The Challenge of Cobalt Exposure and the Cobalt 27 Business Model

The battery industry is at a tipping point, with explosive demand increases from both the automobile industry and grid storage industry. With strong, anticipated growth in the coming years, battery metals represent an exciting and rewarding investment opportunity. As with all commodities, the harder a metal is to acquire, the greater the value, and when it comes to being hard to come by, cobalt is the king of the battery metals.

If you’ve read my previous posts on why Cobalt is getting so much attention and vulnerabilities of cobalt supply you’ll know that the majority of cobalt is produced as a by-product of copper and nickel mines.  Some of the world’s largest mining companies produce cobalt, however, because they are not pure plays on the metal, they expose investors to a number of other commodities, which may not be related to the electric vehicle thematic. In addition, the world’s largest reserves are located in the DRC (Democratic Republic of Congo) – a particularly difficult and dangerous mining jurisdiction.

The challenge as an investor, therefore, is getting exposure to cobalt without opening yourself up to very high levels of sovereign risk. These are some of the challenges that Cobalt 27 was set up to successfully address.  Namely, to create an investor-friendly vehicle designed to maximize exposure to the electric vehicle thematic by allowing the investor to invest directly in cobalt, without the exploration, concentration or jurisdictional risk.

The Cobalt 27 business model is designed to isolate cobalt for investors and to do so in a way that offsets the risks commonly associated with this vital battery metal. Let’s take a look at our approach:

Physical Cobalt. We purchase and hold physical cobalt. This is not as simple as sounds. In fact, many funds are unable to buy and hold the material. We have constant disclosure on how much cobalt we are holding at any given time and you can even price it yourself using metals bulletin. We currently hold 2,158 metric tons of cobalt (1,487 high grade and 671 of standard grade).

Now, it’s important to note here that we do not actively speculate on short-term, day-to-day cobalt pricing activity. Cobalt’s importance as a battery metal, and the associated supply challenges, mean we are focused on appreciation in value, over the long term, of our physical cobalt inventory. One of the great strengths of this approach is that, when an investor holds our stock, they know the value is underpinned by our physical cobalt holdings.

Streams/royalties.  With a “stream” or “royalty”, you’re essentially paying for the commodity for a fixed period of time (ideally life of mine) at a fixed price. In a strong market such as cobalt, this can provide excellent exposure over an extended period by locking in quantity, quality and price. In the short time since launching, we have already acquired a number of net smelter return (NSR) royalties on exploration-stage properties that contain cobalt. We have an agreement in place for another royalty and are in negotiations with several other companies, including producers, near-term producers and exploration companies. Below, you will find our current list.

PropertyOwnerLocationRoyalty
North Canol Properties*Golden Ridge Resources Ltd.Yukon2% Co NSR
Triangle PropertyNew Found Gold Corp.Ontario2% Co NSR
Rusty Lake PropertyNew Found Gold Corp.Ontario2% Co NSR
Professor & Waldman Properties*New Found Gold Corp.Ontario2% Co NSR
Sunset Mineral PropertyThree individual ownersBritish Columbia2% Co NSR

*two separate mineral properties to which a Co NSR applies

Mineral Properties.  In the near-to-medium term, our focus will remain on physical cobalt and streams/royalties. As we expand, however, we may also acquire interests in producing mines and/or exploration and development projects. Successful M&A, particularly in a bull market, requires the right team.  This sort of experience – identifying the right projects, conducting detailed due diligence and negotiating the right deal – is something our team possesses a great deal of. In fact, if you’ve not done so already, I recommend taking a look at our Management Team and Board of Directors.

My overall objective in this blog post is more than just providing an overview of our three-pronged, pure-play approach to cobalt. The vulnerabilities inherent in cobalt supply represent a potentially very high level of risk for investors. If you need convincing, spend some time googling “Democratic Republic of Congo” or read my earlier blog post on the subject. Our business model is specifically built around minimizing those risks, while maximizing exposure to the incredible upside for cobalt, which is coming from the battery boom. Moreover, it is a business model being implemented by one of the most experienced teams in the cobalt sector.

In the coming weeks, I’ll be discussing individual elements of our business and the industry in more detail. In the meantime, if you have any questions, be sure to get in touch.

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The Oregon Group has full editorial control over all content published on this website and the author has not been compensated or remunerated by any person to provide content for The Oregon Group, and all statements and expressions herein are the sole opinion of The Oregon Group. However, from time to time, The Oregon Group and its directors, officers, partners, employees, authors, or members of their families, as well as persons who are interviewed for articles on this website, may have a long or short position in securities or commodities mentioned and may make purchases and/or sales of those securities or commodities in the open market or otherwise. By accessing and using this website, readers are cautioned to assume that each of the foregoing persons may have a financial interest in all companies and sectors mentioned on this website. Any projections, market outlooks or estimates herein are forward looking statements and are inherently unreliable., and any such statements are based upon certain assumptions and should not be construed to be indicative of the actual events that will occur.  Other events that were not taken into account may occur and may significantly affect the returns or performance of the securities or commodities discussed herein. The information provided herein is based on matters as they exist as of the date of preparation and not as of any future date, and The Oregon Group undertakes no obligation to correct, update or revise the information in this document or to otherwise provide any additional material. The information provided on this website is for informational purposes only and is not, directly or indirectly, an offer, solicitation of an offer and/or a recommendation to buy or sell any security or commodity, and the information provided on this website should not be construed as any advice or an opinion as to the price at which the securities of any company or commodity may trade at any time. The Oregon Group is a publisher of financial information, not an investment advisor.  We do not provide personalized or individualized investment advice or information that is tailored to the needs of any particular recipient, and the information provided on this website is not and should not be construed as personal, financial, investment or professional advice. Readers are cautioned to always do their own research and review of publicly available information and to consult their professional and registered advisors before purchasing or selling any securities or commodities and should not rely on the information contained herein. Neither The Oregon Group nor any of its affiliates accepts any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of the information contained herein. By using the Site or any affiliated social media account, you are indicating your consent and agreement to this disclaimer and our terms of use. Unauthorized reproduction of this newsletter or its contents by photocopy, facsimile or any other means is illegal and punishable by law.

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about the author

Anthony Milewski

Anthony Milewski

Anthony Milewski has spent his entire career in various aspects of the investment world, including as a company CEO, board director, advisor, founder and investor, with a focus on commodities

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