Green energy company, Cobalt Blue Holdings (ASX:COB), closed its oversubscribed initial public offer (IPO) last week after investors bid for the $10 million maximum.
The company will commence trading on the ASX at 11am Thursday, 2 February.
Cobalt is a necessary metal for the production of the latest generation, high density lithium-ion batteries.
Due to its high run-time properties, the use of cobalt has risen dramatically as portable lithium-ion battery usage accelerates and electric vehicles become a reality.
Cobalt Blue’s Thackaringa Cobalt Project is strategically located 23 kilometres south-west of the world class mining centre of Broken Hill within New South Wales.
Cobalt Blue has a tight shareholder register with just 95 million shares on issue, with cash in excess of $9 million on hand.
Thackaringa Cobalt Project
The Thackaringa Cobalt Project is a pure play cobalt resource – in contrast to 98% of global cobalt mines that produce cobalt as a by-product of either copper or nickel.
All leases are 100% owned by Broken Hill Prospecting Ltd (BPL) and are subject to a farm in agreement with Cobalt Blue who can earn up to 100%.
The near-surface deposits at Thackaringa also make the project suitable for large-scale, open cut mining methods.
Cobalt Blue is undertaking a series of accelerated feasibility studies targeting a large scale operation with an extended mine life.
The aim is to combine large scale with low cost operations to create strong margins throughout the cobalt cycle and become an entrenched part of global cobalt supply.
The project is substantially aided by the near surface nature of the deposits as well as the local availability of skilled people, high voltage power, town water, a major highway and freight rail facilities.
These studies are due to be completed by 1 July 2019, with project financing expected to be in place shortly after.
Benefits of pure cobalt play
With 98% of global cobalt produced a by-product of either copper or nickel, these industrial metals typically form >70% of operational revenue. Not surprisingly, the cobalt market has been characterised by historical swing in/out production as a result.
Further, with over 10% of global supply coming from artisanal miners (with poor ethical and sustainability practices), in countries such as The Democratic Republic of Congo, world class lithium-ion battery consumers such as Apple Inc. (NASDAQ:AAPL) are looking to countries such as Australia for long term sourcing of cobalt raw materials.
Cobalt market supported by fundamentals
With a significant 67% rise in the price of cobalt over the last 12 months and just 700 tonnes of inventory (equal to 3 days of demand) held in the largest spot market (the London Metal Exchange), fundamentals remain tight and should provide a strong backdrop to the listing.
The market is forecast to swing to increasing multi-year deficits as factors determining cobalt demand such as battery materials drive a net demand compound annual growth of 8% through to 2020.
Against this strong demand, supply growth is forecast to reach 3.5% to 4.0%, thus driving long term deficit markets.
Value proposition: Over A$1 billion worth of cobalt
After the recent JORC 2012 resource upgrade, Cobalt Blue now reports 33.1 million tonnes of inferred resource at 833 ppm inferring ~27,000 tonnes of contained cobalt, valued at A$1.3 billion at spot market prices.
The market capitalisation upon listing will be A$20 million at the $0.20 listing price and exploration is targeting a 100 million tonne resource.
This is a compelling valuation when compared to some of the recent transactional activity in the space, such as the US$2.65 billion purchase by China Molybdenum of Freeport McMoRan’s 56% interest in a DRC cobalt asset.
Canadian listed cobalt company, Ecobalt Solutions Inc (TSE:ECS) has experienced over 900% price appreciation last 12 months.
Similarly, Fortune Minerals Limited (TSE:FT) which produces premium battery-grade cobalt sulphate samples has experienced over 560% price appreciation last 12 months.