Cobalt 27 in talks to supply metal to Chinese firms

Anthony Milewski, Chairman and CEO of Cobalt 27 Capital, at the company's cobalt warehouse in Rotterdam, The Netherlands. Photo courtesy Cobalt 27 Capital Corp.

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Anthony Milewski, Chairman and CEO of Cobalt 27 Capital, at the company’s cobalt warehouse in Rotterdam, The Netherlands. Photo courtesy Cobalt 27 Capital Corp.

Cobalt 27 Capital Corp. [KBLT-TSXV, 270-FSE], owner of the world’s largest stockpile of cobalt, said it is in talks with Chinese companies who are seeking to secure supplies of the metal which is used to manufacture electric vehicle batteries.

According to a Bloomberg report, car and battery makers from China have approached Cobalt 27 to discuss long-term partnerships and supply contracts, Cobalt 27 Chief Executive Officer Anthony Milewski said during an interview in Beijing on Monday.

Cobalt shares rallied on the news, rising to $12.10 on Monday before settling back to $11.97, marking a gain of 0.59% or $0.07 from Friday’s close. The 52-week range is $14 and $7.42.

Milewski said he has had at least 17 such meetings lined up with major Chinese cities over the next three days.

“There is a lot of interest and it is natural because it is where this will happen,” he said. “China is going to be the world leader of electric vehicles.

Cobalt 27 Capital holds 2,982.9 tonnes of physical cobalt, consisting of 2,270.3 tonnes of premium grade cobalt and 712.6 tonnes of standard grade material.

The company started buying this metal from mining companies and putting it in warehouses in 2015 when most industrial commodity prices were slumping.

The company is setting itself up as an investment proxy on the electric vehicle revolution by offering investors pure play exposure to cobalt

In a telephone interview from London, England, Milewski told Resource World Magazine he decided to focus on cobalt because it is mainly produced as a byproduct of other metals, such as copper and nickel.

Therefore supply cannot easily be increased to support the rising demand that is expected to accompany the adoption of electric vehicles and the batteries needed to drive them.

“If you are looking for a proxy for the adoption of the electric vehicle, the one that would have the best correlation is cobalt because of inelasticity of supply,” Milewski said.

“You can’t crank it out like you are going to be able to do for lithium.”

But rather than mine cobalt directly out of the ground, Milewski and his partners decided to take a different approach. In addition to owning 2,982 tonnes of physical cobalt, the company has opted to invest in a cobalt-focused portfolio of streams, royalties and direct interests in mineral properties containing cobalt.

It is a strategy that has already proven successful for precious metal sector companies such as Franco-Nevada Corp. [FNV-TSX, NYSE] and Wheaton Precious Metals Corp. [WPM-TSX, NYSE].

Cobalt 27 recently acquired a 1.75% net smelter royalty on all future production of all metals from the Dumont nickel-cobalt project in the Abitibi region of Quebec.

Held by RNC Minerals [RNX-TSX], the Dumont project contains the world’s largest undeveloped, permitted and construction-ready reserves of nickel and cobalt. Production is expected to commence in 2020.

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