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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 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:

In a 2020 year-in-review document, published on April 16, First Cobalt highlighted the significant progress made toward its goal of producing the most sustainable battery materials and strong setup for growth and execution in 2021.

The company said its primary focus for 2021 is advancing the refinery, with construction commencing in mid-2021, which would put the company on track for commissioning in late 2022. Ultimately, the refinery is intended to divert ethically sourced African mine production from China to North America.

First Cobalt plans to finance the refinery expansion capital costs with a mix of debt and equity, weighted more heavily towards debt instruments. In March 2021, First Cobalt announced it had entered an exclusivity agreement with a leading financing institution to provide US$45 million of debt financing and was entering the due diligence phase, which would be the final piece required for the capital costs to be fully financed.

The company also inked an offtake deal in March with one of the “most knowledgeable” cobalt traders in the world. It has agreed a flexible, long-term, offtake agreement with London-based Stratton Metal Resources Ltd over the sale of up to 100% of annual cobalt sulfate production from the refinery. 

The five-year offtake contract matches the expected term of a project debt facility currently being negotiated, as well as long-term arrangements for refinery feedstock. The sale price will be based on the prevailing market price at the time of shipment. Earlier in the year, First Cobalt also agreed a five-year cobalt hydroxide feed purchase deal with Glencore AG and IXM SA.

Looking at its Iron Creek copper-cobalt project in Idaho, First Cobalt noted that it has completed over 29,000 metres of diamond drilling and significant infrastructure is in place to support multiple drills and underground activity for further work, the company said.

On February 23, First Cobalt has said a geophysical survey of its Iron Creek cobalt-copper deposit in Idaho, US, had identified several new drill targets and provided data that supports a resumption of drilling to expand the deposit and test new targets over a 2-kilometer radius at the site.  The company said high chargeability zones were detected along strike of the deposit, which it said presents an opportunity to more than double the strike length of the current mineralization.

With a strengthening cobalt market, a 2021 drill program is being designed to test for the extensions of the Iron Creek copper-cobalt resource, the company said in April’s statement. The areas with high chargeability anomalies from a geophysical survey that are considered to be associated with mineralization along this horizon have been prioritized for this program. The objective over the next two years is to meaningfully increase the resource size at Iron Creek and advance the asset towards a development decision.

On the financing front, First Cobalt pointed out that in the first quarter of 2021, it received an additional $6 million in cash proceeds relating to warrant exercises. In combination with a January bought-deal financing and the closing of the Kuya Silver transaction on March 1, 2021, First Cobalt noted that it has approximately $19 million of working capital on hand, not including the $10 million of refinery construction funding pledged by the Ontario and Canadian Governments.

The company also revealed in March that it had struck a deal with commodities giant Glencore PLC which will allow it to repay the latter an outstanding debt of around US$5.5 million in shares. The transaction to amend the debt agreement struck in 2019 will eliminate all First Cobalt’s corporate debt ahead of the financing package being negotiated for an expansion to its cobalt refinery in Ontario and frees up the security package associated with the facility.

The transaction to amend the debt agreement struck in 2019 will eliminate all First Cobalt’s corporate debt ahead of a financing package being negotiated for an expansion to its cobalt refinery in Ontario and frees up the security package associated with the facility, the junior said. 

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 construction expected in Q2/202
  • 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 April’s 2020 year-in-review, First Cobalt CEO Trent Mell said: “We are on a path to become the most sustainable producer of cobalt in the world and the only company capable of supplying battery-grade cobalt to the North American electric vehicle market.

“The stage was set in 2020 with the completion of engineering studies, metallurgical work and a strategic investment from the Government of Canada and the Government of Ontario. In 2021, the story will be one of execution, as we expand the First Cobalt Refinery in Canada and resume activities at our advanced copper-cobalt project in Idaho.”

Contact the author at [email protected]

Story by ProactiveInvestors


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