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Cobalt 27: New Streaming Major In The Making
Jan. 10, 2019 2:27 PM•CBLLF
Summary
Cobalt 27 focuses on specialty metals used in the battery industry, especially cobalt, nickel, lithium and scandium.
Cobalt 27 holds physical cobalt and cash worth over $200 million.
The market capitalization of Cobalt 27 is only $285 million which means that only little value is attributed to its portfolio of streams/royalties.
Especially the cobalt and lithium market fundamentals are very favorable.
Cobalt 27 is a very attractive way of getting exposure to the ongoing electric revolution in transportation.
Cobalt 27 Capital Corporation (OTCQX:CBLLF) is a relative newcomer to the metals streaming industry. But unlike the vast majority of its peers, it doesn't focus on precious metals but on industrial metals. Especially on cobalt and nickel, two industrial metals highly important for the battery industry and modern technologies. Although it holds physical cobalt worth around C$240 million ($180 million at the current CAD/USD exchange rate of 1.322), cash of C$51.2 million ($38 million) and several very precious royalties, its current market capitalization is only $285 million. The share price has declined by more than 60% since May 2018, mainly due to the cobalt price that declined from $35 to $22/lb. However, the company is undervalued right now and it presents a significant upside potential.
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Conclusion
Cobalt 27 is a streaming company focused on specialty metals used in the battery industry, especially on cobalt and nickel, however, it holds also some lithium and scandium royalties. Besides the streams and royalties, Cobalt 27 is in the process of directly acquiring a stake in the Ramu nickel-cobalt mine. After the transaction is completed, the Ramu stake together with the Voisey's Bay cobalt stream will be the key assets of the company. Moreover, Cobalt 27 holds sizeable physical cobalt inventories. Right now, the market attributes only ridiculously low value to the stream/royalty portfolio. This is caused by the negative sentiment that has weighed on the cobalt market over the last 6 or 7 months. However, given the cobalt and nickel market fundamentals, it is only question of time before Cobalt 27's share price returns to its previous levels.
Starting from 2021, the Voisey's Bay stream and Ramu interest alone should be able to generate cash-flows over $50 million per year, if the current metals prices prevail. In this case, Cobalt 27's share price should reach at least the $6-7 range, which means a 100% upside potential. If the cobalt and nickel prices increase, as is generally expected, the cash-flows, as well as the share price, will be even higher. Moreover, some other cash-generating streams or royalties may be added by that time. All in all, Cobalt 27 is a very attractive way of getting exposure to the ongoing electric revolution in transportation.
Disclosure: I am/we are long CBLLF, NMKEF, RNKLF.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.