"Once operational, the refinery would become the only North American producer of refined cobalt for the North American EV market. Over the first several years, the intention is to treat high grade cobalt hydroxide currently imported into China. However, the permits and flow sheet for the refinery are such that it can be ideally suited to treat North American mine concentrates as domestic projects are brought into operation."
What were the circumstances surrounding the creation of First Cobalt?
First Cobalt was established in March 2017 as a direct response to the electric vehicle (EV) revolution. We looked at cobalt assets around the world, including the DRC as this is home to almost 70% of global cobalt mining. After a year of investigation, we concluded that the best opportunities were in fact right here in North America. Within the first year and a half, we amalgamated four companies with extensive property and assets in both Canada and the United States. As a result, First Cobalt today has three key assets: (1) a very large prospective land package in the Ontario Cobalt Camp, with 50 past-producing mines; (2) an even more advanced asset in Idaho called the Iron Creek project on patented property and with a growing resource; and (3) the only permitted primary cobalt refinery in North America capable of producing material utilized in Li-ion batteries.
First Cobalt’s most important attribute today is that we have a fully-funded, non-dilutive path to get the company to first cash flow in 2020. We are positioning ourselves to be the only cobalt refiner on the continent, but this will in turn de-risk cobalt mining in our own projects as well as other potential operations on the continent that could be processed through our facility.
First Cobalt recently announced a partnership with Glencore to recommission First Cobalt’s Ontario refinery. What is the timeline for getting the refinery back into operation?
First Cobalt embarked upon a recommissioning strategy in early 2019. It started with recognition that there is no near-term cobalt mining on the continent, and yet we have a refining asset ready to serve the Canadian and US markets. Once we set our sights on foreign feedstock supplied by some of the world’s larger cobalt miners, it opened up a world of opportunities. Specifically, we tested cobalt hydroxide from the DRC, which is the most abundant feedstock in the world, and found that our refinery flow sheet was quite well suited to convert that material into a battery grade cobalt sulfate. The material coming from the DRC is approximately four times higher in grade than what the refinery historically received, so it is easier to process and it does not have the arsenic content that you typically find in North American cobalt ore deposits. The absence of significant arsenic in the ore allowed us to increase the production capacity of our plant. After a global marketing effort, we found ourselves in a situation where we could easily source feed and envision a much more ambitious profile for the 20 year old facility.
Glencore advanced US$5 million to First Cobalt in order to allow us to take the existing metallurgical test work and scoping study and bring it to a feasibility-level study. We have inspected and tested virtually every piece of equipment in the refinery, including tanks, pumps, motors and instrumentation, to establish what might need refurbishing or replacement. The intention is to complete the feasibility study by Q1 2020 and recommission the plant under its current 12 tonnes per day (mt/d) throughput rate in late 2020. Thereafter, we expect to permit and commission a 55 mt/d expansion, which will take approximately 12 months.
How did First Cobalt come to acquire the Ontario refinery?
The previous owner of the refinery was accepting custom feeds on a batch basis and most of these were complex feedstock and relatively low grade. Under this operation scenario, the business plan was not viable and the facility was closed in 2015. First Cobalt completed a three-way merger with other interested parties to ensure that we could get all the pieces together to acquire the facility near our own exploration properties. A 2012 report estimated the replacement value of the First Cobalt refinery at US$78 million, excluding the capital invested in power lines and earthworks related to the tailings facility and roads. We were able to acquire the facility for much less than that. Moreover, you can’t place a value on the fact that it is already permitted. Once operational, the refinery would become the only North American producer of refined cobalt for the North American EV market. Over the first several years, the intention is to treat high grade cobalt hydroxide currently imported into China. However, the permits and flow sheet for the refinery are such that it can be ideally suited to treat North American mine concentrates as domestic projects are brought into operation.
Can you give insights into First Cobalt’s Iron Creek deposit in Idaho and project in Ontario?
Iron Creek is a primary cobalt deposit in Idaho and is our most advanced exploration project. The Idaho Cobalt Belt is the only place, outside of Morocco, where you can find significantly sized (large) primary cobalt deposits. We have drilled cobalt and copper mineralization at Iron Creek over an almost 1 km strike length and up to 300 m down-dip depth. Mineralization is contained along a metasedimentary rock horizon and is considered stratabound, lending a high confidence in cobalt and copper continuity. We have published an ore resource in 2018 and will soon provide an update showing the resource is of reasonable size and is open to warrant continued exploration there.
An important feature of the Iron Creek mineralization that is unique from most other North American primary cobalt deposits is the low level of arsenic. High arsenic levels impede the development of these other deposits in North America. The plan moving forward is to continue developing our resource through drilling. We have an added advantage of operating on a patented mining property which allows us to have a clear path to permitting.
First Cobalt’s other mineral projects take us back to the birthplace of hard rock mining in Canada, to a town called Cobalt, Ontario. We have assembled an extensive property package to facilitate an exploration program across over 10,000 hectares. We have drill-tested several historically mined areas and have intersected cobalt and silver mineralization specifically in one area that keeps us interested in continuing to explore. There still remains high potential for cobalt and silver to occur below cover that we will pursue once we have progressed our other projects in Idaho and at the First Cobalt Refinery.
What is driving the fundamentals of cobalt?
Compared to other base metals, the cobalt market is relatively small, so it does not take a significant amount of new supply to impact the market. When the price of cobalt increased to over US$40/lb., it created an incentive for artisanal mining to pick up in the DRC. Moreover, the world underestimated how quickly that supply response could take place. It is the basic principle of price driving supply, but the sudden increase in production weighed heavily on the market from Q2 2018 until Q3 2019. The outlook is much better today for companies like First Cobalt. That period of oversupply is behind us and it is expected that cobalt demand will rise dramatically as the EV revolution takes hold. I also believe that there will be a premium offered for cobalt that is sourced ethically and responsibly. We are already seeing this in the market today.