Cobalt Holdings is set to launch its IPO on June 5, backed by Glencore. The company eyes $230 million in fundraising, amidst a significant oversupply in the cobalt market. With Glencore as a cornerstone investor, Cobalt Holdings anticipates growth driven by rising battery demand, albeit with potential risks from technology shifts and political changes in supply-dependent countries.

Cobalt Holdings, prepared and backed by mining giant Glencore, is set to begin trading on the London stock market tomorrow, June 5th. This initial public offering (IPO) is significant as it aims to match the success seen by other company floats, like Yellow Cake Ordinary Shares, valued at around £1 billion. The company plans to raise approximately $230 million, that’s about £170 million, marking the largest flotation in London this year and the biggest for the mining sector since 2018.

The IPO will kick off with conditional trading at an initial price of $2.56, with full trading expected to begin next Tuesday. Of the total 90 million new shares, some are reserved for retail investors, alongside institutional backers. Glencore, a major player in the market, has not only invested but has also entered a supply agreement allowing Cobalt Holdings to purchase $200 million worth of cobalt metal in its first year, followed by another $160 million each year over the next five years, amassing a potential total of up to $1 billion.

Cobalt Holdings is strategically positioned as battery demand drives a significant portion of global cobalt consumption—around 75%. Cobalt also has applications beyond batteries, including in turbine generators and various aerospace and defense technologies, noted for their reliance on this high-temperature and corrosion-resistant element. Interestingly, the current oversupply in the cobalt market presents an opportunity for the company to buy at prices below the long-term average.

Currently, cobalt prices hover around $34,000 per tonne, significantly lower than the peak of $85,000 reached in 2008, with some forecasts suggesting a rise to about $56,000 per tonne by 2034. The firm is capitalizing on this moment, asserting that demand has already doubled from 2015 to 2024 and is expected to see further growth of over 54% from 2024 to 2031, especially with new export restrictions recently imposed by the Democratic Republic of Congo (DRC), affecting supply.

Jake Greenberg, the CEO of Cobalt Holdings, expressed confidence in the company’s position: “We anticipate that supply and demand will come back into balance over the coming years and will create the necessary conditions to incentivize investment in new mines and refining capacity in the West,” emphasizing the broader need for an energy transition.

Given his previous experience with Yellow Cake, Greenberg has reason to be optimistic. Yellow Cake had a tremendous success trajectory after its IPO. However, the Cobalt flotation does come with risks, such as the emergence of alternative battery technologies that might not rely on cobalt and political factors that might impact supply chains from nations like the DRC. It’s clear investors should weigh their decisions carefully before diving in.

This article is intended for informational purposes only and does not constitute investment advice.

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