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First Cobalt (Renamed Electra Battery Materials) – 6 Ways to WIN!

First Cobalt Corp. [Electra] (TSX-V: FCC) / (OTCQX: FTSSF) has a number of compelling investment catalysts coming in the next 15 months…

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This article was originally published by Epstein Research.

All $ figures US$ unless indicated otherwise. Co = cobalt, Ni = nickel, Cu = copper, Li = lithium. Note: {First Cobalt Corp. is changing its name to Electra Battery Materials Corp. Going forward I will use “Electra” to refer to the Company.} 

First Cobalt Corp. [Electra] (TSX-V: FCC) / (OTCQX: FTSSF) has a number of compelling investment catalysts coming in the next 15 months. Most important is the ongoing de-risking of its fully-funded Phase 1 expansion of an emerging 100%-owned Battery Materials Park (“BMP”) in northern Ontario. 

The analysis of recycling opportunities to recover/refine cobalt, nickel, lithium, copper (and possibly 1 or 2 other materials) is moving forward as well. In recognition of this notable progress in other areas, FCC is changing its name to Electra Battery Materials Corp. 

Name change to Electra Battery Materials Corp. to reflect multiple metal cash flow streams

In Sunday’s press release management commented,

“The Company has been assessing black mass feed from recycled Li-ion batteries and will be announcing results from test work & engineering studies in coming weeks. 

By month-end, investors should have enough information to begin making rough estimates for Electra’s recycling segment. Li-Cycle, a C$2.8 billion company, stated that it expects EBITDA of ~C$136M in 2023, a margin of 41%, and a 56% EBITDA margin in 2025. Li-Cycle’s Enterprise Value ~20 times its forecast 2023 EBITDA — its [EV/2023e EBITDA = ~20x] 

If Electra could achieve an EBITDA margin of 40% or more by 2023-24, it wouldn’t take that much throughput to generate meaningful EBITDA relative to its pro forma Enterprise Value {market cap + debt – cash} of ~C$286M. Note: {The Company will have ~C$62M in net debt after completion of Phase 1}.

Compared to Li-Cycle’s EV/2023e EBITDA estimate of ~20x, Electra’s EV/2023e EBITDA multiple is much lower at ~5.0x, assuming C$10M of EBITDA from recycling in 2023. 

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CEO Trent Mell reports strong interest from automotive companies and cell makers in the Company’s four-phased growth plan encompassing battery recycling, cobalt, and then nickel refining, followed by Li-ion battery precursor material manufacturing (co-locating with third parties).

In addition to a potential company-making recycling business, developing a BMP around it could take Electra’s valuation to another level. BMPs are popping up all over Asia & Europe as the preferred way for OEMs & battery/cathode/precursor makers to operate in the most efficient & green manner possible. 

Phase 1 plans include transforming clean, ethically-sourced cobalt hydroxide into battery-quality cobalt sulfate at Electra’s 100%-owned refinery that’s being expanded to run at 55 tonnes per day. 

Many Lithium juniors have soared since their lows in July

In the following, > 120 lithium juniors listed in Canada, the U.S. & Australia, the top quartile (30 names) are up an average of 195% from their respective lows of the past four months. The top-10, +264%. By contrast, Electra is up far less, +65%. 

Readers might be wondering what Li juniors have to do with a cobalt/recycling company. It turns out, there’s a lot in common. Most notably, investors in Li juniors are demonstrating high conviction in the idea that Li-ion battery demand will be stronger for longer. 

In the chart below, Li carbonate spot prices in China are at 194,500 yuan, +397% above the low in August 2020, making it one of the best-performing commodities in the world.

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Strong lithium demand can only be good for cobalt. The title of this article says there are SIX ways to win… #1 is by supplying battery-quality cobalt sulfate starting in a little over a year, potentially reaching an annual run-rate of C$45 – $50M in 2023. 

There are dozens of high-flying battery materials, recycling, EV & EV charging companies that are several years from reaching positive EBITDA (if ever!). 

Way to win #2? As Co sulfate production ramps up in 2023, management plans to concurrently be recycling black mass (crushed end-of-life batteries stripped of plastics & casings) + battery scrap (scrap material / rejects from newly manufactured EVs). 

While it’s too soon to know how much EBITDA a recycling segment might deliver, recycling is very important for a number of reasons. It diversifies risk by branching out from just cobalt to generating cash flow from recovered/refined lithium, cobalt, nickel & copper, and possibly manganese + graphite. 

Recycling Li-ion Batteries + OEM/Battery makers’ scrap material could be game-changer 

Recycling contributes to a closed-loop supply chain which is critically important for OEMs & battery material companies. ESG mandates from industry players & institutional investors alike all but demand-supply chains cover these key areas, (minimizing emissions & waste, avoiding excess use of water & chemicals, co-locating facilities, conserving energy, recycling & reclamation). 

Electra has a lot of ESG bases covered, 100% hydroelectric power in Ontario, plans to attract one or more battery materials companies to co-locate next to the Company’s BMP, and (eventually) sourcing some cobalt feedstock from its own operations in Idaho. 

The icing on the ESG cake will be selling its products locally in Canada and regionally into the U.S. 

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In the chart above, ING Research estimates annual demand growth over the next 20 years. I’ve been watching estimates like these for years, ING’s latest work is neither overly conservative nor too aggressive. 

It captures the heart of the situation readers need to understand — demand growth for the key EV metals that Electra will be recycling/refining. Anything north of 10% over a 20-yr period is insanely bullish, for example, a 15% CAGR is a 16.4-fold increase over 20 years. 

NOTE: {this chart is only demanded growth tied to EVs, not for all metal uses}. 

Way to win #3? In addition to Co sulfate production, and end-of-life Li-ion battery + OEM/battery scrap recycling, the Company plans to source regional nickel feedstock for refining into Ni sulfate. I’ve already touched upon the bright prospects for Ni as one of the primary materials coming from recycling circuits. 

Way to win #4? Electra has promising copper & cobalt mineralization in Idaho. The current in-situ value of the Indicated & Inferred resource there is not that large, but management believes it can double the # of pounds from known areas, and possibly make new discoveries in untested or newly acquired zones. 

A tripling or more of the resource size (subject to more drilling and new discoveries), plus increased Cu & Co prices, would make Idaho’s mineral endowment quite meaningful compared to the Company’s Enterprise Value. Readers can look to cobalt/copper peer Jervois Global Ltd. for an idea of what Idaho potentially brings to the table. 

Assuming that Jervois’ Idaho assets are worth 1/3 of the company’s total Enterprise Value, that’s ~C$226M for that company’s Idaho assets alone. Electra’s pro forma enterprise value is ~C$286M, with the vast majority of it tied to its BMP. Investors are ascribing very minimal (if any) value to Electra’s Idaho assets. 

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Way to win #5? A takeout of Electra by a metals commodity trader like Glencore, a diversified miner like Teck Resources, a cobalt player like Umicore, a lithium producer like Livent / Albemarle, or by a number of large battery/cathode/precursor makers. 

Earlier I mentioned there are dozens of companies with multi-billion dollar valuations, yet negative EBITDA for years and years to come. Jumpstarting positive cash flow by a year or two with C$45 – 50M of Electra EBITDA would be worth a lot.

Acquiring cash flow, not just revenue — especially long-term, high-quality cash flow — should be very compelling.

Way to win #6? Electra is in the process of rebranding its mission statement to add recycling & Ni sulphate production in the next 2-3 years and enticing third parties to co-locate battery/cathode/precursor plants next to their BMP. The proposed name change is one part of this effort. 

I’m especially excited about next year’s listing of Electra on the NYSE American or NASDAQ stock exchange. 

Having a full U.S. listing has proven to be incredibly valuable for lithium companies like Lithium Americas & Standard Lithium, uranium company Energy Fuels, copper/coking coal producer Teck Resources, and gold companies Barrick Gold & Pretium Resources. 

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For readers who believe that metals/mining sectors will be strong for most of the 2020s, First Cobalt Corp. [Electra Battery Materials Corp.] (TSX-V: FCC) / (OTCQX: FTSSF) warrants attention. No longer just a cobalt & copper play, now a company with exposure to lithium & nickel (and perhaps graphite & manganese). 

Not an exploration play that will live or die based on drill results, a company with tangible wholly-owned hard assets that will be in production and meaningfully EBITDA+ in 2023. 

Management is moving rapidly, yet prudently, to maximize its role in the paradigm shift to the electrification of transportation, while strictly adhering to increasingly important ESG mandates. 

Disclosures: The content of this article is for information only. Readers understand & agree that nothing contained herein, written by Peter Epstein of Epstein Research [ER], (together, [ER]) about First Cobalt Corp. / Electra, incl. but not limited to, commentary, opinions, views, assumptions, reported facts, calculations, etc. are to be considered implicit or explicit investment advice. Nothing contained herein is a recommendation or solicitation to buy or sell any security. [ER] is not responsible under any circumstances for investment actions taken by the reader. [ER] has never been, and is not currently, a registered or licensed financial advisor or broker/dealer, investment advisor, stockbroker, trader, money manager, compliance or legal officer, and does not perform market-making activities. [ER] is not directly employed by any company, group, organization, party, or person. The shares of First Cobalt Corp. / Electra are highly speculative, not suitable for all investors. Readers understand and agree that investments in small-cap stocks can result in a 100% loss of invested funds. It is assumed and agreed upon by readers that they will consult with their own licensed or registered financial advisors before making investment decisions.

At the time this article was originally posted, Peter Epstein owned shares of First Cobalt Corp. / Electra and the Company was an advertiser on [ER]. 

Readers should consider me biased in my view of the Company. Readers understand and agree that they must conduct their own due diligence above and beyond reading this article. While the author believes he’s diligent in screening out companies that, for any reason, are unattractive investment opportunities, he cannot guarantee that his efforts will (or have been) successful. [ER] is not responsible for any perceived, or actual, errors including, but not limited to, commentary, opinions, views, assumptions, reported facts & financial calculations, or for the completeness of this article or future content. [ER] is not expected or required to subsequently follow or cover events & news, or write about any particular company or topic. [ER] is not an expert in any company, industry sector, or investment topic.

Author: Peter Epstein

Energy & Critical Metals

Metal Plating and Finishing Market -Latest Trends, Demand, Growth, Opportunities & Outlook Till 2028

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Energy & Critical Metals

Nio Has Big Plans for 2022, But the Nio Stock Recovery Might Take Longer

Investors in the Chinese electric vehicle (EV) group Nio (NYSE:NIO) stock have been scratching their heads amidst the year-long decline. On Feb. 10, 2021,…

Investors in the Chinese electric vehicle (EV) group Nio (NYSE:NIO) stock have been scratching their heads amidst the year-long decline. On Feb. 10, 2021, NIO stock hit a peak of $64.60 — a price that is now in the rearview mirror.

Source: Robert Way / Shutterstock.com

Then, Nio shares saw a 52-week low of $27.52 in late December and closed at $29.12 on Jan. 20, down 48% in the last 12 months and 4.5% year-to-date (YTD). By comparison, the S&P Kensho Electric Vehicles Index has dropped 21.6% in the past 52 weeks and 6.8% YTD.

Despite the decline in shares of many EV names, the industry is growing. For instance, new-energy vehicles (NEV) sales in China, the largest EV market in the world, is expected to exceed 5 million units in 2022. And EV sales should comprise over 30% of the nation’s auto market, reaching at least 7 million units, by 2025.

Meanwhile, Chinese authorities are reducing EV subsidies for 2022 and will withdraw them completely in 2023. Moreover, the government has recently removed a long-standing mandate and now allows for “full foreign ownership of passenger car manufacturing” in China.

Puzzled by the extended downtrend, investors of NIO stock wonder what could be in store for the company in 2022. Despite the positive industry outlook, fierce competition and stringent regulations could create further headwinds for NIO. Thus, investors might want to wait on the sidelines for the short-term.

Nio’s Q3 Performance

Founded in 2014, the China-based EV group Nio aims to differentiate itself through its battery swapping solutions, Battery as a Service (BaaS) and Autonomous Driving as a Service (ADaaS).

Management issued Q3 financial results in early November. Revenue soared 116.6% year-over-year (YoY) to 9,805.3 million RMB, or $1.5 billion. Total EV deliveries reached 24,439 vehicles, up 100.2% compared to year-ago quarter.

Net loss attributable to NIO’s ordinary shareholders came in at 2.86 billion RMB (or $443.7 million). It went up by over 140%, mainly due to the increase in operating expenses. Cash and equivalents were 47 billion RMB, or $7.3 billion at quarter end.

On these metrics, CEO William Bin Li said, “Despite the continued supply chain volatilities, our teams and partners are working closely together to secure the supply and production for the fourth quarter of 2021.”

Meanwhile, recent delivery figures point to a record delivery of 25,034 vehicles in Q4, up 44.3% YOY. Total deliveries ended 2021 with 91,429 vehicles, up 109.1% YOY. Nio is expected to report Q4 earnings in late February.

Adding NIO Stock to Portfolios

Among 26 analysts polled, NIO stock has a consensus buy rating. Also, the consensus of 25 analysts for a 12-month median price target stands around $58.43, implying an upside potential of 95% from current levels. The 12-month price estimates for the stock range between $37.74 and $87.64.

Its trailing price-to-book (P/B) and price-to-sales (P/S) ratios stand at 11.9 and 8.5, respectively. By comparison, these metrics for Tesla (NASDAQ:TSLA) are a P/B of 37.8 and a P/S of 24.7.

Put another way, despite the recent decline, NIO shares still look frothy by traditional valuation metrics. The same holds true for TSLA stock as well.

Yet the company gets significant attention due to its growth potential. Thus, despite the ongoing negative market sentiment, investors might want to keep the stock on their radars with a view to buy around $29, or even below.

Meanwhile, interested readers could also consider investing in an exchange-traded fund (ETF) that also holds NIO stock. Examples include the First Trust NASDAQ Clean Edge Green Energy Index Fund (NASDAQ:QCLN), the Invesco PureBeta FTSE Emerging Markets ETF (BATS:PBEE), the KraneShares MSCI China Clean Technology ETF (NYSEARCA:KGRN) or the VanEck Vectors Low Carbon Energy ETF (NYSEARCA:SMOG).

Bottom Line on NIO Stock

Currently, NIO is one of the top-selling EV manufacturers in China. It sells a number of car models including a coupe sports car and three SUV models. Since last September, Nio has been selling its ES8 model in Norway as well. The company plans to expand into five more countries in Europe in 2022 and more than 25 countries worldwide by 2025.

Also, this year management is launching two new models. The luxury sedan ET7, will be available for orders as of Jan. 20. Deliveries are expected to start by late-March. The other new model, the ET5, is a midsize premium smart electric sedan. Deliveries are anticipated to commence in September 2022.

As part of these expansion plans, a second manufacturing plant is being built at NeoPark in Hefei. The facility, which will help meet the growing demand, is expected to become operational around September 2022.

In summary, Nio has a solid product line and offers tangible growth strategies. However, NIO shares could continue to come under pressure in 2022, in part due to tougher competition, higher operational costs and regulatory risks. Given the upcoming tightening moves by the Federal Reserve, investors are also taking money off the table. Therefore, NIO stock could easily continue to slip further below $30. Long-term investors might still need to be patient.

On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.

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DATS Stock Alert: The Latest Acquisition News Sending DatChat Soaring Today

It’s been a busy week for DatChat (NASDAQ:DATS), and it isn’t even over. Yesterday, the alternative social media platform announced it was venturing…

It’s been a busy week for DatChat (NASDAQ:DATS), and it isn’t even over. Yesterday, the alternative social media platform announced it was venturing into the non-fungible token (NFT) security space. Today, it took this mission a step further. DatChat has signed a letter of intent to acquire Avila Security Corporation. This move will mean significantly expanding its holdings in the blockchain and user data security spaces. DATS stock didn’t react well to the news yesterday, but the tides have shifted. Both companies have cause to celebrate today.

Source: Shutterstock

What’s Happening With DATS Stock

Yesterday began with the news of DatChat’s Web 3.0 platform initiative. While this sounded like good news, DATS stock did not initially react to it, slipping into the red. Today’s news has clued Wall Street into the fact that DatChat is making big plans to gain share of a rapidly expanding market. As of this writing, DATS stock is up 23% on the day. It shot up early and hasn’t slipped.

This morning’s gains have pushed DATS into the green by more than 40% for the week and 23% for the month. Investors saw the stock spend the final month of 2021 in decline, falling by as much as 22%. This type of growth should be reassuring.

While the deal is not yet finalized, it includes “$1 million in cash and the greater of 739,650 shares of restricted common stock.”

Why It Matters

These back-to-back announcements make one thing undeniably clear — DatChat is serious about blockchain security. The company made a name for itself by offering secure social media and messaging options. Now it has recognized that its technology can be applied to a new market, one that is ripe with potential. According to a statement released two days ago, the company is focused on building a “decentralized advertising network for Web 3.0 and Metaverse applications.”

The successful acquisition of Avila will expand DatChat’s intellectual property assets to include both blockchain-based digital rights management and object-sharing technology. The move also makes sense for the company’s communications aspect. Avila’s assets also include encrypted WebRTC real-time video and audio-streaming communications. In acquiring this little-known company, DatChat is strengthening both the old and new components of its business.

The markets for enhanced digital security in both communications and digital asset storage is booming. NFT sales are rising, but as they do, so do theft and fraud within the space. Additionally, Web 3.0 and metaverse applications are only going to help drive stock prices up as both markets heat up in 2022. InvestorPlace’s Luke Lango predicts that in 2022, metaverse stocks will see the type of growth that the electric vehicle (EV) sector did in 2021. If DatChat continues this type of progress, it could be among the metaverse stocks that are destined for growth in the year ahead.

What It Means

When a company announces two major deals in the same space within the same week, investors should pay attention. The second deal isn’t finalized, but DatChat has proven it means business when it comes to these digital expansions. It sees multiple red-hot markets, and it is strategically planning ways to secure shares of both.

NFT security, encrypted social media and metaverse technology are going to be three of the hottest sectors in 2022. If you’re bullish on any, or all three, DATS stock should be on your radar.

On the publication date, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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