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

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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:

At the end of September 2020, First Cobalt said it now 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:

First Cobalt CEO Trent Mell has called the Idaho Cobalt Belt a unique geological setting for cobalt deposits “unlike anywhere else in the world.”

“Developing a domestic supply of cobalt and other critical minerals has taken a new urgency in 2020, as North America strives to become less reliant on foreign supply,” Mell said in October’s statement.

“New funding programs within the US Department of Energy, the Department of State and the Department of Defense underscore the priority the US government is placing on developing its domestic critical minerals supply chain.”

Contact the author at [email protected]

Story by ProactiveInvestors


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