Tesla may be best known for its electric vehicles, but people in Puerto Rico likely revere the company for turning the lights back on in wake of September 2017’s Hurricane Maria, the strongest hurricane to make landfall in Puerto Rico over the past 85 years. Tesla, who diversified through the $2.6 billion acquisition of solar energy company SolarCity last year, moved quickly to bring its solar panels and system to Puerto Rico’s Hospital del niño, a children’s hospital in the capital of San Juan serving about 3,000 children, including more than two dozen that require 24/7 care. The hospital had been running off generators, rationing diesel fuel and taking all measures to keep power continuously flowing.
Tesla’s systems use solar panels to generate electricity during daylight hours and batteries to store the power when the sun is down. Tesla says the hospital was only the first of many solar and storage projects it is bringing to the ravaged nation, much of which is still without electricity.
Tesla spreading its technology across the globe, highlights that fact that every one of its projects has metal needs, namely cobalt and lithium, to make them possible. Generally speaking, lithium is the prom queen, garnering most of the media headlines for the investment opportunity. While there is no denying the upside potential to lithium production, cobalt is equally – and perhaps even more – attractive.
For instance, consider that it takes 51 pounds of cobalt to make a Tesla Model S rechargeable battery. Now consider that the world is potentially staring at a large supply/demand imbalance. Mix in that the majority of cobalt today comes from the Democratic Republic of Congo (DRC), a politically unstable country lauded for pockets of its mining industry ignoring child labor and workers’ rights laws.
The International Energy Agency’s Global EV Outlook 2017 shows that over 750,000 new electric vehicles were registered in 2016 and the global electric car stock topped 2 million vehicles. Still, that’s only about 0.2% of the total number of cars on the road today. IEA predicts that the EV stock will range between 40-70 million by 2025. Analysts at Wood Mackenzie are even more bullish, forecasting EVs to dominate sales floors in the future, commanding 85% of all new vehicles sales by 2035.
And that’s just the auto industry. What about off-grid solutions and industrial solar applications like what Tesla just installed in Puerto Rico? Solar solutions are dropping dramatically in price and will steadily continue to come online across the globe. Tesla CEO Elon Musk has pledged to work diligently to solve Australia’s energy problem that has high electricity prices pressuring family budgets.
That means the world is going to need a lot more cobalt just for energy storage, without mention of its other uses today, such as in high-strength alloys. The DRC already produced 63% of the world’s cobalt last year and at 66,200 tons easily out-produced the next closest country
(Russia: 5,800 tons). Rather than looking to the DRC, where in some cases the supply chain can be sketchy, looking to places friendlier to miners where cobalt is or has been produced is the most prudent approach to capitalize on the upcoming market.
That’s exactly the plan of LiCo Energy Metals (TSX-Venture: LIC)(OTCQB: WCTXF) with its Teledyne and Glencore Bucke cobalt properties outside of Cobalt, Ontario. The Vancouver- based company has amassed a leading position in the cobalt mining district that including the land adjoining the past-producing Agaunico Mine. From 1905-1961, the mine produced 4.35 million pounds of cobalt and 980,000 ounces of silver. A large percentage of the cobalt produced was mined from structures extending southward onto the property now optioned to LiCo.
LiCo also has a tremendous opportunity with the Glencore Bucke project, which is the topic of a purchase agreement signed on August 31 2017 with global base mining behemoth Glencore plc (LSE:GLEN OTC: GLNCY) through its subsidiary Glencore Canada Corporation. The property is located adjacent to the Teledyne property and believed to cover the #3 vein that was historically mined at the neighboring Cobalt Contact Mine to the north of the LiCo properties. Historic diamond drilling by Teledyne Canada Inc. (36 holes, 3,323 meters) at Glencore Bucke and a combined 28 surface and underground diamond drill holes totaling 3160 meters on the Teledyne Property, has defined two zones of high-grade mineralization, one 152 meters (the Main vein) and the other 70 meters (the Northwest vein) in length.
The terms of the agreement keep Glencore in the mix going forward, a sign of confidence in the project. Should production be achieved, Glencore has the right to buy the ores and/or concentrates from the project. In short, LiCo could automatically have a big-name buying partner. Moreover, should the underground resource at the project prove to be in excess of CAD$100 million in value, Glencore has first right to buy 51% of the project from LiCo for three times our total exploration costs and become a joint venture partner.
LiCo has just completed 16 diamond drill holes totaling 1,400 meters testing the Main and Northwest veins at Glencore Bucke. Assays are not in yet, but the initial read is encouraging considering LiCo saying “cobalt camp style mineralization has visually been noted in every drill hole [completed].” Investors should have their ears to the ground for news on cores, as it could catalyze the stock from its base at 8 cents.
The drill rig at Glencore Bucke was originally slated to be transferred for drilling on the Teledyne project, but due to the optimism surrounding the visual results, additional drilling is continuing at Glencore Bucke. A second rig was mobilized in mid-October and recently began drilling at Teledyne, giving market participants another milestone to look forward to with new, deeper drill data to aggregate with historic drilling of 28 surface and underground diamond drill holes measuring 3,160 meters.
Producers are confident that the price of cobalt will remain high, at least they seem to be confident anyway. This thesis is gleaned from Volkswagen (OTC: VLKAY) looking to secure long- term cobalt supply partners as it speeds up its EV assembly line as part of a $24 billion initiative to challenge Tesla as the king of EVs. The world’s biggest automaker failed to find a partner,
though, with the Financial Times reporting that the fixed price Volkswagen was offering to pay was too low to get a deal done.
With cobalt prices up more than 80% so far this year and predictions for energy storage applications causing a material shortfall, producers weren’t getting strong armed by Volkswagen. The German auto giant is going to have to pay up.
While the initial focus of LiCo is Canada and cobalt, there is more to the story as LiCo is an international company with interest in a variety of important metals, including lithium. The lithium assets are in the hotspots of production today, including in the “Lithium Triangle” with a massive salt flat property in Chile next to projects of Sociedad Quimica y Minera (NYSE: SQM) and Albemarle (NYSE: ALB) that supply the bulk of Chilean lithium output. In the U.S., again LiCo is at the heartbeat of the industry, with two projects in Nevada, the home of the only producing lithium mine in North America today and Tesla’s (NASDAQ: TSLA) Gigafactory.
The majors, like Glencore, SQM and Albemarle, producing metals critical to energy storage have been on a tear in 2017. Market participants are moving a little slower on upstarts like LiCo, but it should will be only a matter of time before they stand up and take notice as the company proves out it resources, which should intrinsically build corporate value.