PODCAST: Global Energy Metals Corp CEO Mitchell Smith on the Cobalt and Lithium Demand Curve
James West: Mitchell, thanks for joining me today.
Mitchell Smith: Thank you very much.
James West: Mitchell, let’s talk a bit about the Global Energy Metals market and in particular, your company’s role in it. What is new? You seem to be doing lots more in cobalt and in lithium.
Mitchell Smith: We are, yeah. Our focus is cobalt-based. We’ve been involved in the cobalt sector for nearly 10 years, and Global Energy Metals is a company that was built to offer investment exposure for the cobalt market. And I think as people have seen, cobalt last year left other metals in its dust, and a lot of that was driven by the demand from the electric automotive industry.
James West: Mm-hmm. Okay, so tell me a bit about your project portfolio.
Mitchell Smith: Sure. We have two projects; the flagship property is an asset called the Millennium Cobalt Project. It’s located in Mount Isa, Queensland, Australia. We are earning a 75 percent interest into the project through project-level expenditures from a group called Hammer Metals. Hammer Metals is a ASX-listed company, they were a 2015 Miner of the Year in Australia, so a very technical, a very capable team for us to be partnering with.
The other project we have is the Werner Lake Cobalt Project. That’s a past-producing mine in Northwestern Ontario. And we recently joined forces with a group called Marquee Resources for them to fund a $2.5 million development into the project spend into Werner Lake, which should prove out to be the resource is there and give a bit better understanding for the potential for that asset as well.
James West: Sure. Okay, so would those two be your primary focuses then?
Mitchell Smith: These are our focuses right now, Millennium being paramount, but part of our strategy is to grow the company through acquisition, so we’re looking at other opportunities. We see Australia as being key to this, especially given its proximity to the Asian markets and given our partnership with one of the world’s leading battery manufacturers, Beijing Easpring Material Technology Company, we see their opportunity to provide future supply to that growing market.
James West: Looking at the Millennium Cobalt Project, you know, the interesting thing about cobalt resources is that you never see big numbers. So I think it’s probably a perception in the market – and this is why I think despite the robust cobalt price, you don’t see traction with investors in any of the cobalt juniors. Now, I look at your resource at the Millennium Cobalt Project, 3.1 million tonnes at 0.14 percent cobalt, and that’s associated with 0.34 percent copper, 0.12 grams per tonne gold, etcetera. So is that typical of cobalt deposits?
Mitchell Smith: Yeah, when you’re looking at some of these primary cobalt projects – and we would consider Millennium to be a primary project because the economics would likely be driven off the cobalt – the assets tend to be a little bit smaller in that sense. Cobalt is generally found as a by-product of copper and nickel projects, so there are much larger tonnage projects out there, huge nickel laterites or big copper deposits, for instance, in the Congo, that have very high grade cobalt associated with them.
But for us, we’re looking at opportunities that we can grow these resources, and we believe that although the resource at Millennium is relatively small at 3.1 million tonnes, there’s room to grow that, and grow that significantly, with the drill campaign that we have underway. And with that resource, something to take notice of is that the cobalt prices used in that resource estimate were significantly lower than what they are with the cobalt prices today. And so that cut-off could come down quite drastically and increase that tonnage right from there.
I think that, coupled with the drilling that’s underway and some of the results that we got back for the last three holes drilled, there’s a real significant opportunity to grow that project significantly over the next few months.
James West: You bet, you bet. So what is your timeline towards, you know, in both of these projects, what’s the timeline to putting them into production in a best-case scenario?
Mitchell Smith: Yeah, we’re still a little bit away from a production decision on either of these projects. That said, we’re going to be very aggressive in advancing both of these projects with our partners. For Millennium, we have a commitment for the earn-in for a $2.5 million spend over the next three years. I think that will bring us to the pre-feasibility level, and in saying that, we’re looking to fast-track that earn-in to the project through the work campaign that’s currently underway and planned for the future.
With Werner Lake, I think the same could be said. Our partner is Marquee; they’re very ambitious and they’re looking to aggressively move forward further understanding this project and coming to a production decision, or at least have some economics that can support that.
James West: Sure. Now, help me understand the cobalt market a bit more. I mean it’s going up, and it’s been doing nothing but going up for a number of years now, and by all estimates the supply and demand future timeline, you know, they just diverge. Supply is going down, demand is going up, the price is responding accordingly, but the juniors get no love. Why is that?
Mitchell Smith: Right. Ha ha. Yeah, and like you said, I mean, the price for cobalt has more than tripled now in the past two years. The global market for cobalt has increased from $4 billion to $8 billion, and it’s continuing to rise.
You know, I think really because cobalt is a by-product of copper and nickel, these higher prices don’t tend to stimulate new supply like other markets would. And so there isn’t necessarily groups that are going out or majors that are going out and looking to build out their projects based on cobalt alone. It’s really a factor of the nickel and copper that’s being produced at those sites.
So this gives an opportunity for the junior market to go out and discover some of these projects and advance some of these cobalt-rich deposits.
Now that being said, primary cobalt projects are unicorns. They are needles in the haystack, they’re very difficult to find, and when they are, they tend to be rather small, like we mentioned before. But I think there’s a need for diversified supply of a cobalt source, and our partners in Asia have voiced this very loud and very clear to us that they want to see diversification outside of the DRC because of some of the supply risks from the country, and you know, with the recent increase in taxes and some of the political risks there, there’s a definite need for diversified supply. That’s really what global energy is looking to accomplish, and is building that portfolio and a pipeline of supply for future cobalt markets.
James West: Sure. Okay, well so then, it sounds to me like, and tell me if you agree or disagree with this statement: that there is an inflection point in the future at which the disparity between the supply of cobalt and the demand for cobalt is going to catalyze a stampede into cobalt juniors that have a credible source of cobalt.
Mitchell Smith: I really hope so. No, you’re right; there is an enormous amount of opportunity, and I think with Global Energy, I would call us undervalued given the quality of assets that we have, the strengths that we have with our team in terms of the knowledge and the decade of experience in the cobalt market, and some of the partnerships that we’ve been able to make into the downstream market, which really sets us apart from a lot of the other juniors that are out there.
James West: You bet. All right, Mitchell, that’s a great update. We’re going to leave it there for now, we’re going to come back to you a little later in the year, see how your drill program is working out. Thank you so much for your time today.
Mitchell Smith: Perfect, thank you very much. Really appreciate it.
James West: My guest today was Mitchell Smith. He’s the President and CEO of Global Energy Metals Corp, trading on the TSX Venture under the symbol GEMC, trading in the United States under the symbol GBLEF, and trading in Frankfurt, Germany under the symbol 5GE1.
If you’d like to learn more about Global Energy Metals, you can visit them online at globalenergymetals.com. If you’d like to hear more podcasts like this, come and see us at midasletter.com or on iTunes under Midas Letter. My name is James West and this here has been another Midas Letter CEO Podcast.
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