Junior explorer Talga Resources has decided its Swedish cobalt assets would be better off in a separate company that may eventually be spun out and listed in Europe or Australia.
The move will allow Talga to focus on its graphite and graphene projects and provide the new company, Talga Battery Metals AB, the management and funding it needs to take advantage of the uptick in the cobalt price.
“We are heading to the European Battery Show next week and we’ll be in touch with lots of major automotive and battery customers that we can open the dialogue on the cobalt assets with, strategically and development-wise,” boss Mark Thompson told Stockhead.
“There is the potential for other sorts of things to happen with the assets, but one of the most obvious and the most likely things that the board will decide on is a spin-off that would become listed.
“Whether that would be Australia or Europe, that’s yet to be decided.”
The cobalt price has spiked 300 per cent in the past two years to a peak of $US90,000 a tonne.
This drastic hike has been largely driven by bullish forecasts of strong growth in demand for cobalt from electric vehicle battery manufacturers.
Cobalt is mainly used to make the cathode in lithium-ion batteries.
Telsa boss Elon Musk has said he is phasing out the use of cobalt in his electric car batteries, but several analysts have poured cold water on the idea that this will put a substantial dent in demand.
Demand is still expected to triple between now and 2026, with other electric vehicle makers still wanting nickel-cobalt-manganese batteries.
Talga will consider its potential commercialisation options for the four cobalt projects once the restructure has been completed and further work has been undertaken.
A final decision, however, is not expected until early next year, which Mr Thompson explained is due to the fact the projects are in Europe.
“We have predominantly European assets, 95 per cent of our company’s workforce is in Europe and our major shareholders are in Europe,” he said.
“So you have to look into things like taxation impacts, transfer pricing, capital gains for shareholders in the event of an in specie distribution.
“There’s a bit to study, but this is the first step towards being well prepared to make sure that we take the most effective route.”
Talga had around $12.2 million in cash at the end of the March quarter, which it says will allow it to undertake the restructure, associated assessments and continue to progress its business plans.