Cobalt Blue (COB) - Technical Analysis

Cobalt Blue Holdings Limited is a cobalt development and energy storage company with a focus on bringing the Broken Hill Cobalt Project into production. The Broken Hill project is located in New South Wales, Australia. The company also seeks to identify and develop other green energy opportunities to expand its strategic cobalt portfolio, including battery technologies. 

Merlin Marr-Johnson caught up with Dr Andrew Tong, Executive Manager, Cobalt Blue Holdings. Andrew is a metallurgist with over 2 decades of experience in project development, mining, and processing. He previously held senior management corporate roles including CEO and Board roles for Compass/Northern Territories Resources, Goldsmith Resources, and Australia Gold. He is an inventor that holds multiple patents for processing minerals that contain base and precious metals. He is a member of the AUSIMM (Australasian Institute of Mining and Metallurgy).

Company Overview

Cobalt Blue Holdings seeks to invest in energy storage technologies that complement the production of cobalt in commercializing battery and associated energy storage technologies. The company was founded in 2016 and is headquartered in Australia. It is listed on the Australian Stock Exchange (ASX: COB), and the OTC Markets (OTCQX: CBBHF). 

Cobalt Blue is developing the Broken Hill Cobalt project in Australia. The company is looking to become the top 5 global cobalt producers (ex-Africa). The project is currently in the development phase and is expected to enter production by 2025. The company is currently carrying out a Feasibility Study. 

Plant Operations

Cobalt Blue Holdings is building a team and plans to transition the workforce to the project site in the near future. Following a successful run for the pilot plant, the company is now working towards a demonstration plant with an annual capacity of 3,000t concentrate. 

The company's pilot plant has been successful in treating 90t ore, producing multiple samples of mixed hydroxide-cobalt with nickel acting as an intermediate. The company has also produced cobalt sulphate from this plant. It has dispatched the products to several parties for feedback and evaluation. 

The feed rate for the pilot and demonstration plants are similar, with a running capacity of 200kg/hour. Currently, the company is testing out the batch operations and plans to run the demo plant as a 24/7 operation. This demo plant is set to begin operating by March 2022 and is scheduled to run for 4-5 months. 

The pilot plant had a feed batch of 90t. This capacity was upgraded to 3,000t for the demonstration plant. The processing flow sheet for a 600t concentrate output was successfully tested, however, the company needs to test out the plant operation with the supply material. The plant will be used for generating bulk samples that would form the basis for off-take negotiations in 2022. To expand the capacity of the pilot plant, the company plans to carry out upgrades to the control system and feeder hoppers, leading to a 24/7 operation. 

Bulk Sample Collection

Cobalt Blue Holdings' Broken Hill project is a crescent-shaped deposit. Once commercial operations begin, the deposit is planned with a minimum of 3 open-cut pits. 

The company has 2 main deposits that will be utilized for the first 10 and the next 10 years of operation, for a 20-year mine life. The company also has a third deposit that will feed into both parts of the project. The company plans to source its entire ore supply for the initial 10 years from the first pit, with the second pit supplementing the supply on a small scale. 

The bulk sample is planned for extraction from the first pit in the coming weeks. These samples will be representative of the company's first decade of operations. These samples will be collected from the underground, making them significantly more cost-effective while simultaneously providing a better representation of the resource. 

The company plans to collect 3,000t ore from multiple areas within the deposit to provide a sample representation for the demonstration plant. It is currently developing the underground portion of the deposit through the portal and box-cut methodologies. The box-cut method is highly cost-effective for bulk sample collection and enables the company to collect samples from the top section of the ore body. 

Underlying Geology

The estimated CapEx (Capital Expenditure) for this project is $2M. The project is located 20km west of Broken Hill. This region is geologically stable, consisting of very old rocks that have limited weathering of sulphides with an outcropping of soft light material on the surface. The region has an arid climate with 10 times more evaporation than rainfall on an annual basis. 

The oxidation profile for this region is between 5m-15m with base oxidation of 10m across the hill cap. The hills are located at a height of 30m-40m above the land surface and feature a small cap of oxide along with fresh sulphide without transitions. 

The cobalt reserves found here feature pyrite mixed with silica, albite or quartz material. This deposit is essentially a 2-mineral ore body that consists of silica and pyrite. Once the oxide cap has been removed, the underlying deposit features sulphide reserves interspersed with silica, albite or quartz. This geology allows access to the deposit with fairly-limited material removal. 

The company has proposed a very large mining block in the range of 10x10x20 or 10x10x30. The company is planning benches with a minimum size of 10m or larger to develop a very large-scale bulk mining operation. 

The deposit features a sedimentary-hosted, laterally continuous geology. The Broken Hill region is known for its lead-zinc-silver deposits, which is commonly termed as Broken Hill mineralogy. However, as the company's deposit is located 20km west of the Broken Hill area, it features different geology. The deposit features cobalt-hosting pyrite. Due to the arid climate and limited weathering, a major portion of cobalt has been retained within the pyrite. 

Production Estimates

Cobalt Blue Holdings plans to mine 6Mt ore annually over the project's lifetime. The deposit has a 3:1 strip ratio. The company is looking to convert a 6Mt yearly supply into a 1Mt concentrate. This comes out to 80% tailings or waste material and a 20% mass pool. Testing through full-sized commercial gravity spirals and float work demonstrate up to 90%-95% pyrite recovery to the concentrate. 

This project has an estimated mine life of 17 years with an 85Mt M&I (Measured and Indicated) resource. The company is looking to bring the maximum possible material within the portable category for inclusion in the Feasibility Study. 

Cobalt Blue Holdings' overall resource is 125Mt across Measured, Indicated and Inferred categories. To address capital raise concerns, the company is looking to convert the resource into reserves. It intends to bring the underlying deposits into the proven category for the first 5-7 years. The company has plans to drill and increase the resource by the time the operations commence. 

This strategy would enable the company to utilize capital efficiently while gaining a better return on spending. The company is currently prioritizing the spending on the pilot and demonstration plant along with the Feasibility Study over bringing the entire resource into the reserved category. 

The Extraction Process

Cobalt Blue Holdings has the ability to process 6Mt ore into a 1Mt concentrate. The resultant material is put through a crushing process along with milling to get top-sized material. The company is currently looking through various equipment options to gain the desired 1000 micron or 1mm particle size. The top size for the material is p80, where 80% of the material's passing size is 600-700 micron, the common size for a large, coarse pyrite grain. 

For crushing, the company is using either gravity spirals or mineral sands process. These processes also enable material separation. Pyrite has a specific gravity close to 5, while albite, silica and quartz have a specific gravity close to 2-2.5, enabling the gravity spiral to separate the stream of pyrite from the lighter material.

In order to liberate the cobalt from the pyrite, the crushing needs to be below the typical grain size. This enables the separation of sulphides as they are softer than silica, albite and quartz. 

The company is currently evaluating the use of HPGR (High-Pressure Grinding Rolls) for material crushing. The company is also testing out a modified sag mill paired with a board mill that would require additional screening or cycloning work to maintain the material coarseness. The sag mill crushing is a wet process, while the HPGR is a dry one. These tests are set to be included in the options study that is a part of the company's ongoing Feasibility Study. 

Sulphide Processing

The company's sulphide supply is processed into a concentrate, generating cobalt at a fixed rate, irrespective of feed. The first leveller for this process controls the variation before being fed into the concentrate circuit. The circuit has a consistent grade of 0.5% cobalt. The plant's first stage features a kiln that converts pyrite into piretite, meanwhile, the sulphide that is separated during the process turns into sulphur. 

The piretite is then run through a magnetic separator to clean out non-magnetic particles such as silica from the supply. This leads to a reasonably clean piretite being fed into the leach circuit. Following this, the company runs the supply through the second leveller that controls the variability. The next leveller is used to develop mixed hydroxide. The entire cobalt supply is run through the mixed hydroxide stage, leading to the recovery of nickel along with trace amounts of copper and zinc. The resultant material is then put into the MHP (Mixed Hydroxide Precipitate), the third leveller.  

From here on, the company can either sell MHP or make cobalt sulphate. 10% of the company's capital costs are associated with the MHP cobalt-sulphate refinery. The plant is capable of producing at a smaller scale of 10,000t mixed hydroxide consisting of 30-35% cobalt which can be further refined into cobalt sulphate. 

Cobalt sulphate consists of 21% cobalt. Due to the variation in grade, a 10,000t MHP can generate up to 17,000t cobalt sulphate. Since the operation is a fairly straightforward chemical refinery, it is easy to tailor the end product as per the customer's needs. 

Cut-off Grades and Purity

The company's resource update features a cobalt-equivalent cut-off grade of 275ppm (parts per million). The company's deposit features 10-20ppm cobalt and 200-300ppm sulphide. In the past 3-4 years, the company has been optimizing its flow sheet and mining studies. This has led to a 270ppm cut-off grade of a 300ppm equivalent cut-off grade that results in the recovery of the entire mineralized sulphide deposit. 

At a depth of 2-3m, the concentration of pyrite is at 20-30 ppm. Due to a very low internal dilution, the company is able to access the sulphide behind the oxide zone that is present as a single big mass, consistent in all directions. 

The cobalt present within the pyrite features a limited grade variation. The reserves have trace amounts of nickel reserves with a 7:1 cobalt-to-nickel ratio. This deposit also has areas with trace quantities of copper, zinc, and manganese. The company hasn't run trace metal removal circuits on the material due to the fairly limited presence of metals. The company is looking to produce 3,500t/year cobalt in various chemical forms along with 500t nickel. 

The company is looking to ensure that cobalt sulphate, the end product, is free of any impurities resulting from trace metals. This is because cobalt sulphate directly goes into the battery precursor chain. The tolerance level for impurities is 0.5%-1%. However, hydroxide can be sold with 1% zinc or manganese. Any value above this threshold will surpass the acceptable market specifications. 

Cobalt Blue Holdings is open to supplying cobalt sulphate products to a variety of customers through multiple off-take agreements. Although the company would prefer to supply a single business as the company would need to tailor the end product for a single customer. 

Project Economics

Cobalt Blue Holdings' operation has an after-tax IRR (Internal Rate of Return) of 19%. The company is currently focusing on raising additional capital. It's all-in sustaining cash costs for cobalt are $12/lb, which places it into the bottom quartile of cost production profiles. The company's margins for cobalt production are high based on the current market pricing for cobalt at $25-$27/lb. 

The company is currently recovering up to 85% cobalt, with the majority of the cobalt being separated through the concentrating circuit. The concentrating circuit leads to a loss of 5-7% cobalt mainly due to poorly liberated material or agglomerates, leading to a significant drop in margins. Additional losses are caused by either the accumulation of soluble losses or the deportment of cobalt in the residue. 

20% of the operating costs for the plant are power-related. The Broken Hill project sources its entire power requirement from Australia's national energy grid. This means that the power supply originated from renewable energy. The grid prices have dropped substantially in the last 5 years and the company anticipates that the prices will drop further by the time it enters production. 

As energy prices become cheaper, it will have a major impact on the project's OpEx (Operating Expenses). Cobalt Blue's operation has a low chemical requirement for its plant, leading to limited variability from a cost perspective. 

Due to the increasing diesel prices, the company is working on an options study that assesses the possibility of electrifying the entire mine fleet. The electrification would essentially lead to cost savings, a lower carbon footprint, and slightly smaller trucks that would require smaller ramp widths. 

Plans 2021 and Beyond

Cobalt Blue Holdings currently has 4 major targets. The first one is the bulk sample demonstration plant where the majority of the company's staff is working over the next 6-10 months. This plant is expected to finish by mid-2022. The plant is the main highlight for the company's upcoming Feasibility Study. 

The second priority for the company is to conclude the Feasibility Study by 2022 end or early 2023. Currently, the company is working on a tendering process for third-party engineering teams. The announcement of engineering partners will be announced in the near future. 

Thirdly, the company has initiated ground studies on environmental impact. These studies will factor in the site-specific hydrogeology, surface water, the flora and fauna along with heritage and cultural studies. The company is seeking an EIS (Environmental Impact Statement) submission in 2022. The approval process is expected to span a duration of several months. 

Lastly, the company is looking to build a network and forge relationships with various entities for credit, equity and potential off-take agreements over the next 18-24 months. An FID (Final Investment Decision) is planned for the first half of 2023. 

To find out more, go to the Cobalt Blue Holdings Website