As usual
@ozblue you jump so fast to conclusions.
Who in their right mind wouldn't know that the longer-term contracts closely
FOLLOW the
spot prices?
For ANY commodity? You don't even need to be working as a trader at Trafigura to know that! And I have a good mate who works there.
Cobalt
spot prices on the LME
up, the longer-dated
futures also
up. Cobalt spot prices
down, longer-dated
futures down. As to whether or not the current Contango (
Futures > Spot) or Backwardation (
Spot > Futures) for the LME Cobalt price is truly an accurate representation of the supply/demand on the ground would depend on its liquidity and specs, which has thus far not been as adequate and reflective of the current market as the prices on MetalBulletin.
Not to mention the uncertainty of what you are actually buying on LME for Cobalt with the current defined contract specifications. Is it Battery-Grade? Cobalt Sulfate? Cobalt Hydroxide? Is it Low Grade? Standard Grade? High Grade? Broken Cathode? I'll let CEO Anthony Milewski describe the situation for you.
https://twitter.com/A_Milewski/status/1047837424943022080https://twitter.com/A_Milewski/status/1047848176512901120Now, Regardless of whether Cobalt is at $20,000-30,000USD /ton or $50,000-60,000USD /ton, WFE WILL have very profitable margins.
I have already run some preliminary numbers and EVEN assuming Cobalt prices at $30,000USD/ton (highly debatable) for Cobalt and $6500USD/ton for Copper, with purchased ROM feed at $60/ton and an upgraded processing capability of 600,000tpa, I still end up with HALF a BILLION (aud) Market Cap (copper credit inclusive) solely for WFE's share! at a VERY conservative EV/EBITDA of 4x (typically a junior producer may be takeover acquired for 5-10x EV/EBITDA).
At $60,000USD/ton? Even a $BILLION (aud) Market Cap isn't out of the question assuming ROM feed stays the same ($60/ton). I'll post a full valuation once we're able to confirm the pricing matrix for ROM feed.
All these are reflective of the amazingly high grades (minimum of +1% Cobalt & +2.5% Copper) WFE has managed to secure, in highly material (53,000tpm) quantities too to boot!
Tonnage is King.
Grade is Queen. How can WFE be unable to make fantastic profits lest a civil war in the DRC?
Glencore's Katanga operation (the one with
uranium ores anyone?) now processes about 3,000,000tpa with Cobalt grades at ~%0.4. WFE ONLY needs to process 1,500,000tpa at 1% to
equal that. At
1.5% Cobalt grades? Just
1,000,000tpa! 1mtpa at 1.5% Cobalt grade and we'll rival Glencore's Katanga, with Cobalt ore costs inclusive of delivery cleverly hedged to the LME.
If you would've asked me whether we'll be processing even 500k tpa in a year, I would've thought you're dreaming. Now, it appears that we could be processing 600k tpa and eventually perhaps, 1mtpa too! Is it so hard to believe what Jason has accomplished with his team at WFE and connections in the DRC?
At times, one wonders why you keep missing the whole picture?
Or perhaps it is on purpose, that you refuse to see the whole picture? I don't blame you. You once mentioned you've already exited your Cobalt plays so clearly you'll be cherry-picking with a glass half-empty perspective. You'll be subject to confirmation bias. It takes more courage to acknowledge one's shortcomings and what one doesn't know than it is to find great investments. All the best.
