When combined with iron or nickel, it is used to create corrosion- and wear-resistant, high-strength products. It’s also contained in both lithium and nickel rechargeable batteries.
That means a lot of demand now and into the future. But right now, hardly anybody’s mining it. See, as the economic crisis wormed its way into industries across the globe, demand for cobalt softened. One year ago, cobalt was priced over $50. Today it’s priced at around $16.
Notes can reveal that one tiny company holds the key to the U.S. supply of cobalt. And it just got final clearance to break ground on one of the biggest moneymaking mines the U.S. seen in decades. The supply shortage could launch this penny stock to $10… $12… even $18 by November 20, 2009.

The price of fuel now makes up 35 percent of airline costs compared with 13 percent a decade ago. Capital and Crisis editor Chris Mayer says if oil prices stay where they are and nothing else changes, the airline industry will lose about $6 billion this year, compared with a profit of $5.6 billion last year.

This creates a great ‘hidden’ opportunity for investors. More fuel-efficient engines will require the use of exotic metals that can cope with higher-then-normal engine temperatures – metals like cobalt…

The industry is trying – and will try – lots of different tactics to fend off elimination. One of these is to push for more fuel-efficient aircraft. And that is the opportunity for investors to cash in on this crisis.

It starts with the jet engine. Recently, the Wall Street Journal published “Jet Engine Makers Launch New War” – all about the drive for new fuel-efficient engines. The piece notes that airlines worldwide want to replace their existing fleets with next-generation planes, not the current oil-guzzling models. The goal of the jet engine makers – or rather, the mandate put to them by their customers – is to deliver at least double-digit gains in fuel-efficiency.

As the WSJ reports: “Developing fuel-efficient engines requires the use of exotic alloys and ceramic coatings that can cope with internal engine temperatures that would be above the melting points of untreated metal components.”

Enter cobalt. It’s a tough metal with a high melting point of 2,700 degrees Fahrenheit. This higher melting point allows it to maintain its strength at higher temperatures than other metals can. Cobalt alloys have higher melting points than either nickel or iron alloys.

As a result, one of the main uses of cobalt is in superalloys such as those that jet engine makers need. In fact, the making of superalloys consumed about a quarter of global cobalt production, of which about 75 percent wound up in aircraft.

Cobalt would seem to have a nice backdrop of long-term demand. But it doesn’t stop there. Defense spending is also on the rise globally. A Financial Times report on aerospace notes that India, China, Brazil and certain Middle Eastern countries are all upping their defense spending. India alone may spend $40 billion in 2009.

Cobalt is an important part of all that, too. In fact, the U.S. and the Soviet Union used to stockpile cobalt for defense purposes. Those stockpiles are long gone, but the role cobalt plays in defense still exists.

As exciting as the aerospace angle is, a potentially bigger market could be batteries for hybrid cars. As I pointed out in the last issue, there are 5-10 pounds of cobalt in a typical hybrid car battery. Hybrid car sales will probably hit 500,000 cars this year. And that is growing rapidly.

Kitco recently noted that cobalt holds an electric charge better than almost any other metal. That makes it hard to replace, even at $50 per pound. “And the current electric batteries work so well,” Kitco notes, “[that] there is little incentive to change their structure (and other metal prices have skyrocketed, as well as cobalt — nothing is cheap anymore).”

With the failure of banks and the troubles of big financials such as Fannie Mae (NYSE:FNM), cobalt seems a nice place to be. A while ago, I recommended a “cobalt play” to the readers of my investment service, Mayer’s Special Situations. The name of the stock is OM Group (NYSE:OMG). I should warn you that the stock is a bit speculative. But let me share a few of the particulars…

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OMG carries a seemingly absurd valuation. It’s not often that you find profitable and growing companies with no net debt trading for big discounts to book value. The specialty chemical industry – a tribe to which OMG belongs – is undergoing heavy consolidation. Companies are getting bought out left and right. Dow Chemical (NYSE:DOW) bought Rohm and Haas (NYSE:ROH) for a 74 percent premium. And then Ashland (NYSE:ASH) came along and bought Hercules (NYSE:HPC) for a 38 percent premium.

Companies that make low-margin chemicals are looking to beef up on companies that make high-margin, or specialty, chemicals. Because OMG is cheap and very profitable, it has to be on someone’s radar. I hope that it doesn’t get bought out. I think we’ll do better holding the stock. But the deal-happy scene in the chemical business is another potential backstop of value here.

Hard to believe that anyone could buy all of OMG for anything less than at least book – which is $36 per share. And even that would bring howls of protest. After all, the stock was in the $50s for much of the past year. We will see.

In any event, let’s bring this back around to the aviation crisis. A familiar theme in the pages of my letters over the years has been this Templetonian notion of focusing on the opportunities that problems present. The late great John Templeton made this idea a key component of his investment — and life – philosophy.

The high price of oil is a big problem for many industries.

So if you have a good way to mitigate the high price of oil, you have a business. I think the big winners over the next few years are going to be those companies that have a solution to the high price of oil. Those companies have products that other people will pay up for, because fuel-efficiency is a must. The aerospace industry must become more fuel-efficient.

Cobalt alloys will be a big part of that trend.

Source: Fuel Friendly Skies

Recently I’ve been telling my readers about an incredible deal that had just been signed between China and the Democratic Republic of the Congo. For those of you who are new… I’ll give you a quick reminder…

Congo is one of the most mineral-rich places on earth. Africa’s biggest country is said to hold just about every mineral know to man – gold, copper, diamonds, uranium…

In April this year the Chinese sealed an agreement with the Congo government that is going to see China invest $9 billion dollars in reviving Congo’s war-ravaged infrastructure and mines.

In return they will get access to the African giant’s vast mineral wealth. About $3 billion of that is going to be invested in reviving the mines. But a massive $6 billion is going to be spent on building desperately needed infrastructure. China is going to build about 2,400 miles of new roads, 2,000 miles of railway, 32 hospitals, 145 health centres and two universities.

There are only about 3000 miles of roads in the whole Congo at the moment. So the impact on the country is going to be huge…

In return, China is going to get access to some 10.62 million tonnes of copper and 620,000 tonnes of cobalt. That could add-up to more than $42 billion in profit for the Chinese in the coming years.

The sheer size of the deal has completely blown away China’s rivals. Western mining companies and governments have been left reeling as China appears to have locked-up some of the most valuable mineral deposits in the world. And they aren’t very happy…

What are the Chinese up to?

Last week, Hong Kong’s respected South China Morning Post newspaper, carried an article on the deal. I’m going to quote it at length here, because I think it’s an excellent window into how the Chinese actually view their move into Africa:

“Poor Congo! It can never get a break from meddling westerners. But what can it expect, since it is doing a multibillion-dollar deal with China.”

“Worse, this deal, estimated to be worth US$9.25 billion, involves valuable natural resources and will entrench China, for years, in the affairs of a key African country as big as Western Europe. And, as with many similar massive investment schemes across the continent, it is pitting China investors against western institutional lending and aid bureaucrats and mining companies.”

True enough. And the simple fact is that most western companies just aren’t going to have the resources to go head-to-head with the Chinese government in the scramble for Africa. One of our current plays has done just the opposite. It’s providing the infrastructure and support-services that are going to be necessary for the multinationals and Chinese state-owned giants to get their loot out of Africa… find out more about this play here…

The article goes on…
“Sure, there is no guarantee China will deliver. But even if they deliver just half of what they promise, it will benefit the country enormously, which hitherto has been more newsworthy in the west for civil wars and exotic diseases like Ebola.”

“China is taking on enormous risks with the deal. The tonnes of resources sound good on paper, but some of Congo’s mines and concessions are underdeveloped and dangerous to operate; others remain to be explored and developed. The technical and operational challenges are great.

“No western government or corporation would commit so much capital resources in a single enterprise because, as one analyst said of western investments in the continent in general, they mistake their own ignorance and prejudice for risk assessment.

“So, here is a potentially good deal for Congo, and the International Monetary Fund is unhappy. Likewise some western mining companies, which signed dozens of contracts with the country during the last civil war. The chickens are coming home to roost for the companies in the latest sorry attempt at exploitation by the west.”

What he means by that is that many of the small mining exploration companies that entered the country during the Civil War in late 1990’s are now seeing their contracts being cancelled. A lot of these contracts were one-sided deals which left the Congo government holding the short end of the stick. With the support of their powerful new Asian friend, these small American and European companies are now being forced out. And here’s the Post’s rhetorical flourish at the end:

“China is offering real economic growth and opportunity to sub-Saharan Africa, something the west has never done. Poor countries need all the help they can get, from whatever sources they choose.”

The ONE company that can beat the Chinese at their own game…

Why am I revisiting the Congo today? Because when I first wrote about China’s investment deal with the country early last month, I mentioned that we were looking at several investment opportunities in that country…

And we have found one. In fact, if I’m right about it, it’s going to offer the sort of profits that make China’s deal with the Congo look small…

You see, earlier this year, a group of shadowy tycoons who operate in Africa struck a deal that gives them access to the Congo’s richest mines…the sort of thing that the Chinese can only dream about. They’ve got all the right connections and they’ve got the cash to pull it off. And our latest recommendation is going to put you right in the thick of it.

Source: Secret Deals, Africa’s Richest Mines

What if I told you I could show you a place where resources were plentiful, labour is cheap, foreign money flows like water… and the investment potential is limitless?

And what if I then told you it was in Africa?

Imagine the scene…

Two figures are walking along a dusty bush trail deep in the Congo interior. The man in front wears a broad-rimmed sun hat and bush jacket… the deferential African porter trudges along behind him, laden down with exploration equipment. It could be scene from a Conrad or Somerset Maugham story…

They stop and the man in the hat seats himself down on a rock beside the trail. His servant pulls out a thermos flask and pours him a cup of tea. No sugar or milk, of course… they don’t go very well with green tea

The year isn’t 1908… it’s 2008.

And the man in the straw hat isn’t a Dr. Livingstone or Mr. Kurtz, he’s Mr. Chen… an engineer from Guandong province in China… and he is here on a very important mission. He is here to help secure the mineral wealth that China needs in order to feed its vast industrial complex.

Mr. Chen is part of the advance guard of Chinese engineers, surveyors and miners who will soon be descending on the Congo as part of China’s biggest deal on the continent so far.

Here comes the Dragon

You see, the Chinese have now reached an agreement with the Democratic Republic of Congo where China will invest $9 billion dollars in reviving the country’s war-ravaged infrastructure and mines. In return they will get access to the African giant’s vast mineral wealth. A massive $6 billion of that is going to be spent on desperately needed infrastructure. The impact on the country is going to be huge…about 2,400 miles of new roads, 2,000 miles of railway, 32 hospitals, 145 health centres and two universities.

The Chinese aren’t doing any of this out of the goodness of their hearts though. In return for all that investment, they will get access to a slice of the Congo’s mineral wealth. Well, actually, calling it a slice is a bit of an understatement. They will get access to up to 10 million tonnes of copper and 400,000 tonnes of cobalt. To put that in perspective, China could make a profit of up to $42 billion on the deal. And that’s after Even after the $9 billion they will have to spend.

Congo is set for take-off

Congo ’s economy grew by about 6.5% last year and could grow by 8.4% this year. If the mining and infrastructure spending takes-off as planned, the country might hit double-digit growth by 2010-11. They have got the resources for it. Congo produced about 500,000 tonnes of copper in 1989 – that was down to just 23,030 tonnes last year. The Congo government had a budget of just so $1.3 billion last year. So, China’s investment is going to give this economy a shot in the arm. The Congo looks set for take-off. In fact, it’s receiving so much investment into its mining industry that it is beginning to look like the new Canada.

How to profit from it

We are already positioned to profit from what’s happening in the Congo through our investment in a certain pan-African conglomerate. This company is setting up a hotel in a mining boomtown – right in the heart of Katanga province, where the bulk of the Congo’s mineral wealth is located. And they’ve got a water bottling plant close by as well – both vital support for the region’s booming mining industry.

The growth story here is so exciting that we are just putting the final touches to an in-depth investment report showing you how you could win big in the region. We’ll be issuing this report to all our regular readers as soon as possible.

“It’s the economy, stupid.”

And it was economic worries that were on the minds of most voters who entered the polling booths yesterday. Those on low-incomes had recently been hit by the scrapping of the 10p tax rate. Those better off have the memories of Brown’s stealth taxes. And, of course, the ever-present credit crunch is making all of us nervous.

Where now for Gordon Brown? If he leads Labour into the next general election, Labour will lose. That certainly seems to be the opinion of many in Brown’s own party.

Call me a conspiracy theorist, but I reckon Labour backbenchers deliberately bided their time on the 10p tax issue. Brown announced it last year in his final Budget as Chancellor. But it was only once it came into force — conveniently one month before elections — that the rebels kicked up a stink.

Few MPs in marginal seats are looking forward to fighting an election under the Flag of Gordon. They know that the struggling economy will give opposition parties some priceless ammunition over the next couple of years. Brown can’t really duck those bullets — he was Chancellor for ten years.

Expect further dissention in the Labour ranks. In fact, the only people who stand to benefit from Brown’s continued premiership are the Conservatives. If they’re clever they’ll keep the pressure on Brown moderate enough that he stays on.

But if he wants his party to stand a chance of retaining power, he won’t. The only reason he might stick around is if he’s extremely stubborn.

Oh.

Who will build those 3 million houses?

The Government has grand plans to build 3 million new homes by 2020. Trouble is, who’s going to build them? And if anyone does want to, will they be allowed to?

Today we read that private housing orders during the first quarter of the year were 29% down on those in the same period last year. The construction industry, as everybody knows, is in a slump. Homebuilders are building fewer houses.

I’ve said this before about mortgage lenders, but the same applies to homebuilders: private businesses make decisions based on what’s best for them. Not to hit some government target.

This is how it should be, of course. This is capitalism.

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So at some point this policy will probably be quietly ditched. But as I’ve noted above, Gordon Brown may not be at the steering wheel for that particular U-turn.

What went wrong with Exxon?

On Tuesday Garry White wrote about the “earnings surprise” gravy train. Oil analysts are consistently underestimating the oil price, which means they also underestimate oil company profits.

This has created a great investment opportunity.

But yesterday ExxonMobil announced that its profits had missed consensus. That is to say, they were less than analysts expected.

So does that mean Garry was wrong?

“No,” says the man himself. “This says more about Exxon as a company than it does about the sector. This gravy train is still on the rails, my friend. Choo choo!”

Find out why a defiant Garry says: “There’s nothing wrong with my assessment!”

China’s next big investment…

As we all know, China’s growing rapidly. But to achieve this, it needs raw materials.

And where better to get them than mineral-rich Africa?

“This deal will net the Chinese up to 10 million tonnes of copper, and 400,000 tonnes of cobalt,” says an excited Manraaj Singh. “Not to mention how much it could make investors who get in now!”

Find out where Manraaj believes the next multi-billion dollar Chinese investment bomb is about to land…