Cobalt’s Importance Underscored by Critical Minerals Listing, Rising EV Sales

NetworkNewsWire Editorial Coverage: The United States — and the entire world — have become critically dependent on cobalt, which is essential for rechargeable lithium ion (Li-ion) batteries to retain and discharge electricity.

• Cobalt deemed critical for United States security and economic prosperity
• Cobalt need expected to increase with soaring Li-ion battery demand
• U.S. business and military dependent on unstable cobalt sources; North American initiatives seek solutions

In May, cobalt was added to the United States’ list of minerals critical to its security and economic prosperity. Far beyond laptops, phones and electronic gadgets, the Li-ion battery is increasingly important for electric grid power storage and the revved-up electric vehicle market, as well as military applications such as tactical radios, thermal imagers, portable computing and turbine blades in gas turbines and aircraft jet engines.

The United States doesn’t currently mine or refine any meaningful amounts of cobalt, and yet it’s expected that within the next five years Li-ion batteries will be utilized in heavy-duty military platforms, such as vehicles, boats and, eventually, aircraft and missiles. The demand and critical importance of cobalt is only expected to increase as the Li-ion battery quickly moves toward ubiquity in civilian computerized applications as well. First Cobalt Corp. (TSX.V: FCC) (OTCQX: FTSSF) (FTSSF Profile) owns and is developing significant North American cobalt-indicated assets. First Cobalt also owns the only permitted cobalt refinery in North America capable of producing battery-grade materials, and just released the results of three studies supporting a possible restart of the refinery. Global battery makers Panasonic Corporation (OTC: PCRFY), LG Chemical Company, Ltd. (OTC: LGCLF) and Johnson Controls International PLC (NYSE: JCI) rely on cobalt to produce and meet burgeoning Li-ion demand. Even the Boeing Company (NYSE: BA) has invested in battery technology to sustain high-energy density in its first steps toward battery-powered flight.

Critical Cobalt and Blood Diamonds

For more than 20 years, seven African countries endured brutal civil conflicts fueled by diamonds. Civil wars in the Democratic Republic of Congo resulted in the death and displacement of millions of people. “Blood diamonds” helped finance the carnage and led to rampant human rights abuses, as opposing forces sought to gain control of the resource-rich DRC.

Though the wars have subsided, cobalt-rich DRC still reportedly has serious political and ethical problems compromising its place in the minerals market. The world’s largest producer of cobalt, the Republic allegedly uses child labor to procure the mineral in the country’s artisanal mines. EV automakers, battery producers and big tech companies are struggling to keep cobalt sources flowing yet free from abusive child labor. The Responsible Cobalt Initiative is the beginning of that movement.

Secure Ethical Resources

First Cobalt Corp. (TSX.V: FCC) (OTCQX: FTSSF)adopted the Responsible Cobalt Initiative in 2017 and is intently developing North American-based cobalt resources. From raw product to refined chemicals, First Cobalt is rapidly building an economically and politically secure North American cobalt company.

The company owns three substantial North American assets. First Cobalt’s flagship asset, Iron Creek Cobalt Project in Idaho, has an exceptionally promising inferred mineral resource estimate of 29.6 million tons grading 0.11 percent cobalt equivalent. In fact, the company announced the outstanding results of its first NI 43-101 Mineral Resource Estimate for the 100 percent-owned property in September, stating the site contains 45 million pounds (20,411 metric tons) of cobalt and 175 million pounds (79,379 metric tons) of copper for 62.9 million pounds (28,528 metric tons) of cobalt equivalent. In addition, First Cobalt owns an immense land package composed of 50 past-producing mines in the renowned Canadian Cobalt Camp – an area in Ontario thought to be a cobalt trove and ripe for revival.

North American Cobalt Refining

First Cobalt’s other significant asset is its currently shuttered but past-producing cobalt refinery with significant potential. The company is the sole owner of the only permitted cobalt refinery in North America capable of producing battery-grade materials, and First Cobalt is now taking actions to investigate a restart of this invaluable asset.

The facility is a hydrometallurgical cobalt-silver-nickel refinery that was first commissioned in 1996. The facility is fully permitted for processing feedstocks from that contain elevated concentrations of arsenic, which is common in most of the potential material from North America. Trying to permit a similar facility in North America today would require other companies to invest a substantial amount of both time and capital.

In fact, a 2012 report prepared for a previous owner 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. Amazingly, the intrinsic value of the refinery asset alone is about equal to the company’s current total market capitalization. The underlying value of the First Cobalt Refinery will likely be realized once back online in production.

First Cobalt just released the results of studies supporting a restart of the First Cobalt Refinery. The three independent studies were commissioned to estimate capital requirements and operating costs, permit renewal timelines, potential feedstock options and offtake opportunities. The studies determined under a base case scenario that the refinery could produce from 626 to 1,171 tons of cobalt per year. The refinery could produce cobalt sulfate for the lithium-ion battery market or cobalt metal for the American aerospace industry and a permitting review concluded that a restart is possible within 18 months of selecting a feedstock under the base case scenario. The First Cobalt Refinery project team is continuing to work with engineering firms, process experts, a cobalt marketing expert and financial advisers to finalize a business plan to restart the facility.

President and CEO Trent Mell stated, “The First Cobalt Refinery is a strategic North American asset and potentially our quickest path to cash flow by producing cobalt materials for the North American market. The facility is in excellent condition with permits in place and a short timeline to potential production, as well as optionality for both sources of material and refined product. Future offtake partners may offer flexibility with financing options to minimize dilution as we move forward. We believe that the single best use of the refinery is to provide cobalt for the U.S. market, which does not currently produce a meaningful supply.”

The Take Away

Cobalt is now regarded as critical to the security and economic prosperity of the United States. The ability of the First Cobalt Refinery to process materials and produce cobalt battery materials or cobalt metal products has the potential to de-risk North American cobalt projects and provide U.S. cobalt consumers verified ethical materials. Importantly to investors, if the refinery is restarted, the value of the asset could increase substantially once it is back online in production.

Cobalt Consumers

Johnson Controls International PLC (NYSE: JCI) offers a portfolio of lithium-ion battery technology for a range of vehicles. With global manufacturing facilities, it provides lithium-ion batteries to power and energy needs around the world. The company is a global diversified technology and multi-industrial leader serving a wide range of customers in more than 150 countries.

Panasonic Corporation (OTC: PCRFY) is a worldwide leader in the development of diverse electronics technologies and solutions in consumer electronics, housing, automotive and B2B businesses. Panasonic is the exclusive battery cell supplier for Tesla’s current production models. The company sees Li-ion batteries as central to its plan to significantly boost automotive business revenue.

Korea’s leading manufacturer of advanced batteries, LG Chemical Ltd. (OTC: LGCLF), announced that it is building an electric vehicle battery plant in Poland, which will be the first such plant in Europe. Once the plant is built, LG Chem will have a global production system of four internationally located plants. LG Chem aims to be a global market leader manufacturing batteries for pure high-performance EVs.

The world’s largest aerospace company, the Boeing Company (NYSE: BA), manufactures commercial airplanes and defense, space and security systems. Products include commercial and military aircraft, satellites, weapons, and electronic and defense systems. Boeing uses batteries for energy storage in nearly all its platforms, including airplanes, helicopters and satellites. Boeing recently invested in a new battery technology to sustain high-energy density and allow the possibility of electrifying some aspects of air transportation in steps toward battery-powered flight.

For more information about First Cobalt Corp, please visit First Cobalt Corp. (TSX.V: FCC) (OTCQX: FTSSF)

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