Why the GME Resources Limited share price is up over 250% this year

The GME Resources Limited (ASX:GME) share price is up 250% this year. GME is another company that looks set to profit on the cobalt boom. But is it too high risk?

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With its shares up a further 11% today, the GME Resources Limited (ASX: GME) share price has now rocketed over 250% higher so far in 2017.

The reason for its incredible rally is the growing demand for cobalt. The strong demand for its use in batteries for everything from electric cars, smart devices, renewable energy storage, and laptops has driven up the price of the metal.

According to Metal Bulletin cobalt prices hit multi-year highs last week with the high-grade metal fetching upwards of US$20 an ounce. The last time prices were this high was over six years ago.

As my colleague pointed out last week, two other shares have also responded to the rally in cobalt prices.

The Equator Resources Ltd (ASX: EQU) share price has gained 210% year-to-date and the Tiger Resources Limited (ASX: TGS) share price is higher by 36%.

Will the cobalt rally last?

There's actually more cobalt in lithium-ion batteries than there is lithium. So the sudden surge in demand for cobalt appears to be long overdue.

But whether or not that demand will be enough to create a cobalt giant like lithium did with Orocobre Limited (ASX: ORE) and Galaxy Resources Limited (ASX: GXY) is hard to say.

For now I think an investment in any of the cobalt-focused miners is a little too high risk. As a result investors might be better off resisting the lure of cobalt and holding out until a clear market-leader emerges.

Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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