3 days ago UBS put out a highly speculative piece about surplus...

3 days ago UBS put out a highly speculative piece about surplus cobalt supply.

The piece had a number of fundamental flaws.

The substitution of cobalt light batteries for higher cobalt use batteries in the consumer sector is proceeding. What UBS DIDN'T SAY is that the cobalt light batteries are still inherently unsuitable for a range of consumer uses because of stability issues and it is not possible to generalise that these light batteries will be immediately substitutable for all forms of consumer batteries

The analysis makes no allowance for metal loss in converting cobalt metal to cobalt sulphate for battery consumption and given 60% of 2022 demand will be for cobalt sulphate this needs to be factored into the supply analysis and is not. At least 10% of 60% will be lost to metal conversion.

The analysis does not allow a significant enough discount for the use of Congolese cobalt given the four issues of ebola, new government taxes, infrastructure difficulties and ethical supply issues. We believe that no Congolese cobalt will be used in the EV battery market because of the demands of car manufacturers for ethical supply.

The analysis assumes cobalt is price elastic that is supply will respond to demand. More than 98% of the worlds cobalt supply is a byproduct of nickel mining the supply of cobalt is therefore inelastic it will not necessarily respond to the price of cobalt, the price of nickel will be more important.

With EV Battery demand comprising 60% of the near term market the demand for cobalt sulphate becomes the critical issue not cobalt- There is absolutely no analysis in the UBS piece of how and where cobalt metal will be refined into cobalt sulphate for the battery market and even whether that can happen without substantial further mining investment in the correct processes.

For all these reasons we believe UBS oversupply thesis is very very wide of the mark and we still stand by our thesis of a cobalt sulphate deficit and bifurcated pricing mechanism for metal and sulphate.

The analysis of UBS is irrelevant to Clean Teq.