There is a huge cohort of supply tied up in JV with Gecamines, that includes companies like Huayou.
Gecamines is going to be shortly releasing the results of audits conducted on its joint ventures.
It will then use these results and pursue joint venture contract renegotiations.
Both the partners and Gecamines will without a doubt play hard ball and potentially this will lead to taking it all the way to halting production and international arbitration - there is no doubt this will occur in some cases.
Copper market will be fine. But for every 1ktpa of Cobalt production tied up in dispute the significance for cobalt price is huge, as in - the cobalt price can go higher, faster.
Along with a higher cobalt price there will be a massive premium for near term production assets with no Gecamines part ownership, that is Nzuri.
So higher earnings potential and bigger control premium.
Huayou is in a JV with Gecamines was due to commence expanded production in early 2018, which I believe Huayou is now considering buying Gecamines out to remove the uncertainty.
Obviously the other pressures - reducing dependence on artisanal ore and the need to secure feedstock for growth, are also in play. Huayou are definitely feeling the artisanal pressure, the CBS news story that was circulated was immediately responded to.
Remember at 40kT of contained cobalt, with an SXEW I believe NZC could produce roughly 4-5ktpa of Cobalt Hydroxide, or equivalent to 20% of Huayou current feedstock use, for at least 10 years.
It is great that despite the fact that we are situated in a risky jurisdiction, we have something that very valuable companies who have no choice but to operate in this jurisdiction, require. And if we are not satisfied with a deal or offer they give us, we can just go ahead and build our cheap DMS concentrator.
NZC Price at posting:
35.5¢ Sentiment: Buy Disclosure: Held
