Cobalt stocks have been hot lately and there is a good reason for that. Cobalt is an element used to make mobile phone batteries and electric car batteries. Lithium-ion batteries account for more than 50% of annual global production of cobalt. That said, China is the world’s largest consumer of cobalt.
Automakers are gearing up for the electric car revolution. Beginning in 2019, Volvo has said that it will only be making electric and hybrid cars. But they are not the only ones. Companies like BMW, Ford, Land Rover, Tesla, Nissan and General Motors are all making great strides to ramp up production for the coming years.
In fact, Volkswagen announced a $25B battery supply deal from Sansung SDI Co., LG Chem Ltd. and Contemporary Amperex Technology Ltd.
Apple (NASD: AAPL) announced in 2018 that it was in talks to buy long-term supplies of cobalt directly from miners, as it’s one of the world’s largest users of cobalt.
The move by Apple is a strategic one. Cobalt is in scarce demand and the majority of the world’s supply comes from the Republic of Congo, a conflict-ridden country who has been accused of having poor labor practices in the past.
It’s been reported that several thousand children work in the Congo mining industry, getting paid below average wages. Congo’s negative reputation with child labor has caused companies to start to look elsewhere, like Canada, Australia and Europe for their cobalt supply.
As demand is set to rise for the lithium-ion battery, corporations are racing to secure a steady supply of cobalt.
Let’s take a look at some of the top cobalt stocks today.
Best Cobalt Stocks
Glencore Plc (OTC: GLNCY) – A globally diversified natural resources company, Glencore has approximately 150 mining and metallurgical sites, oil production assets and agricultural facilities.
The firm is the world’s largest producer of cobalt. It produces cobalt by mining in the Republic of Congo, Australia, Europe and Canada. Glencore is one the largest company’s that recycles and processes cobalt-bearing materials, like used batteries.
The corporation produced 27,4kt of cobalt in 207 and sold 42 kt in that same year.
Headquartered in Switzerland, U.S. investors can trade Glencore via the OTC Markets.
China Molybdenum (OTC: CMCLF) – Based out of China, and partially owned by the Chinese government, the company is involved in the mining and selecting, smelting and deep processing of molybdenum, tungsten, copper, coblat, niobium and phosphorus minerals.
The company is the second largest cobalt producer in the world. It has a 56% equity interest in the Tenke Fungurume mining area, representing one of the largest reserves of copper and cobalt in the world. In addition, its the largest uni-cobalt-core producer in the world and the largest foreign-invested business in the Congo.
Source: China Molybdenum
Investors interested in trading China Molybdenum can do so via the OTC Markets.
Katanga Mining Ltd. (OTC: KATFF) – Headquartered in Switzerland, Katanga operates a large scale copper-cobalt project in the Republic of Congo.
The company has two joint ventures with Kamoto Copper Company and DRC Copper and Cobalt Project.
It’s worth noting that Glencore is one of its largest shareholders. Katanga expects to produce 34,000 tonnes of cobalt in 2019.
Now, if you’re looking to trade Katanga, you’ll have to do it via the OTC Markets.
Cobalt Stocks: A Basket Approach
The Global X Funds has created an ETF that is set to take advantage of the lithium and cobalt boom.
Lithium & Battery Tech ETF (NYSE: LIT) – invests in the full lithium cycle, from mining and refining the metal, down to the battery production.
The goal of the fund is track the price and yield performance, before fees and expenses, of the Solactive Global Lithium Index.
The fund’s top five holdings include: FMC Corp; Albermarle Corp; Quimica Y Minera; LG Chemical; and Enersys.
Considering Cobalt Stocks
There are several factors to consider before investing in a cobalt stock. Let’s take a look at some of the most important ones.
Social: It’s been reported that the Congo’s labor practices are unethical and dangerous. That said, companies like Apple and Tesla have been criticised about purchasing cobalt from this area in the past. So much so, that they are now refusing to purchase “unethical cobalt.”
These social developments have caused companies to search for other sources of supply. Some of these new places are in North America. Specifically, Idaho in the United States and a town by the name of Cobalt, located in Ontario, Canada.
Competition: Demand for the lithium-ion battery is set to rise for years to come. However, supply remains a major concern for companies that need the mineral. That said, there is always the potential of cobalt being replaced by something more abundant and cheaper.
For example, scientists are experimenting with iron as a possible replacement, as it’s considerably cheaper and more available than cobalt.
Politics: In March of 2018, the President of the Democratic Republic of Congo signed new legislation that would increase taxes and royalties on miners. This has the potential to negatively affect profits for those companies who produce cobalt in the region.
Cheap Oil: The demand for electric cars may halt if oil prices are cheap. Of course, consumers are interested in saving money. If transitioning from a gas-fueled car to an electric one doesn’t make economic sense than that could slow demand down.
Copy Cats: Just like we saw with Blockchain and Bitcoin, you’ll start to hear more about copy-cat cobalt mining companies. As an investor, it’s your responsibility to do your own research and not get sucked into the hype.
Cobalt stocks should continue to gain interest among investors. Major automakers are making a strong push to ramp up EV production. And in the coming years we’ll have more EV’s than we’ve ever had before.
That said, this is a fast and evolving market. The miners that are already producing high levels of cobalt have first mover advantage. They appear to be a safer play than junior mining cobalt companies.
You’ll want to run through financial filings, as company debt is always an important factor when looking at mining companies. If you decide to invest in the space, stick to companies that are transparent. And as always, conduct your own due diligence. No one is going to care more about your money than you.