TM Editors Note: This article discusses a penny stock/microcap. Such stocks are easily manipulated; do your own careful due diligence.

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Katanga Mining Limited (TSX: KAT) continues to ride the strong upsurge in cobalt prices over the past one-and-half years. While the cobalt price has zoomed nearly three times over the mentioned period reaching almost US$30/lb, the share price of Katanga Mining has skyrocketed five to six times to reach $0.70 a share from about $0.14 on January 4, 2017.

We believe there is more upside potential in Katanga Mining stock as the outlook for the cobalt price is robust on increasing usage in batteries, positive momentum in copper prices, and the possible early start of cobalt production in 4Q17.


Investment Thesis

Operates one of world’s largest copper and cobalt projects

Katanga Mining Limited, through its 75%-owned subsidiary Kamoto Copper Company SA (“KCC”), operates a large-scale copper-cobalt project at the Kamoto/Mashamba East mining complex in the Democratic Republic of Congo. The Company suspended processing of copper and cobalt at the mine on September 11, 2015, and continued through 1Q17. Production at the mine is not expected to resume until the WOL Project is commissioned, expected in Q4 2017. As of December 31, 2016, the project holds the world’s largest reserves of cobalt at 1.3 billion lbs (124.7 MT @0.52 % Co) and high-grade copper reserves of 8.7 million lbs (124.7 @ 3.51% Cu).

…As can be seen in the table [below], KAT’s reserves of 1.295 billion lbs are almost twice that of the second largest cobalt miner Lundin Mining, which has 671 million lbs. Market cap to total resources lbs of Katanga Mining stock is at 0.35X, lower than the producers Lundin Mining and First Quantum. We believe once Katanga Mining starts production in 4Q17 or early 2018, there is a potential for the multiple to go up to 1.0x, translating into significant potential upside in the share price of KAT from the current price of $0.70.

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