Commodity trader Glencore is backing a cobalt investment company that plans to float in London this spring in what would be a boost to the UK’s struggling listings market, according to people familiar with the matter.
Cobalt Holdings and its cornerstone investor Glencore are betting that demand for the metal, a key component of electric car batteries, will surge in the transition to clean energy.
The company is aiming to raise £180mn in a May listing.
Jake Greenberg’s Cobalt Holdings is modelled on the London-listed investment company Yellow Cake, which buys and holds the physical uranium that is used to make nuclear reactor fuel.
Despite the small amount, the initial public offering is a boost for the UK after fewer than 20 companies listed on the London exchange last year — the lowest number since the 2009 financial crash.
Glencore and Cobalt Holdings declined to comment.
Although a jump in demand for cobalt is widely forecast, a global glut of supply has depressed prices. Cobalt prices have slumped to about $11 per pound from close to $40 in 2022.
Glencore is expected to take a 10 per cent stake in Cobalt Holdings, according to people familiar with the deal. The FTSE 100 group has also agreed to sell about $200mn-worth of its cobalt to the company under a long-term agreement, which would take some metal off the oversupplied market.
Most of Glencore’s cobalt comes from the Democratic Republic of Congo, which in February announced a four-month export ban on the metal in a bid to halt the slide in prices.
“A cut of supply this large will probably lead to a significant price correction in the coming months,” said Fastmarkets analyst Rob Searle.
Cobalt Holdings will operate in a similar way to Yellow Cake and another uranium investment vehicle managed by Sprott Asset Management, a global asset manager focused on precious and critical materials.
“Ultimately you really want to hold physical [metals], if you’re an investor,” said Ryan McIntyre, a Sprott managing partner. “You can trade derivatives all day long but if you need physical you need physical.”
A future shortage of uranium supply “could very well create the exit opportunity” for the company, said McIntyre.
Yellow Cake chief executive Andre Liebenberg said that in a uranium “supply crunch”, buyers might “come to us and ask to borrow our material or make an offer and buy the company”.
In the market for cobalt, analysts said there was a greater risk of “substitution”, in which the battery metal could be replaced by an alternative mineral or designed out of batteries. This could depress demand.
One trader said the DR Congo export ban could backfire, by making the already volatile cobalt market less appealing to carmakers that might consider alternatives for their batteries.
Glencore has held preliminary talks about selling its multibillion-dollar copper and cobalt mines in the DR Congo, the Financial Times reported in February.