What on earth is happening to Cobalt Stocks these days?


With the surging commodity prices, Cobalt was seen to come into limelight around mid of last year with the growing electric vehicle market as the metal is used as a key ingredient in the lithium-ion batteries. The prospects still look good, but the recent trends have taken a toll on some of the ASX listed stocks dealing in cobalt. The fumes in the sector taking the cobalt stocks down have partly come through recent comments on the metal from the electric car maker, Tesla’s boss, Elon Musk who delivered a bearish speech on cobalt with phasing out of respective use in the car batteries, while many junior miners are still positive on the supply and demand outlook for cobalt. For some, the recent correction might offer an entry point, but we are still vigilant of the overall movement in the sector. Particularly, we have seen ASX listed, Northern Cobalt Ltd (ASX: N27) coming under immense pressure with the sinusoidal trends in the last few months.

Northern Cobalt Ltd (ASX: N27), an emerging resource company engaged in the acquisition, exploration and development of cobalt mineral projects, recently released its final assay results from the 2017 diamond drilling within the Stanton Cobalt Deposit. In December 2017, Northern Cobalt completed approximately 774m of diamond drilling into the Stanton Cobalt Deposit. The drilling was conducted to obtain representative samples of mineralisation for metallurgical testing and petrophysical information needed for resource calculation. A number of drill sections have been prepared to show the distribution of cobalt mineralisation subsurface. The Wollogorang Cobalt Project in the far north-eastern corner of the Northern Territory, a mining friendly jurisdiction, is also group’s key asset, and is a sediment hosted cobalt mineralisation system with potential for low CAPEX and OPEX options due to Non-refractory mineralisation. In addition to this, metallurgical testing as of now is in progress that will give a valuable insight into the possible processing choices in the future. Since past six months, the stock price was down by 53 per cent, as on 9 May 2018 with operations update below market’s expectations. It is a play to be watched out given the steep fall and the sinusoidal sector driven movements.


Location of N27 Projects (Source: Company Reports)

Another player is Cobalt Blue Holdings Ltd (ASX: COB) that announced a significant resource upgrade at the Thackaringa Cobalt Project. The upgrade reflects a 31% increase in total tonnes and a 23% increase in contained cobalt, with global Mineral Resource now comprising 72Mt at 852 ppm cobalt, 9.3% sulphur and 10% iron for 61.5Kt contained cobalt (at a 500ppm cobalt cut-off) as compared to the June 2017 estimates. Thackaringa remains on target to become a world class cobalt project with recent metallurgical test work highlighting 88% cobalt recoveries from ore to payable product. Cobalt Blue aims to complete maiden Ore Reserve estimate as part of PFS. The group has also retained the Stage One percentage share (51% beneficial ownership) under its Joint Venture Agreement with Broken Hill Prospecting Ltd (ASX: BPL). COB remains on track to complete Stage Two and expects to deliver a Preliminary Feasibility Study by mid-2018 and a full Bankable Feasibility Study by mid-2019. The stock price was up by 328 per cent in the past six months, followed by a drop of 12 per cent in the last one month. The stock jumped by over 2.4 per cent as at mid-day trading on 10 May 2018. With the already high run-up, we have a hold on this stock.


COB developmental timeline for the Thackaringa Cobalt Project (Source: Company Reports)

Overall, while some players might not have been clear winners so far, with some still riding high; the view on the sector is mixed at the moment and we keep an eye on the related stocks without discounting on the potential that this sector can flourish on.


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