Electric Car Wars Go Global: Investors Need To Look Past Tesla For Pure Plays (Like This Tiny Stock On The Move)
Maybe you think Elon Musk walks on water. Maybe you think he’s an idiot. It doesn’t matter. He let the electric genie out of the bottle and now there’s no way Big Car is going to let the Tesla threat go unchallenged.
That’s why I find an obscure company, European Electric Metals (OTC:EVXXF)(TSX:EVX) so interesting right now. EVXXF might actually be one of the purest plays on the theme, a stock trading for pennies today but directly exposed to the global car wars. Investors who want a taste of the battery car revolution need look no further.
And since first bringing (OTC:EVXXF) to your attention, the company has moved at lightspeed. They have brought on to the team a world famous expert at battery metal mining, Ian Stalker who was the CEO who sold Uramin for USD $2.5 billion, was VP at Goldfields when it was the 4th largest gold producer in the world and who built Zambia’s only cobalt production plant. They have also taken 177 samples from 66 locations within the underground mine, in 3 different mining blocks!
And it is a revolution. The global giants can feel which way the disruption is blowing. Car buyers like getting to choose between old fossil fuel (still a non-renewing resource no matter how deep we drill, still close to $3 a gallon) and plugging in the battery to build up a charge.
The battery is on a steep growth ramp. From practically ZERO ten years ago to a perky 170,000 new electric cars a month, we’re looking for 1 million battery vehicles selling this year. That’s still a drop in the global gas bucket (90 million a year) but it’s proof of both how big the market opportunity is here and how fast the e-cars are moving to capture the flag.
“This Stock has the potential to make very large gains in a very short time”
All those car sales generate $1.5 TRILLION a year for the giants. Gut check: Tesla is $20 billion of that now. Elon Musk’s big brainchild may have the market cap of General Motors or Ford, but it isn’t even the top electric car brand. That’s the Leaf, by Nissan, a partner of French heavyweight Renault.
Battery cars are only a sliver of these companies’ overall sales. You don’t buy stock in Volkswagen or Renault or Toyota for the battery story. It will be a long, LONG time before any of them become a pure play on post-fossil-fuel transport.
But in the here and now they need to make batteries if they want to play in this market at all. (They do. They want it bad.) And they need the raw materials that go into the batteries. The companies that make that stuff are the real pure play. (OTC:EVXXF) makes that stuff. They’re on a fast track to mining the cobalt that helps the batteries hold a charge.
Just a glance at the chart reveals how fast that track is in this season when oil prices are rising (making the battery car a better deal) and everybody’s staring at Elon Musk:
What’s got this obscure stock on the go? One of those “electric metals” in the company’s name: COBALT. By now you’ve probably heard about lithium. It’s the once-humble element that powers computer and phone batteries as well as the coming age of electric cars and home power packs. And indeed, lithium mining stocks have been in hot demand for several years now.
But those batteries need a second metallic component in order to hold a strong enough charge. That’s cobalt, which is why the power system that runs Apple phones and Tesla cars is formally called the “lithium-cobalt” cell. Like that link says, the cobalt is actually “the main active material that gives this battery character.”
Now a lot of people have spent a lot of time and effort chasing lithium sources. Elon Musk of Tesla is one of them. But while Tesla has already triggered a lithium rush, collecting enough cobalt for 5,000 cars a week is an entirely separate problem.
“European Electric Metals could be the best long and short term play on the OTC”
You can see the supply/demand math play out in the commodity market whenever cobalt comes up these days. $25 a pound. Five years ago it was half the price:
That’s why my eyes lit up to hear that someone out there just bought a high-grade cobalt property . . . one that only a few people in the entire world even knew existed until now. That company is (OTC:EVXXF). The property is in Albania, a tiny and mountainous country in Europe, which is a close ally and friend of the United States, but relatively unknown to most investors until now.
But Albania is coming up fast because of the country’s exceptionally rich mineral resources, especially in metals crucially needed for electrification. It’s in NATO and has been for nearly a decade. It’s on the short list to join the European Union. And (OTC:EVXXF) cobalt is relatively close to roads, shipping and the power grid . . . not the middle of nowhere you might expect.
Click below to view recent photos from the mine…
Heck, this was even a fully functional mine until a few years ago. Back then they mined nickel here and weren’t interested in the cobalt. That was before the age of battery cars. The old owners basically took out the nickel and left the rest of the rock — according to historical records, easily 45,000 tons of ore already dug up, 22 MILLION tons left in the ground — near surface all around the property.
Now the cobalt that each of those tons of rock contains is considered high grade, maybe 4-12 times as rich as most typical economic grades that justify building a brand new mine around. Keep in mind this mine is already built. The permits are in place, the roads are built, the site is clear. All (OTC:EVXXF) needs to do is a few last steps and then the cobalt starts flowing.
After all, ways to get exposure to cobalt at a reasonable price have gotten scarce. Even the Wall Street Journal took notice just a few months ago. (As they say in that article, “good luck” getting into any of the established names on the cheap.)
Where does it go from here? There’s only a few dozen pure cobalt plays in the global database so comparisons are tricky. Most are exploration stage, companies far behind where (OTC:EVXXF) is now . . . itching to get that cobalt moving to the battery makers and Big Auto.
You “only” need about 35 pounds of this once-obscure rock to light up a 75 kWh Tesla. Apple only needs 10 grams per iPhone, about a third of an ounce. But with 1.2 BILLION of those little phones in circulation and Elon Musk ramping up those “giga factories,” the miners haven’t kept up.
Throw in new technology that uses more cobalt than ever . . . plus shadows on the global trade situation . . . and people who invest in cobalt now could be where the first wave of lithium bulls were a few months ago: staring at TRIPLE digit performance!
Unless you’ve got a time machine and can go back to 2013, which one’s on the ground floor today? The $10 billion lithium behemoth trading above $90 or the $5 million cobalt start-up currently priced at pocket change?
But before you answer, remember: down here in the start-up zone, every $1 isn’t just another little bump in the long-term trend. It’s a multiplier, unlocking truly massive return potential for those with the insight to come to the cobalt party BEFORE the me-too money crowds the table.
Cobalt used to be an obscure element (like lithium was 10 years ago), more famous for making a pretty blue when powdered or a higher-temperature steel in trace amounts. Thanks to the emergence of new power storage systems, both elements are now irreplaceable components of phone batteries, laptops, home power systems and yes, electric cars.
HALF of all cobalt that gets consumed right now goes into batteries. That wasn’t true before the high-tech world switched to lithium-cobalt power systems, which means that since the iPhone revolution started and Tesla made its first car demand here has at least DOUBLED.
That’s why smart players are already rolling up as many cobalt prospects as they can. Just a few months ago First Cobalt paid $115 million to buy out US Cobalt. That’s a good number to keep in mind as cobalt consolidation heats up. For one thing, the bid came in 65% abovemarket price, so the deal premiums are already getting huge as the fever kicks in.
And I did the math: historical work on US Cobalt’s primary project showed 1.2 million tons of high-grade cobalt ore grading at maybe 0.6% per ton. That’s roughly 7,500 tons of cobalt in that dirt . . . First Cobalt paid $15,000 per ton, so that’s a benchmark to keep in the back of your mind.
We caught up with a former director of the $200 million First Cobalt and asked him about his thoughts on (OTC:EVXXF). His response to us was simple: the project may be a whole lot richer than anyone currently suspects because the original surveys didn’t have modern geology behind them. “These cobalt grades were historically underestimated/unknown due to a lack of understanding/exposure to the geological model that provides an explanation for where the cobalt would exist within the horizon.”
What that means is that the 0.06% cobalt grades in the old survey are now actually assaying up to 0.6%, ten times richer and right in range with the premium ore that earned that $15,000 per ton takeout offer. And as the miners look for dance partners, the bids tend to get hotter and hotter.
There’s just not enough cobalt
Global supply has not kept up. Go back to 2010, the experts were already warning Congress that U.S. stockpiles had gotten so thin that they would only satisfy 1.7 DAYS of demand. Nobody listened! Since then, gurus think consumption has soared 75% in less than a decade . . . and the strategic government stockpile has shrunk 33%.
Long term, there’s plenty of cobalt in the ground. Recycling is coming. But it just isn’t. ENOUGH to fill the demand gap.
That’s especially true when you look at geography and politics. U.S. cobalt production was dead until 2014, when one mine finally stepped up to address 0.8% of annual demand. The European situation is even worse.
And hey, Europe. Where Volkswagen lives. That big car maker just committed $25 billion for electric car batteries. Where Daimler and BMW live. I read in Bloomberg that they’ve Painted a target on Tesla’s back. Where Mercedes lives, spending $600 million on a new e-car factory. Where Renault lives, and they own a big chunk of Nissan, which leads the global market.
Europe is full of world-class car companies. They’re going all in to keep up with Tesla. They need cobalt. (OTC:EVXXF) is within 16 hours’ drive of the Daimler battery car plant in France. A similar distance from the VW plant . . . did I mention VW wants to sell 3 MILLION electric cars a year by 2025?
3 million times 35 pounds is a lot of cobalt. They’re going to drain a lot of mines. (OTC:EVXXF) is nearby and a lot of the heavy lifting has already been done. Who gets the contract?
By the way, the great Elon Musk had a weird little freakout over cobalt in a recent quarterly conference call . . . fast-forward a year or two, we really need to think about cell production as being a constraint. Making sure that we have a secure supplies of lithium hydroxide, cobalt. There’s actually more amount of cobalt.
He’s talking about how Tesla is running out of secure supplies of cobalt because the company’s power cells use more of it than lithium. Notice how the investor relations guy cuts him off FAST after that. “Sorry everyone, we’re out of time” like he doesn’t want the supply constraint to scare shareholders.
But here’s the stinger. While some cobalt comes off of nickel like what used to drive the mine (OTC:EVXXF) owns now, that’s a secondary concern as well. Refining nickel ore is, and I quote, “horrendously” expensive.
Waiting for a start-up company to take a primary nickel project to a viable economic level is basically bracing for massive investment in time and money. While the path can ultimately be satisfying, it just isn’t easy or quick. European car makers don’t have time to wait. That’s where this property shines. Pure play.
Meanwhile if Nevada is the world capital of Tesla then (OTC:EVXXF) is in the sweet spot between Samsung in Budapest . . . and LG Chem up in Poland . . . you get the picture. All within the European economic zone, convenient to industrial shipping, immune to global trade threats. In the backyard, literally.
Either way, right now it’s almost total upside. All that the big boys on Wall Street know about this company right now is that there’s interesting rock here. They don’t know how much or where the future can go.
That’s the kind of opportunity that’s like getting into lithium five years early. It may not be gold, but it’s precious. Let’s go!
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