When US automaker General Motors introduced its electrically powered concept car – the Chevrolet Volt – in 2007, the response ranged from excitement to skepticism. The 2010 production launch and its aftermath failed to quiet the naysayers. 
Almost a decade later a diminishing number of skeptics remain, despite mounting evidence electric vehicles (EVs) are here to stay.
In mid-January of this year Reuters reported that investments from global automakers in electric vehicles and the batteries that power them stands at $90 billion dollars, with more to come.
There are now six countries on the planet with stated goals of banning sales of internal combustion engine (ICE) vehicles by varying dates.  Country Year China Not setIndia 2030 The Netherlands 2025Norway 2030United Kingdom 2040France 2050
With every major automobile manufacturer entering the EV race, betting on which ones will be big winners is a risky proposition at best.  As an alternative, investors are focusing on the batteries all manufacturers will need for their EVs.  Rather than scouring for publicly traded battery manufacturers that suffer from the same risk of losing to a better competitor, many investors are focusing on the metals/minerals needed to construct the Li-Ion batteries.  Common sense says all manufacturers will need the key metals.
In this case, common sense may not hold.  Although Lithium Ion batteries are the current front-runner in the race to produce the best battery, there are competitive technologies that could displace the Li-Ion battery over time, as well as different metals across the research and development spectrum.
There are three major parts in a Li-Ion battery:
• The anode – made of graphite• The electrolyte solution – made of lithium• The Cathode – made of different formulations.
In addition to lithium and graphite, the remaining critical minerals go into cathode construction – nickel and cobalt. Cobalt is the hot metal right now. Benchmark Mineral Intelligence predicts that by 2020 75% of lithium-ion battery cathodes will include cobalt. 
Couple the demand with scarcity of supply and you have a recipe for steep price increases.  Volkswagen, Tesla, and BMW are vying to lock in future supply of the now sought-after metal, further accelerating the price rush.

A predictable outcome of rising demand and price is the appearance of a multitude of new producers.  Resource investors remember the number of iron ore junior miners multiplying like rabbits in the face of the Chinese building boom and its voracious appetite for steel. Many are gone now and therein lies a lesson for investors looking to cash in on the cobalt boom.  Lithium was the place to be not long ago, and while future potential remains, the rush of new providers has affected the price.

With the number of cobalt miners and cobalt miner “wannabees” on the ASX approaching 100, not all these bees attracted to the cobalt “honey pot” are equal, and many will fall by the wayside.  
Many investors are drawn to newcomers, looking for bargains before a company makes the “big strike.”  Prior to the emergence of Li-Ion smartphone batteries and the rise of EVs, demand for cobalt was low.  In addition, cobalt itself is not mined from the earth as is iron ore but rather is a by-product of the extraction and processing of other metals, most notably nickel and copper.  Mining companies are looking to shuttered mines with history of production and even waste dumps with formerly unwanted cobalt.
The rush today can be roughly divided into two camps – existing miners shifting or expanding focus from existing operations to include cobalt; and newcomers targeted primarily on cobalt.  The following table includes three newcomers to the ASX and two existing miners new to the cobalt space.

First Cobalt (FCC) was formed in 2017 with the bold objective of creating the “largest pure-play cobalt exploration and development company in the world.”  The company rapidly completed two key mergers – first with CobalTech Mining Inc. followed by a merger with Cobalt One (CO1).  Already listed on the OTC in the US and in Canada on the TSX Ventures Exchange, First Cobalt listed on the ASX in November.
The company’s operations are in Canada’s “Cobalt Camp”. The towns of Silver Centre and Cobalt comprised the Camp, beginning with the mining of silver in 1903. Over the 60-year history of the Camp’s key mine, 600 million ounces of silver were mined along with 50 million pounds of Cobalt.
The Keeley-Frontier Mine in the camp is the company’s primary target. First Cobalt believes modern drilling technology will rejuvenate these shuttered mines and drilling has already begun. Early results found in the first targeted shuttered mine yielded “high grade cobalt veins including 3.9%, 2.6% and 2.0% cobalt.”
At the close of 2017 the company successfully completed a private placement capital raise, netting more than $25 million dollars.  The 2018 drilling program will target four of the Camp’s more than 50 formerly producing mines now controlled by First Cobalt.  The area boasts the only refinery in North America licensed to refine cobalt.  The company has begun sampling the 14 muckpiles in its holdings in the camp for possible refining, generating early revenue.  Muckpiles are rocks remaining from early blasting operation, judged unsuitable for further processing for silver at the time, but they may contain cobalt.  Over 400 samples have been collected from the muckpiles.  A recent investor presentation highlights the growth potential of cobalt.

As its name implies, European Cobalt (EUC), acquired 100% ownership of the Dobsina Cobalt Project in Slovenia in April of 2017. The company rebranded itself from iron miner Western Mines Network to emerge as Europe Cobalt following the acquisition. The project includes multiple historical mines and waste piles for exploration, which European Cobalt has initiated with early positive results of high grade cobalt from both mines and waste piles. 
However, the latest drilling reported in late December of 2017 showed low grade results, disappointing eager investors.  More drilling is scheduled so the story is far from over. Risk averse investors would do well to consider where a prospective miner is in the drilling process before investing.  Companies with exploration licences with drilling yet to commence are riskier than companies reporting successful drilling results.
The company has two other prospective cobalt assets, including the Jouhineva Cobalt/Copper/Gold project in Finland, and Kolba Cobalt/Copper/Nickel/Silver Project, also in Central Slovakia.  Drilling has begun in the Jouhineva Project, with ports and processing plants nearby. 
The company chose these European locations because of their historical record of high grade mining in the projects, and the proximity to the of existing battery manufacturers in Europe, with more to come. The initial acquisition of Dobsina was very attractive due to the availability of infrastructure, including rail, road, water, and nearby towns for accommodation and support needs.
Another factor was the stability of supply.  Currently, most of the world’s cobalt comes from the Democratic Republic of the Congo, with considerable sovereign risk.  Battery producers in Europe and elsewhere around the world are looking for safer sources of supply.
Diversified mining explorer FE Limited (FEL) climbed aboard the cobalt train in mid- 2017 by acquiring the Kasombo copper/cobalt project in the Democratic Republic of the Congo (DRC) from Cape Lambert (CFE), a broadly diversified ASX junior miner.
Despite global concerns about mining in the DRC, investors drove up the share price of FEL upon emerging from a trading halt with an announcement drilling at Kasombo had commenced.  The following price movement chart compares the DRC operating FEL with FCC, operating in Canada.

The final two miners in the table came on the ASX in 2017, with Marquee Resources (MQR) coming on in March followed by Northern Cobalt (N27) in September.  Both have seen big moves in the stock price since listing.

Northern Cobalt positioned itself well as drilling commenced shortly after the company began trading.  The flagship Wollogorang project is focused on the Stanton Cobalt Deposit in the Northern Territory. The company began trading on 22 September and by the end of November released drilling results from five holes confirming high grade deposits.  By year end Northern Cobalt had completed drilling in 150 holes.
In December the stock price got another boost when the company announced the acquisition of the Arunta Lithium Project in central Australia, comprising nine tenements, with the company applying for four adjacent tenements. 
Given the importance of both lithium and cobalt in the future, investing in a solid company with high potential resource assets in both seems a sound strategy.
The final share in the table, Marquee Resources (MGR) was formed in 2016 with the express purpose of finding lithium deposits and moving them into production. Their first foray was the acquisition of 111 mineral claims in the US Bureau of Land Management’s Clayton Valley of the US state of Nevada, home to multiple companies involved in lithium exploration and production.  The Silver Peak Operations lithium mine, owned by Albermarle-Rockwood Holdings Inc, has been producing lithium from brine since the 1960’s, ranking it as the largest producer in North America.
Lithium can be produced from salt brine pools or extracted from hard rock.  Currently most of the world’s lithium comes from hard rock, but brine is not far behind and is more cost effective and easier to produce.

The company’s initial efforts following listing on the ASX involved securing drilling permits and equipment with plans to begin drilling the following quarter.  Drilling commenced on 3 July, with mixed results released later in the year.  The company went into a long trading halt pending an announcement which turned to be an acquisition of three highly prospective cobalt prospects in Canada.  Marquee acquired 100% interest in projects at Werner Lake, and Werner Lake East and 70% interest in a project at Skeleton Lake. 
The company has received multiple speeding tickets from the ASX due to the volatility of the share price. The response to the latest ticket bears mentioning:
• Over the last six months there has been a substantial increase in demand for junior resource stocks.  This is particularly the case for ASX Lithium and Cobalt exploration and development companies combined with a record high cobalt price.

>> BACK TO THE NEWSLETTER: Click here to read other articles from this week’s newsletter