarious supply situation. Over 80% of global cobalt production comes from the Democratic Republic of Congo (DRC), which is rife with political corruption and has been known to use child labor in it’s cobalt mines.
It’s no wonder that companies reliant on cobalt for their battery needs have been scrambling to lock up supply wherever they can get it. To bring this point home, even iPhone maker Apple Inc (Nasdaq: AAPL) jumped into the pool in February 2018, with talk of the company wanting to buy cobalt supply to “win the battery wars“.
Chinese electric vehicle giant BYD stated that China intends to have all of its vehicles fully electric by 2030. As such, they have been on an unprecedented spree to lock down as much cobalt supply as possible. Their primary source for the metal to date has been the DRC – however due to the steady stream of negative press coming out of this region, giant Chinese firms and the government have set their sights to safer jurisdictions within reasonable proximity.
The Pacific Rim and Battery Metals
Chinese battery firm GEM announced in September 2018 that they are setting up a $700 million joint venture in Indonesia with a goal to produce battery grade nickel chemicals.
Several global metals producers have also set their sights on Indonesia’s nickel reserves to tap an expected surge in demand for the metal for electric vehicle batteries.
More recently, electric metals streaming and royalty company Cobalt 27 Capital (TSX: KBLT, OTCQX: CBLLF), market capitalization: $282 million, announced it’s entry into the Pacific Rim region with a $100 million friendly takeover of Australian-listed Highlands Pacific, in order to gain access to it’s valuable 8.3% stake in the Ramu cobalt-nickel mine in Papua New Guinea; with an option to increase it’s stake to around 11%. This would value the Ramu mine at approximately $1 billion.
Moving up the coast along the same geographic trend, located in the adjacent Papua Province, Indonesia is a little known battery metals exploration company Pacific Rim Cobalt Corp (CSE: BOLT, OTCQB: PCRCF), Market capitalization: $6.2 million. With offices in Shanghai, Jakarta and Vancouver, Pacific Rim Cobalt Corp is poised to leverage the global shift from fossil fuels to renewable energy. A management team with over 20 years of experience in the region has assembled a 5,000 hectare cobalt and nickel asset, located adjacent to tide water (which opens up options for potential direct shipping to China). Known as Cyclops, Pacific Rim’s flagship project has mining and environmental permits in place, and features excellent infrastructure & proximity to an airport and city for skilled labor, allowing for year-round access and work. The company recently announced a comprehensive Corporate Update, recapping it’s work to date and plans for an active year ahead.
While the Pacific Rim region has not yet been receiving as much coverage as Africa when it comes to sourcing critical battery metals, it is certainly on the radar of the largest and most important players in the space. As such it should be on the radar of the savvy investor looking for undervalued companies doing business in this part of the world.
Indonesia has long been known as one of the planet’s largest producers of nickel. What is less well known is that cobalt is a by-product of nickel mining – the opportunity for early movers to unlock this potentially massive cobalt potential has caught the attention of companies such as Pacific Rim Cobalt Corp (OTCQB: PCRCF) and mining giants such as Vale and Sumitomo.
A trend the modern investor would do well to pay attention to.
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