TORONTO, April 16, 2021 /CNW/ - First Cobalt
Corp. (TSXV: FCC) (OTCQX: FTSSF) (the "Company")
reported its financial results for the year ended December 31, 2020. The Company closed 2020 making
significant progress against its vision to produce the most
sustainable battery materials and entered 2021 poised for growth
and execution.
2020 in Review
The 2020 fiscal year was a turning point in the history of First
Cobalt, as the focus shifted from mineral exploration to near-term
cash flow from our permitted Canadian refinery. In March, the
Company produced a battery-grade cobalt sulfate assaying 21.4%
cobalt, surpassing the reference grade for sulfate pricing, with a
99.9% product purity. This second successful test program
illustrated the ability to treat different feedstocks using the
flowsheet of the Company's permitted hydrometallurgical facility in
Ontario, Canada.
First Cobalt published an engineering study in May that
estimated annual production of 5,000 tonnes of battery grade cobalt
from third-party feed, representing 5% of the total global refined
cobalt market – and 100% of North American cobalt sulfate supply.
In September, optimization studies lowered the operating cost of
the facility to a level competitive with global peers and estimated
the capital cost of the expansion and commissioning at US$60 million. With these results in hand, we
began building our technical team to execute on the project
alongside Ausenco Engineering.
In tandem with these measures, we took deliberate steps to
deliver on a mission of producing the world's most sustainable
cobalt. In August 2020, we joined the
Cobalt Institute and made a commitment to the highest standards of
responsible sourcing by agreeing to follow The Cobalt Industry
Responsible Assessment Framework (CIRAF) and commit to certifying
the First Cobalt Refinery under the Responsible Minerals Initiative
(RMI). In October, we published the results of a third-party Life
Cycle Assessment, which concluded that our facility would have a
carbon footprint generated through the production of one kilogram
of cobalt sulfate of 1.58 kg CO2 eq. compared to 3.25 kg
CO2 eq. for a benchmark refinery in Tongxiang,
China. The impact of producing
cobalt sulfate at First Cobalt's Canadian refinery rather than the
existing supply chain is the equivalent of taking more than 9,000
combustion engines off the road every year.
The year was capped off with the announcements of $10 million in funding from the Government of
Canada and the Government of
Ontario towards the refinery
construction. The Government of Canada is providing a $5 million interest-free loan through the Federal
Economic Development Initiative for Northern Ontario. The
Government of Ontario is providing
a $5 million non-repayable grant
through the Northern Ontario Heritage Fund Corporation.
"We are on a path to become the most sustainable producer of
cobalt in the world and the only company capable of supplying
battery-grade cobalt to the North American electric vehicle
market," said Trent Mell, President
and Chief Executive Officer. "The stage was set in 2020 with
the completion of engineering studies, metallurgical work and a
strategic investment from the Government of Canada and the Government of Ontario. In 2021 the story will be one of
execution, as we expand the First Cobalt Refinery in Canada and resume activities at our advanced
copper-cobalt project in Idaho."
2021 Milestones
The first quarter of 2021 was one of significant achievements
for First Cobalt. Kicking off the year was the announcement of
long-term cobalt hydroxide feed arrangements with Glencore and IXM
SA, a fully owned subsidiary of CMOC, which will provide a total of
4,500 tonnes of contained cobalt per year to the Refinery
commencing in late 2022. The contained cobalt will be
provided from Glencore's KCC mine and CMOC's Tenke Fungurume mine
and represents 90% of the projected capacity of the refinery.
In mid-January, First Cobalt commenced pre-construction
activities for the Refinery, including detailed engineering and the
tendering process for long lead equipment items.
The momentum that was created with the announcement of a
government investment in December
2020 gave us an opportunity to complete a $9.8 million financing at roughly a 100% premium
to the average share price in 2020. The funds will mainly be used
for the advancement of the Refinery project.
In February, First Cobalt implemented an at-the-market equity
program (ATM Program) that allows First Cobalt to issue up to
$10 million of common shares from
treasury to the public from time to time, at the Company's
discretion. To date, there have been no share issuances made under
the ATM Program.
March was a successful and very busy month for First Cobalt.
Starting off the month was the announcement of the completion of
transaction with Kuya Silver Corporation to sell a portion of our
exploration assets in the Canadian Cobalt Camp and to form a joint
venture to advance the remaining mineral assets. Kuya
acquired a 100% interest in the Kerr area properties for total
consideration of $4 million,
comprised of $1 million in cash and
$3 million in Kuya shares. This
transaction allowed First Cobalt to monetize certain non-core
assets to increase cash and cash equivalents on hand to be used for
its refinery project. We are pleased to report that the value of
our Kuya share position has appreciated notably since the
transaction closed.
Later in the month, First Cobalt announced it had signed a
flexible, long-term, offtake agreement with Stratton Metal
Resources Limited for the sale of future cobalt sulfate production
from the Refinery. First Cobalt will have the option to sell
up to 100% of its annual cobalt sulfate production to Stratton
Metals, subject to a minimum annual quantity. The contract
term is five years, with prices based on prevailing market prices
of cobalt sulfate at the time of shipments. The arrangement
provides the flexibility for the Company to enter offtake contracts
with OEMs and their suppliers, which reduces amounts made available
to Stratton Metals.
First Cobalt then announced that it had entered into an
exclusivity agreement with a lender for US$45 million in debt financing. The
exclusivity period provides the basis for which the lender will
complete its due diligence requirements. Engineering work,
permitting activities, and the financing process remain on schedule
for a commencement of construction in mid-2021.
First Cobalt entered into a loan amendment agreement with
Glencore to repay the full amount of an existing loan,
approximately US$5.5 million
inclusive of capitalized interest, by issuing common shares of
First Cobalt. The shares were issued at a 15% discount
to market, consistent with the original loan agreement terms which
gave Glencore the right to convert the balance owing to shares of
First Cobalt at a discount of 15% at maturity. A total of
approximately 23.8 million shares were issued, resulting in
Glencore owning approximately 4.8% of First Cobalt's issued and
outstanding shares.
A final catalyst in Q1 was the announcement of a study to
process black mass from recycled batteries as a supplemental source
of feed for the refinery in a Phase 2 expansion. First Cobalt's
battery recycling circuit would be integrated into the Company's
primary cobalt sulfate refinery and operated by the same team.
Additional capital expenditure is expected to be modest under a
base case scenario. The Company's hydrometallurgical refinery is
expected to provide higher yields at a lower cost and at
significantly lower energy intensity, compared to traditional
pyrometallurgical facilities. Closed loop recycling of lithium-ion
batteries will serve the electric vehicle (EV) market in
North America and Europe and in the short term will benefit from
higher availability of cobalt-rich consumer electronics.
Outlook
Our vision is to provide the world's most sustainable cobalt to
the electric vehicle industry. We believe that zero emission
vehicle owners care about the carbon footprint of the EV supply
chain and we are committed to a carbon neutral future.
Plans are progressing to recommission and expand the First
Cobalt Refinery with a view to becoming the only refiner of
battery-grade cobalt sulfate in North America. The primary
focus for 2021 is advancing the First Cobalt Refinery, with
construction commencing in mid-2021, keeping us on track for
commissioning in late 2022.
We are already thinking about the next stage of the Company's
growth and we are actively studying further expansion opportunities
for the refinery, including the production of a suite of battery
materials from recycled batteries (black mass).
First Cobalt also intends to increase exploration activities at
its flagship development asset in Idaho.
The First Cobalt Refinery (Canada)
Most of the cobalt consumed today is mined in the Democratic Republic of Congo and then shipped
to China for refining, where 80%
of battery-grade cobalt is produced. North America is 100% reliant on imports of
cobalt sulfate. There are no cobalt sulfate refining facilities
operating in North America, which
gives the First Cobalt Refinery a strategic advantage in the
electric vehicle supply chain.
In 2020, engineering study results were announced on the
expansion of the refinery that demonstrated that the facility could
become a significant, globally competitive producer of cobalt
sulfate for the electric vehicle market.
Management believes that the refinery could play an important
role in North America as a source
of refined cobalt for the manufacturing of lithium-ion
batteries.
At a high-level, the First Cobalt's refinery plan is as
follows:
- Divert ethically sourced African mine production from
China to North America
- Recommission and expand the existing, permitted Canadian cobalt
refinery
- Produce cobalt sulfate in Canada for use in the North American and
European EV markets
- Continue to expand capacity of the refinery to meet demand from
a growing North American electric vehicle market by treating
additional mine supply and/or recycled battery material known as
black mass
Engineering studies completed in 2020 determined the refinery
could produce 25,000 tonnes of battery-grade cobalt sulfate
annually (equating to 5,000 tonnes of contained cobalt), which
would represent 5% of the total current refined cobalt market and
100% of North American cobalt sulfate supply.
First Cobalt plans to finance the refinery expansion capital
costs with a mix of debt and equity, weighted more heavily towards
debt instruments. In March
2021, First Cobalt announced it had entered an exclusivity
agreement with a leading financing institution to provide
US$45 million of debt financing and
was entering the due diligence phase. This debt component
would be the final piece required for the capital costs to be fully
financed.
The current estimated timeline to bring the refinery into
production is outlined below:
Q2 2021
|
Complete lender due
diligence and finalize project financing
|
Q2-Q3 2021
|
Receive final permit
amendment approvals necessary to commence on-site
construction
|
Q3 2021
|
Complete detailed
engineering and commence construction activities
|
Q3 2021-Q3
2022
|
Complete construction
activities and equipment installation
|
Q4 2022
|
Commencement of
production
|
The Iron Creek Project (USA)
The Iron Creek copper-cobalt project is located in Idaho, USA, along the most prolific trend of
cobalt mineralization in the U.S., the Idaho Cobalt Belt. The
property consists of mining patents and exploration claims covering
an area of 2,600 acres. Discovered in 1946, explored extensively
from 1970 to 1972, the area then remained relatively dormant until
2017. First Cobalt has completed over 29,000 metres of diamond
drilling and significant infrastructure is in place to support
multiple drills and underground activity for further work. Historic
underground development includes 600 metres of drifting from three
adits and an all-weather road connecting the project to a state
highway.
First Cobalt announced a new mineral resource estimate for the
Iron Creek copper-cobalt project in early 2020. The indicated
resource is currently 2.2 million tonnes grading 0.32% cobalt
equivalent (0.26% cobalt and 0.61% copper) containing 12.3 million
pounds of cobalt and 29.1 million pounds of copper. The
inferred mineral resource is an additional 2.7 million tonnes
grading 0.28% cobalt equivalent (0.22% cobalt and 0.68% copper) for
an additional 12.7 million pounds of cobalt and 39.9 million pounds
of copper. The Company believes there is significant opportunity to
increase the size of the deposit.
Drilling to date has delineated a strike length of Iron Creek
mineralization to nearly 900 metres and mineralization has also
been traced to depth over 650 metres below surface. The
mineralization remains open along strike and downdip. Management
believes that there is potential to continue to expand the size of
the Iron Creek resource. In Q4 2020, First Cobalt completed a new
geophysics program at the property which identified several new
drill targets.
With a strengthening cobalt market, a 2021 drill program is
being designed to test for the extensions of the Iron Creek
copper-cobalt resource. The areas with high chargeability
anomalies from the geophysical survey that are considered to be
associated with mineralization along this horizon have been
prioritized for this program. The objective over the next two
years is to meaningfully increase the resource size at Iron Creek
and advance the asset towards a development decision.
Other cobalt and copper targets exist on the First Cobalt's
property away from the Iron Creek resource which remain interesting
for future exploration.
Capital Structure & Liquidity
From January 1, 2021, through to
the end of Q1 the Company received an additional $6 million in cash proceeds relating to warrant
exercises. In combination with the January bought-deal and
the closing of the Kuya Silver transaction, First Cobalt has
approximately $19 million of working
capital on hand, not including the $10
million of refinery construction funding pledged by the
Ontario and Canadian
Governments. The Company has not issued any shares under its
approved ATM Program.
The US$45 million debt financing
process is progressing through the due diligence phase with an
exclusive lender. In conjunction with the financing milestones
already achieved and noted above, this debt component is the final
piece required for the refinery capital costs to be fully
financed.
ESG Commitments
Cobalt is essential to the global transition to electric
mobility and First Cobalt is committed to sustainable production
and employing industry leading ESG practices at its Refinery.
The Company will provide a clean and ethical supply of cobalt
for the EV market from large, commercial mining operations that
provide ethically sourced cobalt and the highest quality cobalt
hydroxide globally. As a member of the Cobalt Institute, the
Company will follow the Cobalt Industry Responsible Assessment
Framework (CIRAF), an industry-wide risk management tool that helps
cobalt supply chain players identify production and sourcing
related risks. We have also committed to the Responsible Minerals
Initiative, which will include a third-party audit of the systems
in place to responsibly source minerals in line with current global
standards.
We will have a lower quartile carbon intensity cobalt by virtue
of hydro powered mining operations supplying our hydro powered
refining operation. In October 2020,
results were released from a Life Cycle Assessment that affirmed
the low carbon footprint of the Refinery. The report
concluded that the environmental impacts associated with refining
cobalt at the First Cobalt Refinery will be materially lower than
the published impacts of a leading Chinese refiner.
First Cobalt believes that this and other ESG practices will
help it establish a premium brand of cobalt sulfate for the
electric vehicle market.
COVID-19 Response
Despite the current market instability, First Cobalt remains
confident in the electric vehicle revolution and has a strong
business plan with an experienced team that continues to execute on
corporate objectives.
First Cobalt continues to advance its plans for the refinery and
has not encountered any adverse effects relating to COVID-19 to
date. Best practice protocols are being developed for on-site
activity later this year to ensure the health and safety of all
personnel.
Incentive Plan Grants
The Company has issued 218,116 Deferred Share Units (DSUs) to
directors as compensation for their services. In accordance with
the Company's 2019 Long-Term Incentive Plan, the DSUs were priced
based on yesterday's closing price of the Company's common shares
on the TSX Venture Exchange. DSUs vest immediately but may not be
exercised until a director ceases to serve on the Board, thus
aligning director interests with shareholders. The Company has also
issued 115,000 Restricted Share Units (RSUs), 1,575,000 Performance
Share Units (PSUs) and incentive grants to employees to purchase an
aggregate of 575,000 common shares of First Cobalt exercisable at
yesterday's closing price of $0.345
for a period of five years. RSUs will vest in three equal tranches
and will be settled in shares based on yesterday's closing price.
PSUs will be subject to achievement of strategic priorities
relating to the refinery project and the Iron Creek project and
will vest in two equal tranches, settling in shares based on
yesterday's closing price. Long-term incentive grants are a key
retention and incentive tool for key employees as well as new
recruits and remains subject to the approval of the TSX Venture
Exchange.
About First Cobalt
First Cobalt's mission is to be the most sustainable producer of
battery materials. The Company owns North
America's only permitted cobalt refinery, a critical asset
in the development and manufacturing of batteries for electric
vehicles. First Cobalt also owns the Iron Creek cobalt-copper
project in Idaho, USA as well as
several significant cobalt and silver properties in the Canadian
Cobalt Camp.
Neither TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in policies of the TSX Venture
Exchange) accepts responsibility for the adequacy or accuracy of
this release.
Cautionary Note Regarding Forward-Looking
Statements
This news release may contain forward-looking statements and
forward-looking information (together, "forward-looking
statements") within the meaning of applicable securities laws and
the United States Private Securities Litigation Reform Act of 1995.
All statements, other than statements of historical facts, are
forward-looking statements. Generally, forward-looking statements
can be identified by the use of terminology such as "plans",
"expects', "estimates", "intends", "anticipates", "believes" or
variations of such words, or statements that certain actions,
events or results "may", "could", "would", "might", "occur" or "be
achieved". Forward-looking statements involve risks, uncertainties
and other factors that could cause actual results, performance, and
opportunities to differ materially from those implied by such
forward-looking statements. Factors that could cause actual results
to differ materially from these forward-looking statements are set
forth in the management discussion and analysis and other
disclosures of risk factors for First Cobalt, filed on SEDAR at
www.sedar.com. Although First Cobalt believes that the information
and assumptions used in preparing the forward-looking statements
are reasonable, undue reliance should not be placed on these
statements, which only apply as of the date of this news release,
and no assurance can be given that such events will occur in the
disclosed times frames or at all. Except where required by
applicable law, First Cobalt disclaims any intention or obligation
to update or revise any forward-looking statement, whether as a
result of new information, future events or otherwise.
SOURCE First Cobalt Corp.