Recently, cyclical stocks, represented by coal and non-ferrous metals, have seen a sudden and strong rebound. Can this rebound continue, and what is the investment logic behind it? At the beginning of the month, we pointed out investment opportunities in non-ferrous metal stocks from the perspective of the Kitchin cycle, especially Luoyang Molybdenum, which we discussed with our VIP instructors on Hexun Class. Its stock price has risen from over 4 yuan to 7.5 yuan, providing some relief to our students who had been primarily investing in pharmaceutical stocks.
Luoyang Molybdenum's investment logic stems from its acquisition of the world's second-largest cobalt mine: In June 2017, the company's non-public offering of A-shares was approved by the my country Securities Regulatory Commission. After adjustments, the company planned to issue no more than 5.769 billion shares at a price no lower than RMB 3.12 per share, raising a total of no more than RMB 18 billion to acquire copper and cobalt assets in the Democratic Republic of Congo (DRC) (RMB 8.5 billion). The target of the DRC copper and cobalt asset acquisition project is 100% equity of FMDRC, a subsidiary of FCX, which indirectly holds 56% equity of TFM, located in the DRC. TFM's Tenke Fungurume mine is one of the world's largest and highest-grade copper and cobalt deposits. The acquisition is not contingent on the successful execution of this non-public offering of shares. If the non-public offering fails, the company will still use its own funds to pay the transaction price for the asset acquisition project.
Cobalt is primarily used in the cathode material of ternary lithium-ion batteries, significantly improving their energy density. One might wonder, could a small cathode material, and so-called ternary materials (lithium nickel cobalt manganese oxide Li(NiCoMn)O2), a compound of nickel, lithium, and manganese, be more profitable than Tianqi Lithium, which processes lithium-ion batteries?
This depends on the proportion of cobalt cost in the price of lithium-ion batteries and my country's cobalt reserves and consumption. my country's proven cobalt reserves are approximately 80,000 tons, accounting for 1.8% of the world's proven reserves, and the mines are extremely scattered. my country consumes more than 30% of the world's cobalt. The world's largest cobalt reserves are in the Democratic Republic of Congo, acquired by Luoyang Molybdenum, accounting for 48% of the world's reserves. The DRC processes 60,000 tons of cobalt metal annually, accounting for about 60% of global cobalt production, which is close to my country's total reserves.
What percentage of the cost of lithium-ion batteries does ternary lithium account for? Estimates show that in one ton of lithium cobalt oxide, lithium content is only 0.07 tons, but cobalt content reaches 0.61 tons, more than eight times that of lithium. However, cobalt's abundance in the Earth's crust is only one-sixth that of lithium, and annual cobalt mining output is only half that of lithium mining. Referring to the BYD e5 Comfort model (43kWh capacity, priced at 230,000 yuan), a 40kWh electric vehicle could be priced at 200,000 yuan. Considering that a 30kWh new energy vehicle consumes 7.54kg of cobalt, a 40kWh vehicle would require 10.05kg of cobalt per vehicle. With the current gross profit margin in the new energy vehicle industry at approximately 25%, the estimated cost is around 150,000 yuan. The current battery cost is approximately 1400 yuan/kWh, totaling 56,000 yuan, accounting for 37% of the total cost. Other costs amount to 94,000 yuan. At the end of March this year, cobalt tetroxide was priced at 390,000 yuan per ton, 4.35V lithium cobalt oxide was priced at 415,000 yuan per ton, and ternary materials (523) were priced at 195,000 yuan per ton. Based on this, one can roughly estimate the cost proportion of cobalt in lithium-ion batteries.
