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First Cobalt Corp fully focused on creating a North American cobalt supply chain

Snapshot

The company is the owner of North America’s only permitted cobalt refinery located in Ontario, Canada which could produce over 25,000 tonnes

First Cobalt -

Quick facts: First Cobalt

Price: 0.13 CAD

TSX-V:FCC
Market: TSX-V
Market Cap: $52.53 m
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  • Owner of North America’s only permitted cobalt refinery
  • Main cobalt exploration project is at Iron Creek in Idaho, USA
  • Controls significant land package in the Canadian Cobalt Camp

What First Cobalt does:

First Cobalt Corp (CVE:FCC) (OTCMKTS:FTSSF) is focused on creating a North American cobalt supply chain through both exploration and refining.

The company is the owner of North America’s only permitted cobalt refinery located in Ontario, Canada which could produce over 25,000 tonnes of cobalt sulfate per year from third party feed.

Cobalt refining is a critical component in the development and manufacturing of batteries for electric vehicles and forms a foundational piece of the next generation of the North American auto sector and other electrified consumer and industrial applications.

The firm is recommissioning and expanding its permitted cobalt refinery to provide battery-grade cobalt for the North American and European electric vehicle (EV) markets. Discussions are ongoing with several EV manufacturers, according to the company.

The group has said it is confident that cobalt will remain a critical material in electric vehicle battery production for at least another ten years, despite Tesla’s Battery Day proclamation in September that it will produce cobalt-free batteries. Longer-term, the company said it may expand its refinery to recycle black mass from lithium-ion batteries.

First Cobalt’s main cobalt exploration project is the Iron Creek Cobalt Project in Idaho, USA, which has an Indicated Resource of 2.2 million tonnes at 0.32% cobalt equivalent (0.26% cobalt and 0.61% copper) for 12.3 million pounds of contained cobalt and 29 million pounds of contained copper as well as an Inferred Resource of 2.7 million tonnes at 0.28% cobalt equivalent (0.22% cobalt and 0.68% copper) for an additional 12.7 million pounds of contained cobalt and 40 million pounds of contained copper.

Drilling is expected to resume next year based on geophysics findings of this year with a goal of extending the 900-metre mineralized zone and testing new targets.

In 2019, First Cobalt announced high-grade cobalt assays up to 0.5% cobalt at the Ruby prospect 1.5 kilometres south of Iron Creek, which the group said could represent additional near-surface potential for cobalt and copper mineralization on the property.

The company is partnered with researchers at the Colorado School of Mines on a proposal to fund a two-year project on improving the extraction of cobalt from Iron Creek. The aim is to modify conventional methods of extraction to reduce the amount of waste and to increase the concentration of cobalt to be refined.

The United States Geological Survey has deemed the Idaho Cobalt Belt to be strategically important as a domestic supply of cobalt, according to First Cobalt.

The company also controls a significant land package in the Canadian Cobalt Camp spanning over 100 square kilometres, which contains more than 50 past-producing mines, including substantial silver assets.

How is it doing:

On November 10, First Cobalt provided an update on commercial contracts and metallurgical test work relating to its cobalt refinery located in Ontario, Canada, noting that timelines for pilot plant completion and submission of permit amendments remain on track, while discussions for government support are well advanced.

The company said it and Glencore PLC have agreed to discuss a long-term feed purchase contract rather than the tolling arrangement originally contemplated, providing First Cobalt greater leverage to the cobalt market by entering into offtake contracts with end-users directly.

The group added that the maturity date on the company's US$5 million loan with Glencore has been extended by one year to August 23, 2022, which better aligns with refinery commissioning. All other terms are unchanged, including Glencore's right to convert all or a portion of the balance owing to common shares of First Cobalt at a discount to market of up to 15%.

Glencore continues to provide support to ensure a technically viable design of the plant and smooth commissioning, and in on order to secure a diversity of supply, First Cobalt said it will supplement any feed provided by Glencore with other sources of ethical cobalt.

Cobalt hydroxide feed material from Glencore's KCC mining operation was received in September, with leaching and neutralization testing performed by SGS ahead of pilot plant test work. Bench-scale testing of cobalt hydroxide feedstock from KCC yielded recoveries in excess of 97%, significantly higher than the 93% recovery assumption in the company's May engineering study. The 97% recovery is similar to recoveries achieved on other DRC cobalt hydroxide feedstock that First Cobalt tested in 2019 to produce battery-grade cobalt sulfate.

The company said it is confident that it will meet or exceed this recovery level as it proceeds to pilot plant testing, which would contribute to even stronger project economics.

On October 29, First Cobalt released the results of a life cycle assessment (LCA) affirming the low carbon footprint of its Canadian Refinery, demonstrating its commitment to fighting climate change.

The study assesses the life cycle impact of the production of 1 tonne of cobalt sulfate heptahydrate (CoSO4 ·7H2O) converted from cobalt hydroxide. For comparative purposes, results from each category were benchmarked against a leading cobalt refinery in Tongxiang, China.

In four of six impact categories, the First Cobalt Refinery has a lower environmental impact: global warming potential, eutrophication potential, smog potential and freshwater consumption.

And at the end of September 2020, First Cobalt said it estimates that the operating cost for its permitted cobalt refinery in Ontario will be $2.36 per pound of cobalt, a 13% reduction that it says improves refinery margins, enhances project economics and further solidifies the refinery’s global competitiveness.

In an update on ongoing engineering studies at the project, the company said the estimated cost reduction will result in around $4 million of increased annual pre-tax cash flow compared to the May 4 engineering study, which estimated that the refinery could produce 5,000 tonnes of cobalt per year, resulting in 25,000 tonnes of cobalt sulfate product for electric vehicle batteries.

First Cobalt also provided and updated capital estimate of $60 million compared to $56 million in the original engineering study, as well as forecasting $41 million in undiscounted pre-tax free cash flow to the project during the first full year of production.

The company said it has established a joint technical committee with Glencore PLC to continue to work on further technical and cost enhancements to the refinery, while final permit amendments and a closure plan are on track to be submitted before the end of the year.

A financing process has also moved into phase two and the firm is assessing several third-party financing proposals as discussions continue to advance with the private sector and government agencies.

On the mining front, on October 19, First Cobalt said it had resumed exploration at its Iron Creek cobalt-copper project in Idaho with a geophysical survey to outline mineral extensions.

The move came as the cobalt market “continues to strengthen” as North America aims to become less reliant on foreign supply, the Toronto-based junior said.

Exploration will refine drill targets eastwards along strike of the cobalt-rich zone over a 300-metre vertical depth where 0.2% cobalt over 12 metres is found, and test the western extension of the copper-rich zone that includes 3.4% copper over 2.6 metres.

First Cobalt also strengthened its commitment to a clean energy future in early September, having joined the Critical Materials Institute (CMI) as a full team member.

The group pointed out that the CMI, launched in 2013, supported research on expanding the domestic supply of critical minerals.

Three years ago, the US government added cobalt to its list of 'critical minerals' and devised a plan to specifically address supply chain issues as the US is heavily reliant on foreign sources of cobalt for military and industrial applications, including electric vehicles (EVs) and aerospace. There are currently no producing cobalt mines in the US.

The company also recently closed a C$2.5 million financing to develop its planned cobalt refinery in the aptly-named town of Cobalt, Ontario, with flow-through funds earmarked for exploration on its silver properties in the nearby Cobalt Camp.

Inflection points:

  • Further development of cobalt refinery
  • More news on exploration at its Iron Creek project
  • News on silver properties in Canada’s Cobalt Camp

What the broker says:

At the start of September, research house Red Cloud Securities repeated a ‘buy’ rating on First Cobalt shares and raised its price target to C$0.35 from C$0.30 on the back of the firm’s successful financing.

“We believe First Cobalt’s shares are undervalued and we believe that as it advances the only permitted cobalt refinery in North America towards production the stock should re-rate towards our target,” analyst Derek Macpherson wrote in a note to clients.

“We highlight that while a corporate transaction monetizing First Cobalt’s silver asset could push the stock higher in the short-term, the key to a longer-term re-rating is bringing the refinery back into production,” he added.

Meanwhile, the substantial silver assets in the Cobalt Camp of Ontario could pose an interesting upside with the recent run in precious metals prices.

The firm is working to assess the value of the asset in anticipation of further exploration or a potential spin-out or sale, a move that caused Macpherson to increase the estimated in-situ value of the project to C$24.9 million from C$5.6 million.

What the boss says:

In November's update, Trent Mell, president & chief executive officer of First Cobalt said: "The change in approach towards feed purchase contracts results in greater exposure to the cobalt market and potentially a greater share of the project economics outlined in our May 4 engineering study. With the decision to be a market purchaser of feedstock, rather than a toll refiner, the Company has resumed discussions with lenders and intends to move aggressively to advance its strategy."

He added: "I am very appreciative of Glencore's ongoing support and look forward to working towards completing a mutually agreeable cobalt hydroxide supply agreement for our refinery. We continue to advance our vision to create a new cobalt supply chain in North America, which will provide excellent leverage to a strengthening cobalt market for First Cobalt shareholders."

Contact the author at jon.hopkins@proactiveinvestors.com

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First Cobalt Corp resumes exploration and geophysical surveys at its Idaho...

First Cobalt Corp. (TSX-V:FCC) (OTCQX: FTSSF) CEO Trent Mell tells Proactive the Toronto-based group will resume exploration activities at its Iron Creek cobalt-copper deposit in Idaho. Mell says as the cobalt market continues to strengthen, the company is beginning geophysical surveys to...

on 20/10/20

9 min read