Cobalt has become an essential component of lithium-ion batteries used for electric power vehicles (EVs) and mobile phone batteries. Last year, the price of this valuable metal surged by 118 percent due to government assistance for the sale and manufacturing of electric vehicles. However, the development of EVs has been hampered by the restricted availability of lithium-ion batteries. This might be a problem for the EV sector since EV adoption is predicted to increase by 29 percent annually through 2030, indicating a favorable prognosis for cobalt stocks.
Experts believe that industrial demand for cobalt will exceed production by 2025 since the metal's consumption is projected to increase by 9 percent annually between 2020 and 2026. According to the United States Geological Survey (UGS), in 2021, 170,000 metric tonnes of cobalt were produced. Cobalt is a rare metal compared to more plentiful metals such as copper, manganese, and nickel and is primarily a byproduct of nickel and copper mining.
China is home to the majority of cobalt processing facilities, despite not being a large producer. China has a significant demand for cobalt due to its application in semiconductor chips installed in consumer electrical goods such as mobile phone batteries. China is the world's largest producer of electric vehicles and mobile phones. Typically, an electric vehicle's battery requires 9 kg of cobalt; however, cell phone batteries require 30 grams of cobalt.
It is challenging to locate a company that focuses only on the production of cobalt, which makes investing in cobalt stocks challenging. In addition, roughly 71% of cobalt output originates from the Democratic Republic of the Congo (DRC), a nation plagued by human rights violations owing to internal wars, an undeveloped economy, and hazardous mining operations. This generates elevated geopolitical, environmental, social, and governance (ESG) risks for equity investors seeking cobalt exposure.
An Overview of Cobalt Stocks
Due to the various industrial applications of this transition metal, investing in cobalt stocks has lately been popular among hedge funds. Cobalt's continued usage of lithium-ion batteries for the expanding electric vehicle sector remains the industry's primary driver.
Cobalt is also used in producing superalloys for turbine engines, treating cancer with cobalt-60 radiation, and disinfection of medical equipment. Dental, orthopedic, and prosthetic medical implants also include cobalt. Cobalt is also used to produce tooling materials, catalysts, pigments, and permanent magnets.
Therefore, cobalt-focused securities may be utilized in various sectors and applications. You may diversify your cobalt investments so that you are not dependent on the development of one industry.
Why Invest in Cobalt?
The global demand for cobalt, a gray metal derived from copper or nickel mines, is increasing because it is used to power electric vehicle batteries. Lithium-ion batteries account for around one-third of the cost of an EV, whereas metals account for approximately one-quarter of the battery cost.
Cobalt is a critical element in lithium-ion batteries. It protects batteries from overheating, which increases the range of the vehicle and the battery's lifespan. In addition, it is one of the most costly metals utilized to construct electric vehicles. Cobalt is also utilized in cellphones but minute amounts.
Since early 2021, cobalt prices have doubled, hitting a peak of $74,000 per ton in May 2022, as demand for automobiles has surged.
1. BHP Group
BHP Group, one of the world's major mining firms, is an Australian business with global activities. The business extracts metals, raw resources, and energy. BHP's primary products are copper and nickel. Hence, the company naturally mins cobalt (a byproduct of processing these two metals).
BHP announced a collaboration deal with AI computing startup KoBold Metals in 2021. KoBold Metals employs algorithms to determine land acquisition and exploration choices. The arrangement is intended to assist BHP in acquiring metals such as cobalt and nickel that are utilized in the production of batteries for electric vehicles and other renewable energy projects.
Despite the cyclical nature of the mining business, BHP Group is constantly successful and has operating profit margins in the double digits.
2. Glencore (GLNCY)
Glencore, situated in Switzerland, is the world's leading cobalt producer despite not being a cobalt pure-play. Glencore runs the two primary cobalt mines in the DRC, Katanga, and Mutanda. Australia and Canada also generate cobalt as a byproduct of nickel mining. Tesla has agreed to purchase cobalt from Glencore for its Shanghai and Berlin operations.
In addition to cobalt, Glencore produces copper, zinc, nickel, and ferroalloys, among other metals and minerals. Copper and nickel are also utilized in EV batteries. Additionally, the firm is one of the effective recyclers of spent batteries, contributing to cobalt's release.
Glencore is a prosperous enterprise with 2021 revenues exceeding $203 billion. However, Glencore also works in the thermal coal business, which has made it contentious among the expanding number of environmental, social, and governance (ESG) investors. Activists have demanded that Glencore sell or split off its coal division.
3. Wheaton Precious Metals (NYSE: WPM)
Wheaton Precious Metals is a provider of metal streaming services. Recently, the firm joined the cobalt industry, but it also handles silver, gold, and palladium. Wheaton, a streaming firm, does not mine precious metals. Instead, it creates purchasing deals with proven miners across the world. Then, Wheaton Precious Metals delivers cobalt to international technological businesses. This is a far more solid business strategy than investing directly with miners. This is because this approach diversifies Wheaton's income streams. Wheaton Precious Metals is not manufacturing a significant amount of cobalt.
Nonetheless, it just signed a contract with Sabina. With the Goose Project in the Back River Gold District in Nunavut, Wheaton will have an exceptional opportunity to expand its portfolio into one of Canada's largest and fastest-growing mining jurisdictions. This transaction involves 31 million pounds of cobalt. After that, Wheaton will keep access to 21,2% of the mine's continuing cobalt output. However, this transaction involves some risk. Wheaton expects greater cobalt demand in the future to provide a profit. In addition, it has streaming agreements for other metals.
The corporation has a strong presence in the silver industry. This implies that Wheaton might provide investors greater security while continuing to capitalize on the financial possibilities of cobalt.
This year, Wheaton Precious Metals stock has performed admirably, generating $305 million in sales and $210 million in cash flow during the first quarter. In addition to its increasing sales, profitability, and cash flow, the business declared a $0.15 quarterly cash dividend in June 2022. Keep a watch on this cobalt stock if you search for long-term investment potential.
4. Freeport-McMoRan
Arizona-based Freeport-McMoRan is another multinational mining and energy firm. Freeport-McMoRan is one of the world's top producers of copper, an essential element of the global economy. As a copper miner, the corporation has cobalt among its holdings.
In 2019, Freeport-McMoRan struck a deal to sell $200 million worth of its cobalt business. The corporation retains a portion of the cobalt refining industry. Freeport-McMoRan has historically earned relatively high operating earnings from its mining assets, similar to other global mining businesses.
5. Jervois Global (JRVMF)
Jervois Global is a very intriguing nickel play and one of the best cobalt companies to purchase as the need for EV battery metals develops. Freeport Cobalt Oy, the cobalt-refining and recycling assets bought from Freeport-McMoRan (NYSE: FCX) in 2021, might convert Jervois into the second-largest producer of refined cobalt outside of China.
The JRVMF stock price has climbed by around 55% this year. In 2021, the business earned $296 million on selling almost 5,700 tonnes of cobalt. As cobalt prices skyrocketed in the fourth quarter of 2012, the company's quarterly revenue increased by a robust 26 percent sequentially. Management feels the conditions are favorable for revenue growth in 2022.
Jervois also owns a cobalt-copper development project in Idaho, which is anticipated to commence production by mid-2022. Additionally, the corporation intends to reopen the sole nickel-cobalt refinery in Latin America, the Sao Miguel Paulista facility in Brazil.
6. Electra Battery Materials Corporation (OTC: ELBMF)
Electra Battery Materials Corporation, formerly First Cobalt, is a cobalt penny stock to watch. Unlike the bulk of firms on this list, the corporation used to specialize entirely in cobalt production and refinement.
However, since changing its name to Electra, the firm has announced an expansion of its strategic goal to include the provision of battery-grade nickel and cobalt. The relocation is anticipated to establish the only battery materials park on the continent, providing automakers in North America with direct access to a dependable source of low-carbon raw materials.
If this critical step is successful, it might benefit the corporation and its shareholders. Beginning in the fourth quarter of 2022, Electra Battery Materials will construct a hydrometallurgical refinery north of Toronto to produce 5,000 tons of cobalt.
In addition, the business has been experimenting with recycled battery-based black mass feeds. It will share the results of its research and engineering investigations in the following weeks. This is because rechargeable battery businesses could get cobalt from North America and produce lithium-ion batteries domestically.
Its stock is trading for less than $1 a share, so investors should be wary of the higher risks associated with buying penny stocks.
7. Sherritt International (OTC: SHERF)
Sherritt International is an additional Canadian precious metals stock with tremendous potential. The firm is one of the largest nickel producers in the world. A byproduct of its nickel mining processes is cobalt. Consequently, Sherritt's is also a nickel/cobalt refinery. Nickel and cobalt prospects provide the company's portfolio with more diversification than a pure cobalt play would. Most of Sherritt International's cobalt is extracted from a mine in the Cuban city of Moa.
Nonetheless, it is refined at a facility in Saskatchewan, Canada. This is done to reduce the political difficulties associated with operating in Cuba. The business then sells cobalt to battery manufacturers in Europe and Asia.
The Moa mine is a joint venture that produces as much as 3,800 metric tons of cobalt annually. Even though this is far less than firms like Glencore or China Molybdenum, it represents a considerable portion of Sherritt's portfolio. The most recent earnings call for the corporation revealed a 14 percent rise in revenue from the previous year. According to the research, this was primarily due to increased costs of cobalt and nickel. The business also announced the extension of its Moa joint venture with its Cuban partners, which is anticipated to increase annual nickel and cobalt production by 15 to 20 percent.
Sherritt's financial indicators increased in the first quarter due to high realized cobalt prices, excellent Moa JV plant production, and the Power business's revitalization. Significantly, adjusted EBITDA climbed by 94 percent to $58.5 million. Additionally, Sherritt manufactures fertilizers and mineral byproducts. There are several advantages to investing in Sherritt. The organization employs environmentally friendly business methods and has a comprehensive portfolio. Even though Sherritt International is now a penny stock, its cobalt initiatives set it apart and might lead to future gains.
8. China Molybdenum
China is the most significant market for electric vehicles in the world. China is also a leading cobalt user, and China Molybdenum is a leading element producer. China Molybdenum is the world's second-largest producer of cobalt because of its copper mining holdings in the Democratic Republic of the Congo.
Like other worldwide mining businesses, China Molybdenum is not listed on the U.S. stock market. Be cautious before making a buy on the OTC market. China Molybdenum is held via funds such as the Amplify Lithium & Battery Technology ETF as an alternative to purchasing the stock directly.
9. Canada Nickel Co (OTC: CNIKF)
Recently, Canadian Nickel Co. was listed on the OTCQB Venture Market, catering to entrepreneurial and emerging enterprises. Canada Nickel's Crawford Nickel-Cobalt Sulphide Project is deeply rooted in the Ontario mining area of Timmins-Cochrane. The miner is pushing next-generation nickel-cobalt sulfide production to meet the increased demand for electric vehicles and stainless steel. The business has also applied for trademarks for the words NetZero NickelTM, NetZero CobaltTM, and NetZero IronTM in many jurisdictions in connection with its development of a method that enables the manufacturing net-zero cobalt, iron, and nickel products. After reaching a high of $3.51 on February 17, 2021, the current price of Canada Nickel Co. stock qualifies it for our sub-$5 stocks category. Given the predicted high future demand for cobalt in the production of electric vehicles and other items using cobalt, iron, and nickel, the stock's current price might increase dramatically.
10. Cobalt Blue Holdings
This last firm is a penny stock, which is typical in the mining industry. Cobalt Blue Holdings does not create considerable income at this time. This is an exploration and project development business with a significant focus on the Broken Hill Cobalt.
New South Wales, Australia, project. Suppose the development of this project is successful. In that case, the business thinks that commercializing the cobalt produced at the site would allow it to become a leading manufacturer of battery raw materials.
Contrariwise, this stock is not given as a suggestion. As a development business and a penny stock, Cobalt Blue is a very hazardous investment, the success of which is predicated on the firm launching mining operations. Use additional caution while dealing with such businesses. Nevertheless, if its mine begins operations, Cobalt Blue is a potential leader in cobalt production and warrants close observation.
Investing in the production of commodities such as cobalt might be difficult. The relationship between supply and demand varies from month to month and year to year, and the price of the stocks of firms that manufacture such goods can likewise swing drastically. Focus on investing in well-established companies with a history of generating strong profit margins, mainly if you are an investor seeking more predictable returns or investment income.
However, cobalt is potential raw material. In the coming decade, manufacturers of the element stand to earn significantly if battery technology continues to progress and demand for electric cars and renewable energy projects grow.
Final Thoughts
Investing in cobalt equities makes much sense as both a long-term investment and a hedge against inflation, given the rising popularity of electric vehicles and the rising need for various industrial uses of cobalt.
Cobalt is being employed in cutting-edge technologies that are projected to expand rapidly. This pattern shows that a patient investor's investment in cobalt equities from big mine operators to firms in the mine development phase might yield substantial profits over time.
Real-time News
