President Donald Trump isn’t exactly a friend of green energy advocates, pulling the U.S. out of the Paris climate treaty, remaining supportive of the oil and coal industries and proposing a budget that defunds an energy innovation program known as ARPA-E, an acronym for Advanced Research Projects Agency-Energy. These are just a handful of initiatives by the Trump Administration that provides muscle for conventional energy and hamstrings renewables. Despite those political headwinds, alternative power is building momentum and will continue to expand, especially in the area of electric vehicles (EVs), as measured by auto makers that ignore Washington’s rhetoric and listen to consumers’ cries for options other than fossil-fueled vehicles.
The latest Republican tax plan proposes to put an axe to a $7,500 tax credit for EVs and hybrids, yet car makers have made no bones about committing major investments into plug-in vehicles. Last month, General Motors (NYSE: GM) said it will be releasing two new EVs in the next year-and-a-half and as many as 20 new EVs in the next six years. Volkswagen, looking to emerge from its diesel scandal, is reinventing itself as an EV powerhouse and plans to roll-out new, affordable electric cars in the next couple years, including sport utility vehicles, a sedan and a hatchback as it has figured out ways to greatly reduce production costs. Tesla (NASDAQ: TSLA), the household name in EVs, just unveiled its new all-electric semi and a new supercar against the backdrop of struggling to roll enough of its inexpensive Model 3 of the production line to keep up with demand. Ford (NYSE: F) says its investing $4.5 billion to launch 13 new EV models by 2023. The list goes on in on amongst major auto manufacturers despite what appears to be limited support from Capitol Hill.
It’s for these reasons that some of the hottest stocks in the market today are miners drilling for key ingredients necessary to for energy storage (i.e. EV batteries): cobalt and lithium (and graphite for that matter).
The majority of lithium and cobalt production is limited to only a handful of majors…and they’ve been enjoying a great run in share value because of it.
While it’s not exclusive to these minerals, there is a reason that companies like Sociedad Quimica y Minera de Chile (NYSE: SQM), FMC Corp. (NYSE: FMC) and Albemarle (NYSE: ALB) have experienced tremendous increases in share value. Simply, they’re some of the top producers of lithium in the world and there is an expected lithium supply shortfall.
While lithium is traditionally mined through brine or hard rock as a primary metal, cobalt is different. It is nearly always (~98%) a by-product of other metal mining, largely copper, but also nickel, silver and gold. Moreover, 60 percent of the world’s cobalt is produced in the politically-volatile Democratic Republic of Congo, a country with a checkered history or protecting worker’s rights. Beyond that, China controls the bulk of refined cobalt output – which it gets largely from the DRC – with the whole supply chain often criticized for its lack of regulatory oversight to ensure a safety.
Glencore (LSE: GLEN)( OTC: GLNCY), by far the world’s biggest producer of cobalt, has also realized triple-digit gains in the past couple years. Already with a solid ethical mine presence in the DRC, the company cemented its position as the top producer earlier this year in buying the interest in Mutanda Mining and Katanga Mining in the DRC from Fleurette Group (2016’s #3 cobalt producer) for $960 million.
Other companies like Gecamines and China Molybdenum also have a strong presence in the DRC, with Brazil’s Vale (NYSE: VALE) being the only top producer (albeit all three are far being Glencore) that is producing cobalt as a byproduct of its mines outside the DRC.
Glencore’s acquisition is likely to be the first of many in the future across the industry that consolidate cobalt production as automakers look to source and secure cobalt for the electric vehicles.
“The world has never seen a need for cobalt like there is today and for the foreseeable future,” said Tim Fernback, CEO of Lico Energy (OTCQB:WCTXF)(TSX-V: LIC), in a phone conversation with Lithium Stock News. “There is a really interesting shift happening in the cobalt mining landscape at this moment, creating a nearly once-in-a-lifetime opportunity for small companies to build an immediate market presence as demand ramps up and supplies run short.”
From its headquarters in Vancouver, Lico has a portfolio of projects squarely focused on both lithium and cobalt in some of the most politically stable areas of the world, including the Atacama Salar in Chile that producers some 37% of the world’s lithium, two properties in Nevada, the only lithium-producing region in North America, and a series of claims across two projects in the Cobalt Mining District in Ontario, Canada.
As it strategizes exploration of the lithium properties and looks to add more, initial efforts are centered on the two adjoining cobalt properties in Ontario: Teledyne, which the company has held for a while, and Glencore Bucke, which was recently purchased from Glencore.
“We saw what was coming with the EV business and wanted to position ourselves in mining-friendly jurisdictions known to have prolific reserves of high-quality, low-cost cobalt and lithium,” said Fernback. “To have Glencore, the most well-respected cobalt miner in the world, as a potential partner certainly provides plenty of incentive for us to move expeditiously forward with exploratory work to prove-up reserves in Ontario.”
Fernback was referencing the terms of the acquisition that allows Glencore several options to work with Lico at various levels, including a 50/50 joint venture, in the future on both Teledyne and Glencore Bucke should reserves reach certain milestones.
Since announcing the deal to acquire Glencore Bucke in September, Lico mobilized rigs immediately and has completed 27 drill holes (3,100+ meters), with assays arriving weekly as it moves through its NI 43-101 plan. Drilling to date has been successful, showing small-vein, high concentration (3%+) cobalt underground. The company is actively working to expand the land package and the proven mineralization from its property that produced 4.35 million pounds of cobalt and 980,000 ounces of silver during historic mining from 1905-1961.
There are little indications that the EV movement is going to slow. In fact, it looks like it is only going to continue to gather steam, no matter what policies Congress haggles over in the coming months. The plug-in revolution is not near-sighted as Washington often seems to be. Its impact is only starting to be felt now, but it reaches decades down the road, which is aligned with the mindset investors should have with investment strategies seeking to capitalize on the space.