Cobalt Blue (COB-ASX): Leverage to capital efficient cobalt; initiate with a SPECULATIVE BUY, A$0.65 price target.
from the PDF:
Cobalt market, miner, refinerCobalt: Driven by battery demand to the point of deficitThe cobalt market is relatively small (128kt in 2020) but highly topical when considering the lithium-ion battery supply chain. Supply is dominated by the Democratic Republic of Congo (~70% of global supply), with the metal largely mined as a by-product of copper. Demand has traditionally been driven by portable device batteries (LCO cathodes) and alloys. However, we expect this to rapidly shift to demand linked to EVs, consuming 32% of cobalt by 2025 and 50% by 2030, doubling demand to 272kt despite thrifting and a shift to low/no cobalt cathodes. We expect the market to be balanced on a knife's edge until 2024 when it enters a structural deficit. As the deficit approaches we expect to see a scramble to secure supply and rapidly rising prices. We anticipate US$14-30bn of investment is required to balance the market and there are limited opportunities to invest in an ex-DRC/ Indonesia/China cobalt supply chain. In this report we take a deep dive into the cobalt market and highlight three ASX-listed opportunities.Cobalt Blue (COB-ASX): Leverage to capital efficient cobalt; initiate with a SPECULATIVE BUY, A$0.65 price targetCobalt Blue is developing the Broken Hill Cobalt Project (BHCP) in western NSW, Australia. The project differs from other projects in that cobalt is the primary revenue stream. The BHCP presents as a cobalt-focussed project with low capital intensity (US$120m/ktpa capacity) while delivering a meaningful volume of material into the market (3.5ktpa). COB is currently piloting its process in Broken Hill before progressing to a demonstration plant in 2022 and FID in late 2022/early 2023. COB’s process flow sheet is unique; however, it delivers a balance between operational costs, capex, cobalt recovery and environmental impact. We believe there is value in the flowsheet IP, which may present further commercial opportunities. Our price target is set in line with our risked (35%) NAV. SPECULATIVE BUY; A$0.65 price target (0.43 P/NAV).
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