Source: Streetwise Reports 07/03/2018
Analysts provided an update on the company’s flagship asset in Idaho.
TD Securities recently initiated coverage on eCobalt Solutions Inc. (ECS:TSX; ECSIF:OTCQX; ECO:FSE), whose Idaho cobalt project “is advancing rapidly toward production at a time when demand for cobalt is accelerating, driven largely by demand growth for electric vehicles,” reported analyst Craig Hutchison in a June 14 research note. TD’s initial rating on eCobalt was Speculative Buy and its target price, CA$2.25 per share.
ECobalt would be one of only two primary cobalt producers in the world, and it is “well positioned to fill the growing supply gap, from a safe and mining friendly jurisdiction,” Hutchison indicated.
The company is currently continuing preconstruction efforts and developing an optimized feasibility study (OFS), Hutchison wrote, “which will look to simplify its flowsheet by producing a bulk concentrate to sell directly to offtake parties given the strong demand for safe secure supply.” It is actively pursuing such offtake agreements, which could help finance Idaho.
Subsequent to initiating on eCobalt, Hutchison issued a company update on June 25 noting the release of the OFS is now expected in Q3/18 versus Q2/18. “The delay was primarily due to longer-than-expected testing to achieve optimum arsenic removal from the bulk concentrate,” the analyst explained.
For most smelters to accept Idaho’s concentrate without penalizing eCobalt, the arsenic content must be below 0.5%. Tests using a rotary kiln roasting method have shown 0.2% arsenic in the near-term producer’s final product.
In terms of financing, eCobalt has received “preliminary project term sheets from multiple counterparties” to finance Idaho, Hutchison relayed. Those are expected to be updated as the OFS advances.
Despite the OFS release being pushed back, the company reiterated its commercial production guidance for H1/20 and its intent to stick to the defined project schedule.
Regarding eCobalt’s timeline for Idaho, Hutchison concluded, “We continue to allow for 24 months to complete construction and permitting of an off-site arsenic roaster, with production starting in mid-2020 and ramping up to full production in 2021.”
Hutchison reiterated TD’s Speculative Buy rating and CA$2.25 target price on the company.
Analyst Eric Zaunscherb with Canaccord Genuity also addressed eCobalt’s OFS in a research report of the same date, June 25. He noted the company needs more time to conduct additional tests and “redesign portions of its flowsheet,” which are now necessary due to the switch in roaster type to be used going forward. Consequently, eCobalt is targeting Q3/18 for release of the OFS.
Based on findings during metallurgical testing, eCobalt now plans to use a rotary kiln versus a fluidized bed in its concentrate extraction process for “maximized cobalt recoveries and sequestering of arsenic in a vitrified matrix,” Zaunscherb explained.
This plan revision came on the heels of another, earlier in the year, when the company decided to pursue delivering cobalt concentrate rather than “the more expensive cobalt sulphate,” a change that “resulted in enhanced project economics,” wrote Zaunscherb.
Now, the company is conducting bench-scale rotary kiln tests to determine the best way to consistently produce a cobalt concentrate whose arsenic level is less than 0.5%.
Zaunscherb concluded the report with a look to the future. “Two key milestones we expect to see in the near term, which we believe could result in a rerating of the company, are the completion of the feasibility study and finalizing project financing.”
Canaccord Genuity has a Speculative Buy rating and a CA$1.80 per share target price on eCobalt. Its stock is currently trading at around CA$1.04 per share.
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Disclosures from TD Securities, eCobalt Solutions, Initiating Coverage, June 14, 2018; Flash …read more
From:: The Energy Report