NEW YORK, November 9, 2017 /PRNewswire/ --
In July 2017, France and Britain declared their intention to prohibit the sale of cars operating on fossil fuels by 2040 (http://nnw.fm/PnY5f), opening the door for automotive manufacturers to focus their future developments on electric vehicles (EVs). Cobalt is a critical element of the lithium-ion batteries used in EVs, and investors are starting to take notice that increasing demand for electric cars will likely push cobalt into a supply deficit, sending prices of the metal higher. As a result, cobalt producers are employing their expertise in geosciences and exploration to develop current mining assets and search for new deposits. Prominent among them is First Cobalt Corp. (TSX-V: FCC) (OTC: FTSSF) (FTSSF profile), a Canadian company focused on the development of its assets in the Cobalt Camp of Ontario mining area. First Cobalt is joined by Swiss-based Glencore Plc (OTC: GLNCY), Freeport-McMoRan, Inc. (NYSE: FCX), eCobalt Solutions, Inc. (OTC: ECSIF) and other companies endeavoring to meet the increased demand of cobalt from Tesla, Inc. (NASDAQ: TSLA) and other automakers leaning toward electric vehicles.
Nearly all the cobalt mined throughout the world is found as a by-product of nickel or copper, and on some occasions silver. The Democratic Republic of the Congo (DRC) is currently the largest producer of cobalt globally. However, the DRC is not attractive from an investment point of view due to the numerous incidents of unrest and political instability in the country. In addition, its mining industry is rife with exploitation and the use of child labor. This has led new cobalt producers to focus their mining and exploration efforts on North America.
While First Cobalt Corp. (TSX.V: FCC) (OTCQB: FTSSF) is primarily focused on its Greater Cobalt Project located near the aptly named Cobalt, Ontario, the company is in the middle of a three-way merger with Cobalt One Ltd. and CobalTech Mining Inc. Once the merger is finalized, First Cobalt will control over 10,000 hectares (nearly 25,000 acres) of prospective land and more than 50 historic mining operations in the Cobalt Camp in Ontario, Canada, as well as a portfolio of high-quality exploration assets, including a fully permitted refinery and a mill facility.
The Cobalt Camp is of considerable interest to the company, as an initial mineralogical assessment of sample material taken from various historical mines located throughout the Cobalt Camp show both cobalt-rich and silver-rich mineralization styles.
Earlier this week First Cobalt reported high-grade (up to 1.14 percent) cobalt from muckpile sampling at the historic Silver Banner mine at the northern part of the Cobalt Camp. These results confirm the presence of a productive vein system in the area, similar to that seen at the company's Bellellen (located within the Greater Cobalt Project), Keeley and Frontier mines.
"We have quickly identified several prospective cobalt targets within the First Cobalt, CobalTech and Cobalt One land packages and we are confident others will follow. As with Bellellen and Drummond, the positive results at Silver Banner make it an excellent candidate for additional work. The next task is to prioritize these targets for more focused exploration work and drilling through the winter months," First Cobalt president and CEO Trent Mell stated in the news release announcing the results (http://nnw.fm/h2EYi).
A look at the historic production of Silver Banner further emphasizes the company's optimism in the underexplored mafic volcanic rocks at the mine.
Mining at Silver Banner occurred intermittently from 1927 to 1958, producing approximately 40,000 oz of silver, some copper and unspecified amounts of cobalt. First Cobalt believes that the short production history of this mine may be attributed to a cobalt-rich and silver-poor vein system, making Silver Banner an "attractive drilling target for 2018" and a "high priority for immediate work."
The company's next step is to conduct follow-up work including shallow drilling near the historic workings to define the orientation of the vein system and test for the metal content of the veins as well as in the footwall and hangingwall rocks. Because similar mineralization occurs at the nearby historic Ophir mine, follow-up exploration work is being done over an area spanning approximately 25 square kilometers (9.65 square miles).
With strategic human capital in geosciences, mining, engineering and business development, First Cobalt is in a strong position to leverage its potential against an economic background that forecasts global consumption for refined cobalt will grow at an average rate of approximately 5 percent per annum for the next 10 years.
Furthermore, its focus on North America sets it apart from key industry players such as Glencore Plc (OTC: GLNCY), a mining giant with a market cap of over $70 billion. Though the company produces nearly a third of the world's cobalt annually, nearly two-thirds of its supply comes from the DRC, which has experienced a drop in cobalt production this year due to political instability. This resulted in a jump in cobalt prices, which reached $61,000 per ton in July 2017. Glencore's third-quarter results for 2017 showed cobalt production from its own sources of 19.8 kilotons year-to-date, a drop of 6 percent over the same period in 2016.
In May 2017, the world's largest publicly traded copper mining company, Freeport-McMoRan (NYSE: FCX) sold a majority stake in its Congolese Tenke Fungurume mine to the China Molybdenum Co Ltd (CMOC) for $2.65 billion. Freeport had a 70 percent holding in TF Holdings, which in turn held an 80 percent interest in the Tenke Fungurume copper mine, which is also one of the DRC's largest cobalt producers. In June 2017, the company agreed to terminate discussions with CMOC on the acquisition of its other cobalt assets, which include the Kokkola cobalt refinery in Finland and the Kisanfu exploration project in the DRC. But Freeport still intends to retain its cobalt business interests via a supply agreement with the Tenke Fungurume mine for the next 10 years at least. Freeport has a market cap of over $21 billion.
Another key industry player is eCobalt Solutions (OTCQB: ECSIF), a Canadian company with interests in base and precious metals, as well as uranium projects in Canada, the United States and Mexico. The company's cobalt interests are focused on the Idaho Cobalt Project (ICP), one of the few primarily cobalt deposits in the world, which leaves it unaffected by copper and nickel markets. eCobalt sees this development as an opportunity to divorce itself from the risks of operating in the volatile and politically unstable DRC. Initial engineering studies have indicated that this project has the potential to produce cobalt of high purity, which would be suitable for applications in aerospace.
On track to become one of the world's largest producers of lithium ion batteries, Tesla (NASDAQ: TSLA) will stand to benefit from - if not rely on - increased cobalt supply from North America. Valued at $51+ billion, Tesla's primary focus is to develop reliable and affordable electric cars. In 2015 Tesla launched its Gigafactory to meet its goal of producing 500,000 cars per year by 2018. This lofty goal would require today's entire global supply of lithium-ion batteries, according to the electric carmaker's website. As it stands, there is not enough cobalt production to meet the supply demands from Tesla and Chinese and European automakers over the next five years, according to a recent Financial Times article (http://nnw.fm/2DwoL).
This fact underscores the market potential for small and large-cap cobalt players willing to shift their focus and operations to areas outside the DRC and take advantage of increasing demand for cobalt amid heightened interest and push for EVs worldwide.
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