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I know lithium is a great way to play the growth of electric vehicles. Are there any other materials we should be aware of?

By Matt McCallNov 30, 2017

That’s a great question. You’re correct that the primary power behind electric vehicle (EV) batteries comes from lithium, and this material has become a hot commodity as it is also used in iPhones and computers. In fact, we’ve already made some money on this growth theme in my services.

But what is often not talked about on Wall Street are the other materials that make up these batteries. Cobalt, which is typically a byproduct of copper and nickel mining, is essential for high-end rechargeable batteries, and the demand for this blueish-grey metal is about to explode.

To give you an idea of the cobalt supply/demand issue that I see building in the years ahead, consider that it takes approximately 8 kilograms (kg) of cobalt per car on average. A typical power unit in today’s EV contains 15 kg, but some are as low as 5 kg. The industry is looking to produce about 10 million EVs in 2025, but the estimated 41,200 tons of cobalt available will only be enough to support a little over five million. The inevitable demand for cobalt in the years ahead will lead to big profits for the companies and investors in position for it.

The search for cobalt is focused in the Democratic Republic of Congo (DRC), formerly known as Zaire and also home to the famous “Rumble in the Jungle” boxing match between Muhammad Ali and George Foreman in 1974. Last year, 63% of the world’s cobalt supply came from the DRC and that number could increase to 73% by 2025. The concentration of a much sought after resource in one small country that is far from stable has the potential to send cobalt prices soaring if supplies cannot keep up with demand.

Bloomberg New Energy Finance (BNEF) estimates that by 2030, the global demand for cobalt could be 47 times higher than last year. Another report from BNEF predicts the global fleet of EVs to reach 282 million in the next two decades, up to 16% of all cars in the world. The price of cobalt has already doubled in the last year to $60,125 per metric ton, and if the demand is even close to the estimates the price will continue to soar in the years ahead.

That’s the kind of NexGen potential we aim to capture, and I recently added three major players in the cobalt industry to my watch list that could help us do so.

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