NetworkNewsWire Editorial Coverage: Demand for high-efficiency batteries is leading to growth in the cobalt industry, but new ventures are threatened by the Democratic Republic of Congo’s (DRC) dominance in mining and China’s in processing. Some companies are now trying to break this stranglehold, with First Cobalt Corp. (TSX.V: FCC) (OTCQX: FTSSF) (FTSSF Profile) establishing the largest integrated operation in North America and eCobalt Solutions, Inc. (OTCQX: ECSIF) joining in with the construction of a mine in Idaho. Katanga Mining Ltd Ord (OTC: KATFF) dominates the DRC-sourced market despite legal troubles besetting its mining operation in the country. The backing of parent company Glencore PLC ADR (OTC: GLNCY) may give Katanga the resources to weather the storm and allow these linked companies to become the world’s largest producers in cobalt. Meanwhile, investment companies such as Cobalt 27 Capital Corp. (TSX.V: KBLT) are investing in both cobalt and its producers, showing the wider faith the market has in this mineral.
A Vulnerable Industry
Cobalt mining is vital to supporting many up-and-coming technologies, in particular the batteries needed to power electric cars, but, while it is an increasingly important industry, it is also a vulnerable one. Two-thirds of the world’s cobalt production currently takes place in the Democratic Republic of Congo (DRC), with this proportion expected to rise past 70 percent by 2021. The processing of cobalt is dominated by China, which produces 80 percent of the cobalt mineral used in lithium-ion batteries. Of the processing not done by the Chinese, half involves materials from a majority-Chinese-owned mine in the DRC. Global supplies of cobalt are therefore controlled by these two countries and vulnerable to the political and economic climate there.
Cobalt mining is extremely profitable, but, as long as it is tied to just two countries, it is also very vulnerable. Is there another path for cobalt companies?
The executives at First Cobalt Corp. (TSX.V: FCC) (OTCQX: FTSSF) certainly think so. A North American mining company, First Cobalt is set on diversifying its sources of cobalt production.
The company’s operations are based in Canada (http://nnw.fm/2ucsI), where it has acquired a string of claims in former silver mining country. Cobalt is often found in the ground alongside other minerals in these abandoned claims, and former exploitation has left the cobalt exposed. What makes First Cobalt’s camp unique is that it is a silver-cobalt camp rather than the more common copper-cobalt operation. With cobalt now an important resource, First Cobalt has been able to obtain these abandoned mines with the aim of using them to produce new wealth.
The company has already acquired 50 historic mines covering nearly 25,000 acres of Canadian mining country, making it the largest landowner in the country’s cobalt region. This provides a unique opportunity to bring meaningful cobalt production into North America, reducing the vulnerabilities to political and social unrest that have come with work in the DRC. And moving production closer to North American tech companies also provides the potential to reduce shipping, possibly providing cobalt more quickly and cost effectively for these companies.
First Cobalt has been quick to make the most of this opportunity. By combining a century of historic mining data with modern analytical techniques, it has quickly identified the most likely locations of cobalt deposits and moved to exploit them. The results of test drilling quickly produced positive results. Recent work near Kerr Lake (http://nnw.fm/fmjQ0) has discovered mineral deposits at least twice the size of those previously known to exist there. Through a vigorous strategy of expansion and exploration, First Cobalt has created one of the most valuable potential sources of cobalt in North America.
A Larger Cobalt Company
First Cobalt is now reinforcing their position through an ongoing merger with US Cobalt, Inc. (TSX.V: USCO) (OTCQB: USCFF), expected to close the end of this month. The absorption of US Cobalt into First Cobalt is a friendly transaction, with the two companies working together to combine into a more powerful and streamlined cobalt operation. This adds the Iron Creek Cobalt Project in Idaho to the company’s resources, including a historic resource (non-compliant with NI 43-101) of 1.3 million tons grading 0.59% cobalt, allowing it to mine significant cobalt deposits in the United States as well as Canada.
The merger takes First Cobalt from a cobalt explorer to a vertically integrated cobalt solution, with potential to cover the mining, refining and sale of cobalt in the growing North American battery market. It’s an invaluable position to be in, as interest in electric cars grows, and American industry moves to serve this market. It also makes First Cobalt one of the leading politically “clean” cobalt companies, remaining clear of the human rights issues and regulatory turmoil that have affected mining operations in the DRC.
With a strong balance sheet, a global institutional shareholder base and a proven management team, the merger should create a greater profile in the global markets for the company. First Cobalt was already potentially in a strong position to secure finance, with a raise in late 2017 bringing in $30.6 million (http://nnw.fm/831pS). This has helped the company keep up its excellent financial performance, with share prices rising 350 percent over the course of 2017 to give it the largest market cap of any cobalt exploration company in the world.
First Cobalt President and CEO Trent Mell said, “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.”
North America’s Only Cobalt Refinery
One of the most important features of this integrated company is the ownership of a unique asset — the only permitted refinery in North America capable of producing battery-grade cobalt.
Located east of the town of Cobalt in Ontario, the refinery is currently inactive, having been shut down in 2015. Care and maintenance of the facility has continued, and now First Cobalt is investigating the potential not only to start it up again but also to expand the facility (http://nnw.fm/5jUH3). A study being conducted by engineering firm The Primero Group will provide an assessment of the costs and practicalities of reopening and expansion. This would allow First Cobalt to process minerals from mines in both Ontario and Idaho, as well as to process materials for third parties that don’t have their own facilities.
On the subject of the refinery, Mell said, “We view the First Cobalt Refinery as a strategic asset as it is the only permitted cobalt refinery in North America capable of producing battery materials.” It’s this unique facility that puts First Cobalt in a position to become the first fully integrated North American clean cobalt producer, providing a reliable source for an American market previously reliant on the DRC and China.”
Other Cobalt Market Players
In the wider cobalt market, companies are profiting from the rise in demand for the mineral while facing challenges stemming from the sources of their products.
Katanga Mining Ltd Ord (OTC: KATFF) is Swiss giant Glencore’s way into the cobalt market. The company has worked in partnership with others in the DRC to transform the Katanga copper mine into a major source of cobalt. It has the resources to run a major site such as Katanga, but its presence there has made the company vulnerable as the DRC’s politicians seek to assert control and extract more wealth from cobalt production.
Glencore PLC ADR (OTC: GLNCY) itself is looking to profit from the rise in the cobalt market. The company predicted a 42 percent rise in cobalt production at the Katanga mine (http://nnw.fm/M9k7W) over 2018, along with a smaller increase in copper production. The impact of a recent lawsuit over the mine remains to be seen, but the company has the resources to put up a fight in court.
Cobalt 27 Capital Corp. (TSX.V: KBLT) is an investment company focused on the cobalt market. It is best known for stockpiling physical supplies of cobalt — at 3,000 metric tons (http://nnw.fm/dCir5) this is the largest privately owned supply in the world. It has also acquired rights and shares in other companies (http://nnw.fm/FEVs0), helping to finance a growing industry.
In North America, the only other significant cobalt producer is cobalt Solutions, Inc. (OTCQX: ECSIF). With a mine in Idaho that could be up and running in the next 18 to 24 months, it’s showing the growing faith of investors in the long-term future of North American cobalt. As North American producers find their own niches, collaboration between them could bring extra profit for all parties.
Demand for batteries will ensure that the cobalt market keeps growing. And as companies shift away from reliance on China and the DRC for production and processing, we’re starting to see a diverse and exciting market.
For more information about First Cobalt Corp, please visit First Cobalt Corp. (TSX.V: FCC) (OTCQX: FTSSF).
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