Highlands To Ride High On Back Of Cobalt Boom

By Barry Fitzgerald | More Articles by Barry Fitzgerald

Cobalt is a key metal in the dominant lithium-ion battery chemistries, meaning demand for the stuff is being swept along by the biggest disruptive industrial event since Henry Ford’s Model T hit the roads in the early 1900s – the electric vehicle revolution.

The problem is that 65% of the world’s cobalt is sourced from the Democratic Republic of the Congo, with the artisinally-produced component of that – think child labour and shocking working conditions – accounting for some 15%.

That’s not good enough for the world’s auto makers. A more diverse and ethically-sourced supply chain is needed. The more-than-doubling in the cobalt price to $US60,000 a tonne is providing the incentive for that to happen.

But it is going to take time, prompting most forecasters to have cobalt staying at elevated levels for the foreseeable future.

Nickel is also a key metal in the dominant lithium-ion chemistries. And it too has been enjoying a strong price gain this year, albeit from a low base. It is now sitting at $US5.57 a pound, which is 27% higher than last year’s average.

The price performance of cobalt, and to a lesser extent nickel, has been powering up the market caps of the ASX explorers/developers which have made the metals their speciality.

Some might become producers. Most won’t. It’s just that super-strong prices don’t in themselves guarantee exploration success or a successful mining operation.

Investor enthusiasm for the cobalt/nickel explorers is understandable. It is where amped-up leverage resides.

But a more conservative response to the battery boom and the associated cobalt/nickel thematic has been to look to the existing producers, which in this market means the nickel producers where cobalt is a by-product.

It’s why the share prices of Western Areas (WSA) and Independence (IGO) have been on the tear since July.

But today’s interest is in one of the market’s most over-looked mining companies – Highlands Pacific (HIG).

And will Perseus’ forecast production increases get the stock out of the sin bin? Read more +

Barry Fitzgerald

About Barry Fitzgerald

Barry FitzGerald has covered the resources industry for 30 years. His column highlights the issues, opportunities and challenges for small and mid-cap resources stocks - most recently penned his column for The Australian newspaper and before that, The Age.

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