Buying shares in a cobalt junior is not really a bet on cobalt. It is a bet on a small group of people, working in a specific place, with a limited amount of cash and a plan that has to survive geology, permitting, metallurgy and politics before a single tonne of saleable product ever leaves site. The metal price matters, but it rarely decides who makes money and who does not.

Most of the work of avoiding a dud happens before you open a price chart. Run through the checklist below in order, and you will know within an hour whether a company deserves more of your time.

Start with the jurisdiction, not the drill results

Ask where the ground is before you ask what is under it. Two projects with identical grades can have wildly different odds depending on the mining code, the permitting timetable and the distance to a working port. In the Democratic Republic of Congo, which hosts the bulk of the world's mined cobalt, the practical questions quickly become roads, grid power, sulphuric acid supply and how the company's chain of custody would stand up to the due diligence expectations of smelters and exchanges. In Canada, Australia or Finland the same questions apply in a different form: permitting timelines, Indigenous or Sámi consultation, water rights, and whether a mine can actually be built at the grade being reported.

Then read the fiscal terms. Royalty rates, export levies and local ownership rules move the economics far more than a small change in the cobalt price. Where a government has revised its mining code once, assume it can do so again, and ask how much of the project's value depends on terms that could be rewritten.

Management: who has actually built a mine?

Promoters can talk about a project. Operators can talk about what went wrong on the last one. Look for people who have taken a deposit through feasibility, financing, construction and commissioning, and who are still in the industry with their reputation intact. Ask what happened to their previous company. A receivership is not automatically disqualifying, but silence about it usually is.

Pay attention to ownership. Directors holding meaningful equity are aligned with you; directors holding options and a consulting contract are aligned with the next financing. Check whether the board has independent members with technical or operating backgrounds, or whether it is largely composed of friends of the chief executive. Watch for turnover on the technical side too, because a steady trickle of resignations from geologists and engineers tells you something a press release never will.

Cash, burn and the dilution treadmill

Take the most recent cash and short-term investments figure. Subtract money already committed: drill contracts, option payments, rehabilitation bonds, near-term debt repayments. Divide what remains by quarterly cash outgoings. That is your runway. If it is under four quarters, assume a financing is coming and that it will be priced below today's shares.

Then look at the share count over three years. If it has doubled while the resource has not, you are being diluted into a story rather than a project. Read the notes in the accounts for warrants, options, convertible notes and stock issued to consultants, and check whether staff are being paid in shares because the company cannot pay them in cash.

The two lines worth comparing

Put general and administrative expenses next to spending on the ground. A junior that spends more on offices, promotion and directors' fees than on drilling is running a marketing business with a mining licence attached.

Offtake agreements: read the small print

An offtake is not automatically good news. It can be validation from a serious buyer, or a decade-long mortgage on the project's upside.

• What is the pricing formula? Payables, quotational period and refining charges determine actual revenue far more than the headline discount.
• Is it exclusive, and does it cover all production? A deal that captures every tonne for ten years leaves you owning the costs and none of the upside.
• Is there a prepayment? If so, it is a loan secured against the project, dressed up as a sale.
• How long does it run, and can either side terminate early? Look for clauses triggered by missed delivery or a change of control.
• Who is the buyer, and can they pay? A creditworthy smelter or trader is worth more than an unknown intermediary.
• Are there conditions precedent the company may struggle to satisfy?

Exclusive, long-dated offtakes with prepayments are common in cobalt because the market is concentrated. That does not make them bad, but you should price in the fact that much of the upside you are buying has already been sold.

Grade, by-products and metallurgy

Most cobalt is not mined for cobalt. It comes out of copper and nickel operations as a by-product, which means the host metal usually drives the decision to build. Ask what the project looks like with cobalt valued at nothing. If it does not work without cobalt, the company is more exposed than its presentation suggests.

Check the reporting standard. JORC and NI 43-101 both require an independent qualified person and both distinguish resources from reserves. An inferred resource is a geological hypothesis, and a preliminary economic assessment is not a feasibility study. A high cut-off grade can flatter the headline number by excluding material that would still have to be mined.

Then ask about metallurgy. Cobalt sits in different mineral phases, and some are far harder to process than others. Until the company has run locked-cycle testwork and produced a saleable hydroxide or sulphate, nobody knows whether the rock in the ground can become something a buyer will accept.

Red flags worth walking away from

• No current technical report signed off by an independent qualified person.
• A resource that grows with every press release but never converts into reserves.
• Serial name changes, rebrandings, or a sudden pivot from one metal to another.
• Insiders selling into strength while telling private investors to hold.
• Heavy share issuance to related parties, or consultants paid in cheap stock.
• Ground in a sanctioned jurisdiction, or a title under active dispute.
• Cobalt grades that appear in presentation slides but never in the technical report.
• Paid-for promotional coverage presented as independent analysis.

Put it on one page, then decidePhoto: RDNE Stock project / Pexels