Wednesday, June 6, 2018

First Cobalt Corp. (TSX.V: FCC) (OTCQX: FTSSF) on Shortlist as Attention Shifts to Juniors

  • New restrictive tax regime in DRC makes North American cobalt more attractive
  • Efforts to secure supplies turns attention to cobalt juniors
  • First Cobalt is now the world’s largest pure play cobalt explorer
With production of electric vehicles (EVs) set to increase, “at least 90,000 tonnes of additional cobalt will be needed by 2025 to meet demand”, according to a May research note from the Swiss bank, UBS (http://nnw.fm/0ZRpj). The bank’s brokerage arm expects global market penetration of EVs to rise to 16 percent by then, from its current one percent, sparking fears of a cobalt shortage as early as 2022. Naturally, this has created a degree of anxiety in the battery manufacturing community, which was very evident at the recent Cobalt Institute Conference in Las Vegas. This dynamic is driving “lots of discussion,” says Peter Campbell, vice president of business development at First Cobalt Corp. (TSX.V: FCC) (OTCQX: FTSSF). The pure play cobalt explorer is currently expanding its portfolio of properties with an ongoing series of mergers that includes CobalTech Mining Inc., Cobalt One and, most recently, US Cobalt Inc. The final entity will carry the name First Cobalt and should have a market cap of around C$400 million ($311 million) (http://nnw.fm/g7bNe).
At present, the Democratic Republic of the Congo (DRC) is the world’s top producer of cobalt. The central African country produces about 60 percent of global cobalt supply, a leading position that it may retain for at least a decade. However, challenges to that dominance are emerging, as concerns about human rights and related issues multiply. The industry has been accused of widespread abuse, in particular, the employment of child labor. Moreover, about 20 percent of DRC cobalt output is mined by artisanal miners, or creuseurs, under conditions that pose great risk to their health and safety.
The Congolese government has moved to address some of these issues. In March 2018, it revised the country’s 2002 mining code in an attempt to improve the working environment and increase benefits for employees. It also implemented measures to gain greater control of the industry and take a larger slice of the pie. Henceforth, the state’s “free share” in mining projects will increase to 10 percent, up from five percent, and the period after which future contracts can be renegotiated will fall from 10 years to five years. In addition, a “super profits” tax of 50 percent has been introduced, and royalties are to rise to 3.5 percent from two percent; they may reach five percent, if the DRC decides to name cobalt a “strategic substance” (http://nnw.fm/bYM5U).
These developments are causing battery manufacturers and automakers to break out in a cold sweat. Cobalt has become a highly prized commodity, used alongside lithium in a growing number of rechargeable battery technologies. A shortage of the metal has been apparent since 2016, when prices were $22,000 a tonne. Now, spot cobalt is trading at around $90,000 a tonne on the London Metal Exchange.
First Cobalt is focused on North America. As a result of a merger with Cobalt One in December 2017, First Cobalt is now the largest landowner in Canada’s Cobalt Camp, a region that includes the historically significant Kerr Lake, Drummond and Bellellen mines. The company now controls over 10,000 hectares of prospective land and 50 historic mines, as well as a mill and the only permitted cobalt refinery in North America capable of producing battery materials. Around the same time, First Cobalt completed its merger with CobalTech Mining.
Most recently, First Cobalt has completed the acquisition of US Cobalt to add the Iron Creek Project in the prolific Idaho Cobalt Belt to its portfolio of assets. The Iron Creek Project boasts a historic estimate (non-compliant with NI 43-101 standards) of 1.3 million tons of 0.59 percent cobalt, which the company is now in the process of confirming with a mineral resource estimate that’s expected in September. First Cobalt’s recent M&A activity reflects its new tactical direction and dynamism, noted by one analyst who remarked that the company has ‘been moving very fast under CEO Tent Mell.’
First Cobalt recently announced the results of drilling that has extended the strike length of the mineralized zone in the Kerr area to over 350 meters. Results to date from this recently-identified mineralized zone located south of Kerr Lake in the Cobalt North area of the Canadian Cobalt Camp confirm that the area hosts a near-surface network of cobalt veins and disseminated mineralization associated with silver and nickel, as well as copper, zinc and lead (http://nnw.fm/CTj7s). Results like those are getting First Cobalt some attention. According to Campbell, “Companies looking to secure supplies, in a sign of their need, were talking to junior miners as much as six years away from production”.
For more information, visit the company’s website at http://nnw.fm/FTSSF
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