Cobalt prices IPO in bid to become biggest London listing in a year

Times

3 days ago

A Glencore-backed cobalt group has priced its $230 million initial public offering at $2.56 a share as it aims to become the biggest stock market listing in London since early last year.
Cobalt Holdings is seeking to capitalise on low prices for the battery metal by stockpiling it in anticipation of a recovery in the long-term, as demand for electric vehicles and energy storage facilities increases.
The group announced its intention to float earlier this month, defying the trading turmoil unleashed by President Trump's tariff chaos.
However, in a prospectus published on Tuesday it acknowledged that intensifying trade tensions between the US and China could affect the pricing and availability of cobalt and potentially have a 'material adverse effect' on its business.
The prospectus confirmed that it intends to sell 90 million new shares priced at $2.56 a share, with unconditional trading to begin on the main market of the London Stock Exchange on June 10.
Cobalt Holdings will then use $200 million of the proceeds to purchase 6,000 tonnes of cobalt at a slight discount to market prices from Glencore, the FTSE 100 commodities miner and trader. Glencore will take a 10 per cent stake in the company and the American investment firm Anchorage is taking a 9.5 per cent stake.
The cobalt will be stockpiled at secure facilities in Belgium, the Netherlands, Singapore and South Korea.
Cobalt Holdings says it offers investors 'pure-play exposure to cobalt … without the direct risks and liabilities associated with cobalt exploration, development or mining operations'.
The price of cobalt has fallen sharply in the past few years, losing about three quarters of its value from a recent peak in 2022 to the start of this year. In response to the supply glut, the Democratic Republic of Congo, which produces three-quarters of the world's cobalt, in February said it was suspending exports for four months. Prices have rallied by about 50 per cent since then but remain at less than half their 2022 high, with the DRC considering an extension of its ban in an attempt to further support prices.
Global cobalt demand stood at about 239,000 tonnes last year while supply was nearer 254,000 tonnes, according to Benchmark Minerals. The surplus is forecast to continue this year and the 6,000 tonnes Cobalt Holdings plans to buy would account for about a third of excess supply volumes.
Jake Greenberg, chief executive of Cobalt Holdings, argues that 'now is an opportune time to purchase cobalt when cobalt is trading below long-term average prices, providing investors with exposure to the cobalt price as the market is expected to turn from oversupply to deficit in the coming years'.
The group says that demand is expected to increase to enable production of high-performance batteries for use in electric vehicles, portable electronics and energy storage systems.
Its prospectus acknowledges that the bet may not pay off, with Trump's tariffs among the risks to demand. The cobalt price could be affected by 'any trade wars between the United States and China or other end users which may include the imposition of tariffs on EVs and consequently reduce the demand for cobalt in EV battery production'.
'In addition, the introduction of any US tariffs on cobalt produced or refined in China could impact the supply of cobalt available to the company and limit any resale market as a result of reduction in demand from the US,' it said.
It noted that some big cobalt producers were stepping up production. 'Although the directors believe that cobalt is currently in oversupply, causing historically low pricing, there is no guarantee that cobalt production will not continue to increase or that global supply levels will not remain high. If supply continues to outpace demand, the market surplus could widen, further reducing cobalt prices,' it said. This could have a 'material adverse effect' on the business.