Heading to the Mines and Money conference in Hong Kong a fortnight ago, I didn’t know what to expect. I thought we’d get a few good charts and some investment ideas for the future.
That’s exactly what I got. But, after reflecting on the information presented at the conference, something hit me.
There were about 1,500 people attending the conference. Many of them were crazy about the battery revolution. Institutions, investment banks, company directors and high-net-wealth investors are hungry for battery plays.
Several company directors at the conference told me they wanted to buy cobalt projects in particular.
My main thought was that they were a bit late to the party!
I believe cobalt is way overhyped. The smart money was in cobalt nine months ago. There are far better ‘Gigastock’ opportunities floating around now.
Why batteries remain a hot topic
I recommended cobalt stocks to Resource Speculator readers when the base metal was trading at roughly US$11.50 per tonne in June. I recommended selling when cobalt was trading at US$25 per tonne in February.
Take a look at the price action below:
Source: Infomine; Resource Speculator
[Click to enlarge]
We sold Barra Resources Ltd [ASX:BAR] for a 138.6% profit at 10.5 cents per share on 27 February. The buy-in price was 4.4 cents on 23 June 2016.
I also tipped another stock that month for a buy-in price of 16.5 cents. We sold part of our holding for a 75.8% gain on 27 February. 25% exposure to the company remains in a HOLD position. The company has a great story, and a big part of it has nothing to do with cobalt. We might buy more stock when the timing looks better — in all likelihood, that’ll be when the cobalt price cools down.
The base metal is surging because of civil unrest in the Democratic Republic of Congo (DRC) — not because of batteries. That may shock you, as the battery story is touted by the mainstream as the main game. That was always going to happen. In fact, we warned that would happen when recommending the sector months ago.
Unfortunately, when the storm starts to calm in the DRC, both cobalt prices and stocks are likely to be in a world of pain. And while that may not happen anytime soon, I believe now is a great time to sell — not buy — your cobalt stocks. There are far better opportunities floating around.
Billionaires know what they are talking about
Billionaire mining magnate Robert Friedland agrees. And with a focus on copper (a major component in electric vehicles), he’s fixated on the big-picture story for electric cars.
Friedland is the founder of Ivanhoe Mines Ltd [TSE:IVN], a CA$4.36-billion-dollar company. He was a last-minute speaker at the conference.
Friedland was in fine form. As one of the conference attendees said over the microphone, ‘Robert, I have seen a lot of your talks and you are hit and miss; but today you certainty turned up.’
I’ve seen Friedland talk on three previous occasions. Every time he presents, he makes my jaw drop. You know those people who are just on another level? Friedland is one of them.
The billionaire is exceptionally bullish on electric cars. He said (and please excuse the language) to us:
‘People made a fortune shovelling shit from horses in 1900. The horse-backed cart was the primary form of transport. Then [Henry] Ford worked out mass production for his motor vehicle, reducing the time to build from 12.5 hours to 93 minutes. By 1913, there were very few horse-backed carts…and fewer people making a living from shovelling shit. Ford revolutionised.’
The world can change quickly…and that’s what Robert Friedland expects for electric cars.
Norway, the Netherlands and Germany want to ban fossil-fuel emitting vehicles by 2025. Governments worldwide are moving towards subsidising charging points. China has declared war on pollution, with Premier Li Keqiang saying, ‘We will make our sky blue again.’ Friedland believes that China will fully deliver on its promise, and notes that the country is transitioning its taxi fleet to run on electricity by 2022.
Tesla’s share price keeps defying the critics
The big-picture story is that electric cars are here to stay. Perhaps that’s why Willem Middelkoop, Managing Director of the Commodity Discovery Fund, explained why the death of big oil is approaching at the conference.
Middelkoop is clearly a wealthy guy. He has owned a Tesla vehicle since 2014, which his wife drives. He said that he’s ‘stuck’ with the BMW.
What a shame!
Interestingly, Middelkoop explained how his Tesla is mainly a computer system. The software updates every morning, and you’re able to check its location and charge using a mobile phone. I’m sure there’s more to it. But what’s interesting is that Tesla Inc. [NASDAQ:TSLA] sold roughly 400,000 Model 3s in less than a week. Meanwhile, the Chevrolet Bolt 238-mile all-electric car isn’t selling well. Despite the fact that the Bolt is one-third the cost of a Tesla 3.
It’s an impressive system, and a lot people agree.
From the Financial Post a fortnight ago (my emphasis added):
‘Tesla Inc surpassed General Motors Co as the most valuable U.S. auto firm, after blowing past Ford.
‘Tesla had a market capitalization of US$52.7 billion compared with $49.6 billion for GM, as investors bet Elon Musk can deliver on ambitious growth targets before his more affordable Model 3 sedan even hits the market.
‘Tesla’s surging shares have boosted its market value to US$47.8 billion, about US$2.7 billion more than Ford.’
It sounds crazy. Tesla sold 76,285 electric cars last year. General Electric and Ford sold around 11–13 million vehicles!
That’s saying something…
Tesla has put EVs on the map as the future for mobility. In 2008, the company was a start-up. Today, it’s a world-leader in research and development. Tesla’s first car cost about US$100,000. It’s now selling cars at around US$35,000. Middelkoop said that research suggests worldwide sales of EVs are set to hit 30 million in 2030. The industry is just getting started.
The EV battery pack cost about US$109,000 in 2007. Prices have dropped by 80% today. And as costs continue to fall, more people are likely to buy EV battery packs. Apparently, the Tesla Model S is already being used as a taxi in Geneva.
The world is moving towards electric-powered vehicles…
Royal Dutch Shell plc [AMS:RDSA] knows this; it has forecasted that oil demand should start to fall in the 2020s, year on year.
That’s good news for our lithium stocks in the short term.
Goldman Sachs calls lithium the fuel of the 21st century, by the way. Our two lithium stocks are about to drill any day now. In my view, if they hit the mother lode, the market will go crazy for these stocks.
Remember, Resource Speculator readers who followed my advice made massive gains with the cobalt stocks I tipped. I truly believe our lithium stocks will provide the next big gains. No one cares about lithium anymore, especially with cobalt taking the spotlight.
That presents an opportunity…one which is closing by the day. To find out more, click here.
For Markets & Money