cobalt price slump more bad news for cmr, page-6

Olympian,

”Since JV partner HNC are taking ALL our Cobalt concentrate u would THINK it has been done at some kinda fixed price already and THAT would have to be reflected in the figures just presented (?). “

HNC have an offtake agreement for the cobalt concentrate however unless CMR have hedged cobalt then they will be taking market price. ie not $50/lb.

Looking at the last presentation of the oxide production and commodity price assumptions (still LOL on that) the project is highly leveraged to the cobalt market. Greater than 50% of the revenue is from cobalt! In others words long term buyers of CMR must have a positive or a least have a neutral view on the cobalt market. (And have confidence in the oxide plant reaching production goals)

I don’t.

Seriously, some research here is required. Right now, the largest copper cobalt mine in Africa is being constructed by Freeport which is slated produce ~8ktpa of cobalt into a ~60ktpa market in 2009….initially! This followed by Caledonia (Zambia) also 2009 and latter by Katanga (also in Congo). These 3 mines to my knowledge will be the largest individual cobalt producers ever constructed…..

This is just the African copper cobalt deposits, although less certain the next nickel oxide mines Goro and Ramu could also come on stream in the next few years as well.

Follow the article up by denpal. How can the demand side absorb this increase in supply in the next few years without serious price implications to the downside??

With new production coming on stream in 2009 imo cobalt will fall back below $10/lb in 2009 limiting CMRs profitability for both the oxide and sulphide projects.

Apart from short term trading why you would place a long term buy on a company levered to the cobalt market at this stage, especially when production and cash cost have not been confirmed from the oxide project?