First Cobalt Corp. (FCC.V) aims to be the first vertically integrated cobalt company in North America. FCC.V controls over 10,000 hectares of prospective land, including a cobalt project in the United States (Iron Creek) and significant silver and cobalt assets in the Canadian Cobalt Camp, as well as, North America's only permitted cobalt refinery.
Previous coverage was issued on May 2018, October 2018, May 2019, and March 2020.
News releases
Mar. 17 - Provides Corporate Update - 1) Refinery studies nearing completion, including a prefeasibility study for a restart of the First Cobalt Refinery and a definitive feasibility study for an expansion scenario; 2) Off-take discussions are underway, with several automotive companies interested in a North American supply of battery grade cobalt; 3) Refinery capital cost is not dependent on equity markets and is expected to be funded by one or more corporate, private equity, debt and government counterparts. 4) Strong balance sheet with sufficient cash on hand for the next 12 months and additional funds remaining from a Glencore advance to continue work on the refinery.
The Company is contemplating initially recommissioning the refinery in partnership with Glencore in Q4 2020 and then expanding production as early as the second half of 2021.
Mar. 30 - Produces Battery Grade Cobalt Sulfate. Using its refinery flow sheet but this time with a different feed source.
Definitive Feasibility Study in final stages with completion now anticipated in one month.
Apr. 15 - Increases U.S. Land Position by 50%. The expanded property contains the Iron Creek cobalt-copper deposit, the Ruby target and several other surface exposures of cobalt-copper mineralization; 43 new claims have been staked to the west of the Iron Creek Project, expanding the total area from 1,700 acres to over 2,600 acres.
May 1 - To Host Investor Call on Refinery Feasibility Study Results.
May 4 - Announces Positive Feasibility Study Results for Canadian Cobalt Refinery Expansion. Annual production of 25,000 tonnes of battery grade cobalt sulfate from third party feed, representing 5% of the total global refined cobalt market and 100% of North American cobalt sulfate supply.
Initial capital estimate of $56 million and an operating cost estimate of $2.72/lb of cobalt produced, which is competitive with global markets. Estimates$139 million after-tax net present value (NPV) using an 8% discount and 53% after-tax internal rate of return (IRR), representing a payback period of only 1.8 years.
May 13 - Announces $2 Million Work Program to Advance Cobalt Refinery Plans. The program is intended to build upon the successful feasibility study completed on May 4 to further improve the project's long-term success and viability.
Jun. 24 - Joins Cobalt Institute, Strengthens Commitment to ESG Practices. A key part of the Institute's mandate is to promote the responsible and sustainable production and use of cobalt. In connection with this membership, the Company intends to qualify the First Cobalt Refinery under the Responsible Minerals Initiative (RMI).
First Cobalt is in the initial stages of quantifying and benchmarking the expected carbon footprint of the First Cobalt Refinery. To assist with this work, the Company has obtained a grant of $50,000 from the National Research Council of Canada Industrial Research Assistant Program (NRC IRAP) to model its greenhouse gas (GHG) emissions and identify opportunities to reduce its carbon footprint throughout the refining process.
Jul. 10 - First Cobalt Announces Filing of Refinery Study: The results were previously disclosed on May 4, 2020. The report includes additional details related to the underlying assumptions used in the engineering study.
The company issued 1,144,643 Deferred Share Units (DSUs) to directors and certain officers as compensation for their services. It also issued 1,050,000 Restricted Share Units (RSUs) and incentive grants to employees to purchase an aggregate of 2.2 million common shares of First Cobalt exercisable at $0.14 for a period of five years.
Jul. 22 -Provides Refinery Project Update: 1) Intends to move directly to an expansion scenario and conduct pilot plant work at third party facilities. 2) Optimization studies are advancing, with significant opportunities identified to lower operating costs. 3) Financing discussions are entering phase two, with proposals under review with CIBC.
In consultation with Glencore and prospective EV partners, the Company concluded that the optimal economic decision is to conduct pilot plant testing at third party sites and focus construction efforts on the 55 tpd expansion.
Based on work completed to date, the Company is confident to demonstrate higher recoveries in Q3-Q4 2020.
Aug. 6 - Evaluates its Canadian Silver Portfolio: Undertaking an internal review of its silver projects in Ontario, Canada, with a view towards value creation for shareholders by potentially spinning out, divesting, or joint-venturing these non-core assets in what is a greatly improved silver market.
First Cobalt holds the largest land package in the historical silver mining camp of Cobalt, Ontario, which contains more than 50 past-producing mines, including some of the region’s largest high-grade silver producers.
In light of a strong silver market, the Company has received inquiries about its silver assets and management has commenced a review of opportunities to create value from non-core portfolio holdings.
Aug. 11 - Announces Private Placement: $2 million non-brokered private placement for (i) 6,250,000 units ("Flow-Through Units") at a price of $0.16 for gross $1 million (the "FT Offering") and (ii) 7,142,857 units (the "Units") of the Company at a price of $0.14 per Unit (Warrant $0.21 cents) for gross proceeds of $1 million (the "Offering").
Proceeds of the Offering will be used by the Company to fund the advancement of First Cobalt's silver assets in Ontario and the remaining proceeds will be used for general corporate purposes.
Aug. 17 - Appoints Project Development Vice-President. Mark Trevisiol as Vice-President, Project Development. In this capacity, Mark will have overall responsibility for the recommissioning and expansion of the First Cobalt Refinery.
Aug. 18 - Upsizes Private Placement: increased non-brokered private placement from $2 million to $2.5 million.
Aug. 26 - Announces Annual Meeting Results: All other resolutions (management information circular) were approved.
Aug. 28 - Completes $2.5 Million Private Placement: Issued 8,225,000 units ( "Flow-Through Units") at a price of $0.16 per Unit for gross proceeds of approximately $1.3 million and 8,528,643 units (the "Units") at $0.16 per Unit for gross proceeds of approximately $1.2 million. Insiders subscribed for an aggregate of 962,500 Flow-Through Units under the Offering.
Sep. 10 - Joins Critical Materials Institute: First Cobalt has partnered with researchers at the Colorado School of Mines on a proposal to fund a project on improving the extraction of cobalt from ore from the Iron Creek cobalt-copper deposit in Idaho. The two-year project is aimed at modifying conventional methods of extraction to reduce the amount of waste material processed and to increase the concentration of cobalt in material to be refined.
Sep. 23 -Comments on Tesla Battery Day: Battery manufacturers have instead opted to lower the amount of cobalt in a cell to decrease the cost while preserving the integrity of the battery. This is the battery evolution trend almost all market experts are predicting, with the nickel-cobalt-manganese (NCM) cathode remaining the dominant chemistry.
Cobalt will continue to play an essential role in long range vehicles, keeping cars safe and prolonging battery life.
Contrary to speculation, cobalt will not be taken out of the battery anytime soon, reinforcing our business plan.
The evolution of battery technology towards lower cobalt content is positive from the perspective of EV penetration rates and for cobalt as a critical input.
Sep. 24 - Announces 13% Operating Cost Reduction for Canadian Cobalt Refinery Project. The Company now estimates operating costs of $2.36 per pound of cobalt produced, which represents a 13% reduction that improves refinery margins, enhances project economics, and further solidifies the Refinery's global competitiveness.
Operating costs estimate reduced from $2.72/lb of cobalt produced to $2.36/lb, resulting in approximately $4 million of increased annual pre-tax cash flows compared to results in the May 4 engineering study. Updated capital estimate of $60 million compared to $56 million in the original engineering study.
Glencore and First Cobalt have established a Joint Technical Committee that continues to work on further technical and cost enhancements to the refinery. Final permit amendments and closure plan on track to be submitted before the end of the year. Financing process has moved to phase 2 and the Company is assessing several third-party financing proposals as discussions continue to advance with the private sector and government agencies.
Summary
Refinery
In March, FCC.V provided an update laying the course for the rest of 2020. Delivering the refinery study along with reporting preliminary discussion with off-take partners were underway. Notably, the release mentioned that:
Refinery capital cost is not dependent on equity markets and is expected to be funded by one or more corporate, private equity, debt and government counterparts.
FCC.V also reported to have "sufficient cash on hand for the next 12 months". The company reiterated its objective of recommissioning the refinery with Glencore in Q4 2020 and expanding production as early as the second half of 2021.
In late March, FCC.V reported a significant milestone: the production of Battery Grade Cobalt Sulfate at the Refinery.
In early May, it announced a Positive Feasibility Study Results.
Initial capital estimate of $56 million and an operating cost estimate of $2.72/lb of cobalt produced, which is competitive with global markets. Estimates$139 million after-tax net present value (NPV) using an 8% discount and 53% after-tax internal rate of return (IRR), representing a payback period of only 1.8 years.
Thereafter FCC.V disclosed a $2M Work Program to advance the refinery plan and the work of the feasibility study.
In late July, First Cobalt reported that it was moving directly to expansion scenario (55 tpd).
In consultation with Glencore and prospective EV partners, the Company concluded that the optimal economic decision is to conduct pilot plant testing at third party sites and focus construction efforts on the 55 tpd expansion.
FCC.V reported that it would be able to show higher recovery rate in Q3-Q4 2020. Also mentioned; financing discussions are entering (phase II) with proposal review with CIBC.
Recently, (Sep. 24) FCC.V announced a 13% cost reduction.
Operating costs estimate reduced from $2.72/lb of cobalt produced to $2.36/lb, resulting in approximately $4 million of increased annual pre-tax cash flows compared to results in the May 4 engineering study. Updated capital estimate of $60 million compared to $56 million in the original engineering study.
Iron Creek
In April, FCC.V announced that it was increasing its land position by 50%: In total the company reported "43 new claims have been staked to the west of the Iron Creek Project, expanding the total area from 1,700 acres to over 2,600 acres".
Silver-Cobalt Camp
In early August, FCC.V announced that it was planning to conduct an "internal review" of its silver properties in Ontario. Specifically, the company mentioned " spinning out, divesting, or joint-venturing" to unlock shareholder value.
First Cobalt holds the largest land package in the historical silver mining camp of Cobalt, Ontario, which contains more than 50 past-producing mines, including some of the region’s largest high-grade silver producers.
In connection with this effort FCC.V launched a $2M (non-brokered placement) which it later increased to $2.5M. In less than 30 days, First Cobalt closed the offering; Flow Through Units at $0.16 cents for $1.3M, and Standard Units at $0.16 cents for $1.2M (Warrant $0.21 cents) . Insider participation was noted $0.96M Flow Through Units or 12% of the offer.
Memberships
In June, First Cobalt joined the Cobalt Institute enhancing its commitment to ESG Practice. It reported being in the initial stages of quantifying the expected carbon footprint of the First Cobalt Refinery. First Cobalt reported obtaining a grant of $50,000 from the National Research Council of Canada Industrial Research Assistant Program (NRC IRAP) to model its greenhouse gas (GHG) emissions and identify opportunities throughout the refining process.
In September, FCC.V joined the Critical Material Institute. It has reportedly partnered with researchers at the Colorado School of Mines on a proposal to fund a project on improving the extraction of cobalt from ore from the Iron Creek cobalt-copper deposit in Idaho. The two-year project is aimed at modifying conventional methods of extraction to reduce the amount of waste material processed and to increase the concentration of cobalt in material to be refined.
In Short
First Cobalt continues to execute and deliver on the plan it had set for the refinery in March 2020. In essence, FCC.V has made significant progress; advancing the refinery and reducing its operating cost.
First Cobalt is still working on means to reduce cost further and de-risk the project. Financing discussions have progressed to to phase II and are under review with the assistance of CIBC. As of last earnings report (June 30) FCC.V reported cash of $3,580,789 which was relatively healthy given its activity at the time.
In addition, the expansion of Iron Creek and the internal review to unlock the value of the Silver-Cobalt Camp are considered positive development along with the new membership with the Cobalt and Critical Metals Institute.
Noted was the amount of insider sales. However, it is believed to be attributed to the timing of the Silver-Cobalt Camp placement participation. Nonetheless, keeping an eye for additional transactions and the posted date is wise.
To date, FCC.V has been getting a considerable amount of press but the impact on valuation to date as been mute.
Indeed, valuation has remained stagnant throughout the period. Eight Capital did issue a price target $0.60 cents but many factors are needed to reach this target. Remember, the initial support from Glencore dates back more than a year ago (May & August 2019) and FCC.V will need additional funds ($60M) to advance the refinery project forward.
Another factor that has not help in influencing valuation is the fact that FCC.V has passed a proposition to permitting a consolidation between (1 to 5 and 7) as it see fit in the future at the last AGM (August 25th).
Although the outcome of the Silver-Cobalt Camp review can be a catalyst in unlocking value in the short term, the timing of the consolidation in relation to the detailed delivery of the funding package for the refinery remains at issue.
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