It's most likely because you're epub is using SVG cover images - Calibre needs to rasterize SVG images in order to make them display in mobi.
Try using --cover with an external file as Kovid said (go ahead and extract from the epub). Calibre will probably automatically avoid using the existing epub cover if it's marked correctly semantically, but if it doesn't you can use the remove first image option (not sure of the ebook convert argument, check the docs).
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