First Cobalt Corp. [FCC-TSXV; FTSSF-OTCQB; FCC-ASX] said Tuesday July 16 that it has agreed on a term sheet with Glencore AG, the Swiss commodities trading giant, that could lead to the recommissioning of an Ontario facility that ranks as the only permitted cobalt refinery in North America.
First Cobalt said the term sheet outlines a non-dilutive, fully funded, phased approaching to recommissioning of the refinery. However, it said the framework remains subject to a number of conditions and outlines the key milestones to a long-term strategic relationship that could bring a reliable source of domestically refined cobalt to the North American market.
First Cobalt shares advanced on the news, rising 3.13% or $0.005 to 16.5 cents on active volume of over 1.0 million shares traded. The shares trade in a 52-week range of 14 cents and 50 cents.
First Cobalt is the largest land owner in the historic Cobalt, northeast Ontario region. The company 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 metals.
Its Kerr Lake area properties include the past producing Juno, Drummond, Kerr Lake, Lawson and Conisil mines, all of which operated primarily as silver mines.
First Cobalt recently moved to enhance its position as a pure-play North American cobalt company by acquiring all of the issued and outstanding shares of US Cobalt Inc. The acquisition positioned First Cobalt as a leading non-Democratic Republic of Congo (DRC) cobalt company with North American projects located in close proximity to infrastructure as well as electric vehicle and technology hubs such as Michigan and California.
The combined entity has projects in Ontario and Idaho, which, once they reach the production stage, could be major cobalt suppliers for the electric vehicle market, which now depend mostly on supply from the DRC.
News of the latest Glencore agreement comes after First Cobalt recently said it has successfully produced a battery grade cobalt sulfate.
Highlights of the agreement announced on Tuesday are as follows:
- Phase 1 entails a US$5 million loan from Glencore to support additional metallurgical testing, engineering, cost estimating, field work, and permitting associated with the recommissioning of the refinery. That includes a feasibility study for a 55 tonnes-per-day refinery expansion.
- Phase 2 envisions commissioning the refinery at a feed rate of 12 tonnes per day in 2020 to produce a battery grade cobalt sulfate for prequalification for the electric vehicle supply chain.
- Phase 3 involves an expansion of the refinery to a 55 tonnes per day feed rate by 2021, using current site infrastructure and buildings.
- The total capital investment under the three phases is estimated at approximately US45 million and phases two and three remain subject to the findings of studies undertaken in the first phase. Capital invested will be repaid by First Cobalt from cash flow generated under a long-term refining arrangement.
“Transitioning to cash flow as a North American refiner is our primary focus and today’s news demonstrates that we are moving closer to achieving that objective,” said First Cobalt President and CEO Trent Mell. “Glencore has been supportive throughout the process and we look forward to working closely with their technical team on a successful execution,” he said.
On May 21, 2019, First Cobalt and Glencore signed a memorandum of understanding outlining the terms of a potential partnership to produce refined cobalt for the North American market. Since that time, the two parties have conducted due diligence and held extensive discussions to develop a business plan for the First Cobalt refinery.
The facility is a hydrometallurgical cobalt refinery in the Canadian Cobalt Camp, approximately 600 km from the U.S. border. The First Cobalt Refinery has the potential to produce either cobalt sulfate for the lithium-ion battery market, or cobalt metal for the North American aerospace industry or other industrial military applications.
First Cobalt’s other flagship asset is the Iron Creek Cobalt project in Idaho. The project has an inferred mineral resource of 26.9 million tonnes, grading 0.11% cobalt equivalent, or an alternative underground only scenario of 4.4 million tonnes of grade 0.3% cobalt equivalent.