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First Cobalt Corp. (TSX.V: FCC) (OTCQB: FTSSF) Strengthens Position as Pure-Play Cobalt Company with US Cobalt Inc. Acquisition

  • The transaction is in line with First Cobalt’s vision for growth via organic and strategic opportunities
  • Company will expand its North American assets by gaining access to US Cobalt’s Iron Creek property in Idaho
  • The acquisition further cements the company’s status as provider of clean, conflict-free cobalt

The largest landowner in Canada’s prominent Cobalt Camp and a leading explorer for cobalt in the region, First Cobalt Corp. (TSX.V: FCC) (OTCQB: FTSSF) is poised to strengthen its position as a pure-play cobalt company in North America after the friendly acquisition of US Cobalt Inc. (TSX.V: USCO) (OTCQB: USCFF).

Under the agreement, First Cobalt will acquire all of US Cobalt’s issued and outstanding shares at an exchange ratio of 1.5 First Cobalt common shares per each US Cobalt common share, the two companies announced in a joint press release (http://nnw.fm/tW7WS). As part of the transaction, all US Cobalt stock options will be replaced with First Cobalt stock options and all US Cobalt warrants outstanding will participate on a comparable basis to US Cobalt shareholders, implying an equity value of roughly C$149.9 million on a fully diluted, in-the-money basis. As a result, existing shareholders of First Cobalt and US Cobalt will hold approximately 62.5 percent and 37.5 percent, respectively, of the combined company, if all US Cobalt warrants and options are exercised before the transaction is complete, the release said.

The acquisition has already been unanimously approved by the boards of directors of both companies. Before completion, the transaction also requires the approval of two-thirds of US Cobalt shareholders, who are scheduled to vote on the issue in May. It further needs to be accepted by the TSX Venture Exchange and to meet various other closing conditions, including customary deal protections such as non-solicitation agreements, among others.

Upon completion of the transaction, the combined entity will be uniquely positioned in the industry, with a strong balance sheet, a global institutional shareholder base, a proven management team and an enhanced profile on the capital markets.

Clean Cobalt

With this transaction, First Cobalt will further cement its position as a potential provider of clean, conflict-free cobalt. The global demand for cobalt has been growing exponentially lately as a result of the rapid development of the electric vehicle industry, which relies heavily on lithium-ion batteries that include cobalt. The same types of batteries are also used in popular electronic devices such as smartphones, laptops and tablets. The world’s leading provider of cobalt is the Democratic Republic of the Congo (DRC), but mining sites in the African nation remain highly controversial because of the use of child labor and other destructive practices.

The US Cobalt acquisition will help First Cobalt increase its output and position itself strategically as a leading non-DRC cobalt company, with mining assets located close to infrastructure and major technology and electric vehicle manufacturing hubs such as California and Michigan.

Three Major North American Assets

The US Cobalt acquisition is in line with First Cobalt’s commitment to company growth via organic and strategic opportunities. The transaction will strengthen the company’s position as a pure-play cobalt company with three significant cobalt assets in North America: the Canadian Cobalt Camp project in Ontario, US Cobalt’s Iron Creek project in the Idaho Cobalt Belt and the only permitted cobalt refinery in the region that can produce battery materials.

The Iron Creek property includes a historic mineral resource estimate of 1.3 million tons of grading 0.59 percent cobalt and 0.3 percent copper, non-compliant with Canada’s National Instrument 43-101. This year’s drilling program is already underway at the Idaho Iron Creek property, seeking to support a maiden mineral resource estimate that’s expected during this year. In combination with First Cobalt’s 50 historic mining operations in Ontario’s Cobalt Camp on over 10,000 hectares of land, and the only North American refinery capable of producing battery materials, Iron Creek is expected to help increase First Cobalt’s potential output and provide significant growth opportunities for shareholders of both companies.

“We foresee a shortage of cobalt over the next five years yet there are few companies doing significant work to identify new sources of supply. This transaction creates a larger platform to discover and develop cobalt projects for the growing electric vehicle market by combining high quality North American assets in two of the best cobalt jurisdictions outside the DRC. US Cobalt’s Idaho project complements our Canadian Cobalt Camp properties, offering upside potential for shareholders of both companies,” First Cobalt President and CEO Trent Mell explained in the news release.

Significant Benefits for Shareholders

US Cobalt shareholders have a lot to gain from the transaction, with immediate access to a significant premium on shares of 61.8 percent to its closing price and 58.5 percent based on both companies’ five-day volume-weighted average trading prices, as of March 13. Additionally, US Cobalt shareholders will be able to maintain a meaningful position in First Cobalt and reap the benefits of exploration and development projects. The US Cobalt exploration team will also join First Cobalt’s senior management, where it will contribute its experience in the Idaho Cobalt Belt.

“The transaction offers our shareholders an opportunity to benefit from a larger North American cobalt company with a portfolio of high quality assets and a strong balance sheet. US Cobalt shareholders will have meaningful ownership in a vertically integrated pure-play cobalt company with a proven and experienced management team that shares our commitment to creating long-term sustainable value. We are very proud of what the US Cobalt team has accomplished in a very short period of time. We look forward to advancing our original vision that demand for ethically-sourced cobalt is just beginning,” US Cobalt CEO Wayne Tisdale added.

For First Cobalt shareholders, the US Cobalt transaction and the Iron Creek property acquisition, in particular, strengthen and de-risk the company’s asset portfolio while also offering excellent resource potential in the short term. The transaction further gives First Cobalt the opportunity to leverage its refinery to process cobalt from two different jurisdictions and, ultimately, contributes to fulfilling the company’s mission to grow its presence in North America and become a leading provider of cobalt.

For more information, visit the company’s website at http://nnw.fm/FTSSF

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