How Does the Hottest Metals Trade Work? First, Find Storage – by Mark Burton (Bloomberg News – January 24, 2017)

Pala Investments Ltd. fund manager Anthony Milewski figures one of the best payoffs from a global boom in electric vehicles will be a hard, gray metal that so far has drawn little interest from investors. That’s why he’s stockpiling it.

During the past year, the Switzerland-based mining fund has been buying cobalt, an essential element in the lithium-ion batteries powering Tesla Motors Inc. cars as well as all sorts of mobile devices. Even after a 50 percent surge in prices last year, Milewski and other bulls expect more gains as companies like General Motors Co. and Volkswagen AG make their own electronic vehicles.

But cobalt investing isn’t all that simple. There’s very little trading in futures contracts offered by the London Metal Exchange, which can mean increased volatility risk.

A handful of penny-stock companies like Fortune Minerals Ltd. are developing cobalt projects, though most won’t start producing for years. And for mining giants including Glencore Plc and Vale SA, the metal remains just a small byproduct of bigger copper and nickel operations.

“By buying physical stock, you actually own the metal that’s going into the batteries,” Milewski, a Pala managing director, said by telephone from Zug, Switzerland. “It’s a much more attractive option, and we’re not the only fund out there doing this.” He declined to disclose how much he’s accumulated.

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