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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

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TSX-V:FCC

Price: 0.285 CAD

Market Cap: $152.27 m
  • Owner of North America’s only permitted cobalt refinery
  • Main cobalt exploration project at Iron Creek in Idaho, USA
  • Controls significant land package in 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.

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:

First Cobalt has been making advances so far in 2021.

On June 24, the company said it had kicked off a $2.5 million exploration program at the Iron Creek cobalt-copper project in Idaho. The company said its objective is to “double the size of its resource” over the next two drill seasons as interest grows in a US domestic cobalt supply to support a growing electric vehicle market.

The company said that it would deploy its $2.5 million budget towards a total of 4,500 metres of drilling. The primary focus of drilling will be to test the western and eastern extensions to the Iron Creek deposit identified in IP-Resistivity surveys and potentially other targets on the property. The firm also highlighted that geophysical surveys are planned covering the Ruby Zone area and eastward to the Redcastle Property to identify new drill targets.

Earlier, on May 11 the company announced that it had increased the size of its land position surrounding Iron Creek by more than 100%. First Colbalt said it had acquired mining claims to the west of its existing cobalt-copper project, expanding its land package to over 1,600 hectares. 

Then on May 25, the company revealed that it had further expanded its footprint at Iron Creek by striking an earn-in deal for the Redcastle property, which spans 224 hectares, and lies immediately east of the project.

The Redcastle property, optioned from Phoenix Copper Ltd, comprises 31 claims and expands the size of First Cobalt's ground to more than 1,820 hectares. It lies just east of the firm's Ruby Zone cobalt-copper prospect, which is exposed at surface, and First Cobalt believes the sulfide mineralisation there extends into Redcastle.

Under the terms of the Redcastle deal with Phoenix Copper, First Cobalt can earn a 51% stake by paying US$50,000 initially, incurring US$1.5 million in expenditures over three years, issuing 200,000 shares and making staged payments of US$100,000. It can lift this to 75% upon incurring an additional US$1.5 million in expenditures and making a payment of US$150,000 over another two years.

Also in May, First Cobalt updated on its path to bring North America’s only permitted cobalt refinery back into production, saying it had awarded the contract to build the cobalt sulfate crystallizer.

This equipment, which includes pumps and dryers, is the last step in the refining process and takes cobalt concentrated in an aqueous solution into a powder called cobalt sulfate. It will be built in the US and be shipped to site in less than 44 weeks, the company said, adding that it remains on track to recommission the facility in 4Q, 2022.

First Cobalt said it and Ausenco Engineering are now working on detailed engineering and procurement of the last two long lead equipment orders, namely solvent extraction tanks and filters.

The relevant Ontario Ministry, on May 10, also issued a new permit to take water from Lake Timiskaming covering potable water supply and industrial use. Two other permit applications for air and noise and industrial sewage are expected in the coming months.

And it noted trhat lender discussions for a US$45 million debt facility are also advancing, supplemented by C$18 million in working capital plus an additional C$10 million investment by the Government of Canada and the Government of Ontario towards the refinery capital costs, the company added.

First Cobalt had announced at the end of April that it had been awarded funding from the US Department of Energy's Critical Materials Institute (CMI) to research innovative mineral processing techniques for its Iron Creek copper-cobalt project in Idaho. 

The company said it will receive US$600,000 from CMI, plus an in-kind match from the company itself, for a total US$1.2 million program. Ultimately, the company said the research effort is a step in its strategic plan to become the world's most sustainable producer of battery materials. 

It said the funding will go towards an interdisciplinary, collaborative research effort conducted in conjunction with the Kroll Institute for Extractive Metallurgy (KIEM) at the Colorado School of Mines over a two-year period, the company said, with the objective of identifying more efficient and environmentally friendly methods to process cobalt ore from pyrite material. 

Looking at its financials, on May 27 First Cobalt filed its unaudited first-quarter financial results for the three-month period ended March 31, 2021, which showed it had cash of $16 million and working capital of $20.2 million. 

The company said then that it remains “on schedule” to commission its expanded refinery in October 2022 which will make First Cobalt the only refiner of battery-grade cobalt sulfate in North America and the second-largest outside of China. 

On the management front, on April 9, First Cobalt announced the appointment of experienced commodities industry executive Michael Insulan as vice-president of commercial to market the group's refined cobalt sulfate production to electric vehicle (EV) manufacturers and battery makers.

Insulan has nearly 20 years' experience across oil and gas, bulk commodities, base and minor metals but over the past four has mainly been focused on cobalt. He has worked for Royal Dutch Shell, CRU, and Eurasian Resources Group.

And at the start of February, First Cobalt announced the appointments of Regan Watts as the company’s new vice-president of Corporate Affairs and Dr George Puvvada as its Refinery Technical Manager.

Inflection points:

  • Cobalt refinery commissioning expected in Q4 2022
  • More news on exploration at its Iron Creek project
  • News on silver properties in Canada’s Cobalt Camp

What the broker says:

In a note on March 19, 2021, Cantor Fitzgerald initiated coverage on First Cobalt with a Buy rating and a C$0.60 price target.

Analyst Matthew O’Keefe said: “The company’s top focus is refurbishing and expanding its 100% owned and permitted Canadian cobalt refinery, which will support production of 25 kt of battery-grade cobalt sulfate, or roughly 5% of the current global refined market, annually,”

“Commissioning is expected in late 2022. Cobalt is a critical metal to power the green economy and electric vehicles (EVs) and FCC offers one of the few pureplay cobalt equities available.”

O’Keefe stressed several other factors working in First Cobalt's favor, notably:

  • Cobalt is a critical metal: In its January 25, 2021, Macro Report entitled 'A Green Economy and Electric Vehicles Start with Metals', Cantor Fitzgerald highlighted cobalt as one of the critical metals needed to make the transition due to its core function in the stability of high-powered and long-range lithium-ion batteries. 
  • First Cobalt well supported: The company has received financial support from the Provincial and Federal governments and secured cobalt feed from two major cobalt producer/traders. 
  • Cobalt refinery construction expected Q2/2021: First Cobalt is on-track to produce cobalt sulphate for the EV market by the end of 2022 and generate annual operating cash flow of over US$37 million.
  • Cobalt exploration in North America: First Cobalt’s Iron Creek project in Idaho currently hosts a cobalt equivalent resource of 37 MMlbs which should double by 2023 as well as exposure to a large land package in the historic cobalt camp of Ontario.

What the boss says:

In June's statement on the exploration program at Iron Creek, First Cobalt CEO Trent Mell said: "Cobalt demand for electric vehicles is projected to increase more than 250% by 2025 and Idaho is believed to be America's best opportunity to develop a domestic supply of this critical mineral.

"With our Canadian refinery expansion underway, we are turning our attention to our flagship mineral project in Idaho. Drilling aims to extend the cobalt and copper mineralization at Iron Creek and test for new mineralization at nearby targets that could result in additional resources on the property.”

Contact the author at jon.hopkins@proactiveinvestors.com

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