Red Rock Resources (LON: RRR) looks to be perfectly positioned at the moment when it comes to the electric vehicle revolution. This is particularly the case for its interests in the DRC, origin of more than half of the world’s cobalt.

In an interview with ValueTheMarkets, chair and chief executive Andrew Bell highlighted the excellent combination of Red Rock’s copper/cobalt joint ventures amid the push for electrification.

Red Rock has a controlling position in its projects, which cover potentially four copper/cobalt licences and one copper licence in the heart of the Katanga provinces, located within the Central African Copperbelt.

Around 60% of the globe’s cobalt resources come from the DRC. Not only that, but, as Bell explained, “50% of that cobalt comes from the areas around Kolwezi, including where we have one project”.

In terms of cobalt reserves by country, the DRC had 3.6 million metric tons as of 2020. Meanwhile, there is an estimated $24 trillion worth of cobalt, copper, gold, diamonds, and other mineral deposits untapped in the country, making it one of the world’s most in-demand mining destinations.

Specifically, the global electrification trend that is currently playing out is reliant heavily on both cobalt and copper.  

Indeed, right now, around 50% of cobalt produced worldwide ends up in rechargeable batteries, and when it comes to the total battery metals market, cobalt has the second-biggest volume share.

Meanwhile, copper is another major electric vehicle (“EV”) component used in electric motors, batteries, and wiring. The red metal is also used for EV charging stations, part of the infrastructure needed to make electrification possible.

This is all great news for Red Rock and its investors, because the JVs target both cobalt and copper. As Bell explained:

“The argument for copper is really good already. The argument for copper including electric cars is even better. Copper and cobalt are often found together, as in the parts of the DRC where we're exploring.”

Bell also pointed out the “government pressure” that is helping to push electrification forward. He highlighted that “a lot of money” is going into driving the change.

“Humans are so innovative that people will find cheaper and cheaper car batteries and this market will expand,” he added.

Evidence of this direction of travel is playing out everywhere.

For example, Norway is poised to ban the sale of fossil fuel-powered cars within just four years. The UK is to follow suit with a ban in 2030 and Japan in the mid-2030s. The EU is also proposing a crackdown in order to hit its legally-binding 2050 zero emissions target while China, too, is considering its own ban.

Likewise, over in the US, California intends a halt the sale of passenger cars and trucks that use gasoline by 2035. 

This will sit alongside broader US measures under the Biden administration’s American Jobs Plan. These include sales rebates and tax incentives to encourage the purchase of EVs. Further, the plan will also involve the creation of a network of 500,000 EV chargers by 2030.

Moving back to the JVs, and Bell said Red Rock is right now conducting exploration on one licence, which will involve drilling. “We have taken a greenfield project from zero to high expectations of an imminent resource with careful, economical, systematic, intelligent exploration,” he added

Bell also said the company was also “negotiating with other parties about assets that contain resources”. 

Alongside its position in the DRC, Red Rock also owns 25 million shares in its London-peer Power Metal Resources (LON: POW) along with a further 20 million warrants.

Power Metals is also exploring for key metals needed to fuel the EV revolution – including nickel, copper, lithium, and cobalt. As a result, Red Rock’s position adds further diversified exposure to the electrification trend and another string to its already-well-crafted bow.

With all of this combined Red Rock is perfectly positioned right now to capitalise on the EV revolution. It has electrification exposure just as the sector is booming, both regulation and incentives in place to encourage huge growth in the EV space.

On top of that, Red Rock also has gold exposure at a time when prices of the yellow metal are on the rise. While there was some premature optimism at the start of 2021, which led a few investors away from safe havens, reality has set in again. A resurgence of Covid-19 outbreaks, like one right now in India, remain a threat and make gold all the more enticing.

It is also worth considering the firm’s c.1% ownership of Jupiter Mines (ASX:JMS), a manganese producer in South Africa and a significant part of Red Rock’s investment portfolio since 2007. In the past two years, Jupiter has made a number of distributions totalling more than $200 million.

Red Rock is in the perfect position, with plenty of catalysts waiting in the wings that could trigger a significant re-rate from its current £10.2 million market cap. The Congo JVs alone stands to benefit not only from any strong drill results and production in the DRC, but also increasing demand from the EV space keeping prices high.

Author: Anna Farley

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