New fund aims to invest in the metals that will power our world
London — An investment firm founded by Russian billionaire Vladimir Iorich is following its winning bet on cobalt in 2017 by creating a $150m fund to buy into metals used in electric cars.
Pala New Energy Metals will invest in cobalt, lithium, vanadium, rare earths, nickel and tin. Pala Investments started the fund with its own money and cash from other investors. The firm previously snapped up cobalt, anticipating surging demand from vehicle makers, which more than doubled prices in the past year.
"We have been focused on the evolution of the battery chemistries and this has allowed us to invest early in different components of the battery," Stephen Gill, managing partner at Swiss-based Pala Investments, said in an interview. "We hope to continue to be ahead of the curve as technologies evolve."
The company was among investors to buy up physical cobalt before selling it for cash and shares in Cobalt 27 Capital, which was listed in Canada in 2017 to offer equity investors a way to take a stake in the market. In June, Pala said it swapped 626 tonnes of cobalt for shares in Cobalt 27, making it the largest shareholder with 19.5%.
In total, the Toronto-listed firm, run by Pala MD Anthony Milewski, bought 2,158.6 tonnes of cobalt for cash and shares, or about 2.5% of annual global demand. Spot prices have jumped almost 120% in the past year to $57,500 a tonne.
Pala is betting that demand for specific base metals will surge in coming years as more and larger batteries are built. Supply of metals such as cobalt would not be "sufficient to meet projected needs over the next decade", Gill said.
Cobalt is essential for lithium-ion batteries powering anything from Tesla cars to Apple iPhones and iPads. Heath Jansen, a mining analyst at Citigroup, recently called cobalt a "wonder metal" riding the boom in electric vehicles. The metal, mined in places such as the Democratic Republic of the Congo, is more efficient than the minerals used in earlier-generation batteries.
Pala may invest through debt and equity stakes in mining projects or buy and store physical metal to benefit from rising prices.
Plans to hoard base metals, including a scheme promoted by JPMorgan Chase for copper in 2012, have previously prompted concerns among consumers that prices would be pushed artificially high. The cobalt market was mired in surplus for years after the global financial crisis before battery demand tightened the market.
Pala is looking beyond its early focus on cobalt, with battery technology starting to shift towards other metals. "What’s cobalt today may also be nickel tomorrow," Gill said.