Cruz Cobalt Corp. (TSXV:CUZ) has acquired a suite of cobalt assets across North America and expects to begin drilling in the first half of 2018
SmallCapPower | March 7, 2018: Cruz Cobalt Corp. (TSXV:CUZ) is an exploration-stage company focused on cobalt. Over the past year, Cruz Cobalt has acquired a suite of cobalt assets across North America and currently holds nine assets, comprising of five in Ontario, two in British Columbia, one in Idaho and one in Montana. Cruz Cobalt has identified several targets and expects to begin drilling in the first half of 2018.
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Despite surging more than 50% over the past three months, Cruz Cobalt stock trades at a market capitalization of $29 million, in line with other pure-play cobalt exploration peers such as Quantum Cobalt Corp. (CSE:QBOT) and US Cobalt Inc. (TSXV:USCO) – all of which are yet to report resource and reserve estimates.
Investment thesis
- Significant cobalt assets across North America
- Growing cobalt demand
Significant cobalt assets across North America
Cruz Cobalt holds cobalt assets across North America and continues to increase its land acreage at these assets. Key recent additions to acreage include 11,150 acres at the Purcell Cobalt Prospect located in BC in January 2018, and 10,556 acres contiguous to the Lorraine prospect located Ontario in February 2018. Cruz’s five separate Ontario cobalt prospects (Coleman-1,265 acres, Johnson-900 acres, Hector- 4,980 acres, Bucke-1,580 acres and Lorraine-10,556 acres) are located within the Cobalt district of Ontario, making Cruz Cobalt one of the single largest landholders in the region. 
Electric vehicles driving cobalt demand; price hits multi-year highs
A crucial metal for manufacturing high energy density lithium-ion batteries, global demand for cobalt is expected to surge on growing demand for electric vehicles, presenting a lucrative opportunity for Cruz Cobalt. According to Benchmark Mineral Intelligence, battery demand for cobalt is forecast to reach 76,000 tonnes by 2020 from 46,000 tonnes in 2016. Additionally, as reported by Darton Commodities, total cobalt demand is forecasted to exceed 120,000 tonnes per annum by 2020, up 30% from the 93,950 tonnes consumed in 2016. Darton expects cobalt demand will continue to be dominated by lithium-ion batteries, with consumption projected to reach 62% by 2020 from 51% in 2016.
Rechargeable batteries to account for 62% of total cobalt consumption by 2020
According to Bloomberg New Energy Finance, currently only ~10% of cobalt is consumed in electric vehicles, but the boom in electric cars is expected to more than quadruple demand for cobalt to 450,000 tonnes by 2030, from less than 100,000 tonnes in 2017.
Cobalt prices at multi-year highs. Driven by strong demand for electric vehicles, as well as supply shortages, cobalt prices have steadily increased over the past two years, currently trading near a nine-year high at ~US$36/lb. This bodes well for the economics of cobalt miners and explorers such as Cruz Cobalt.
Outlook and valuation
Despite surging more than 50% over the past three months, Cruz Cobalt stock trades at a market capitalization of just $29 million, in line with other pure play cobalt explorers such as Quantum Cobalt Corp. and US Cobalt Inc. – all of which are yet to report resource estimates.
As Cruz Cobalt starts drilling and continues to de-risk its cobalt assets, the valuation of Cruz Cobalt’s stock could rise. As at Q1 2018 ending October 31, 2017, Cruz Cobalt spent a total of $233K in exploration expenditures on the Ontario Cobalt Prospects and expects to commence a drill program in the first half of 2018.
Disclosure: Neither the author nor his family own shares in the company mentioned above.
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