First Cobalt (FCC) - Can They be America's First Battery Park?

First Cobalt is a North American battery materials company listed on the Toronto Stock Exchange (TSX-V: FCC) and the OTC Markets (OTCQX: FTSSF). Their major projects include the First Cobalt hydrometallurgical cobalt refinery in Ontario, the Iron Creek Project in Idaho, and the Greater Cobalt Project in Ontario.

The company is currently working with a mining project valued at USD $60M that has been producing Nickel, Copper, Cobalt, and Silver for the past decade. First Cobalt is looking to double to overall output at this site.

We met with Trent Mell, President, CEO, and Director at First Cobalt. Trent founded the company in 2017 and has over two decades of experience in international business and operations. His mining career includes offtake contracts with $2.6 billion raised in equity and debt financing. Previously, he served as the CEO of Falco Resources. He is also credited for creating and directing a mining team to become the largest provider of flow-through capital in Canada. His educational credentials include an EMBA from Kellogg School of Management and Schulich School of Business, LL.M from Osgood Hall, and LL.B from McGill University. 

Company Overview

First Cobalt is a battery material and recycling company based out of Canada. The company is known for having the lowest-quartile carbon footprint along with great proximity to the US and European markets. Their hydro-metallurgical facility further puts them in a strong position against the competition.

The operations are set to commence within the next 18 months. This includes the production of Cobalt and a recycling plant. Over time, the company plans to produce Nickel sulphate at the same site, officially making it a battery park.

The company is gearing up to become the standalone producer of cobalt sulphate in North America. This is being carried out through the company's refinery based in Ontario, Canada. This refinery will also carry out battery recycling where black mass will be processed to recover Cobalt, Nickel, and other metals. 

The Iron Creek Project

The Iron Creek Project is a cobalt-copper mineral deposit based in the mining-friendly jurisdiction of Idaho, United States. This site is planned as a secure and strategic domestic supply of critical raw material in the North American region. This site is situated within a patented property in the Idaho Cobalt Belt. The site benefits from a strong infrastructure in place with an all-weather road that connects to the state highway and 600m of drifting from three adits.

Phase 1 consists of producing a 25,000t supply of battery-grade cobalt sulfate (5,000t of contained cobalt) by October 2022.

Phase 2 expansion involves a recycling plant for lithium-ion batteries, turning them into black mass to recover cobalt, nickel, copper, and other materials.

Future prospects for this site include the construction of a futuristic underground mine which employs best practices to further reduce the carbon footprint and provide a sustainable operation that is geared towards minimizing the environmental impact of mining and exploration. 

At the Iron Creek site, the company has doubled its footprint. The strike extent at the host rock stands at 900, which the company is looking to expand further. The company already has a deposit at Iron creek along with 3 more known deposits. This can potentially lead to a district-scale opportunity by way of partnerships and investments. 

First Cobalt is currently the sole major player in the Idaho region. Given the extent of available supply, this site could lead to a regional processing plant in the next 4-5 years.

Internal PEA Findings

Based on the internal PEA (Preliminary Economic Assessment), the Iron Creek Project has a potential 5Mt deposit. The company is looking to double this supply over the course of two drilling seasons. This 5Mt supply feature clearly indicated and inferred deposits that have high-grade material with strong continuity. The intercepts reach out to a depth of 30m. The company is planning the mining and underground operations and has scheduled drilling operations in summer 2021. 

The first drill operation was carried out in 2018 which confirmed the presence of historical resources. The second operation was mainly based on infill. The site features consistent high-grade mineralized deposits. The Idaho site has the potential to produce 32,000t of concentrated material on an annual basis.

The company has put forward a $35M EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) potential on an annual basis. This is based on the market trends in hydroxide feed and sulphate. The $60M CapEx brings the cash flow into positive territory. The company plans to invest another $2M - $3M to expand drilling operations by several thousand meters at the site. 

Project Planning and Resource Allocation

The company is currently carrying out detailed engineering work at the site and looking to re-purpose the existing equipment. In the past, the plant was producing 12t supply, which the company plans to upscale to 55t through leach kinetics and additional equipment.

First Cobalt has an ongoing working relationship with Ausenco. The company is looking to sign an EPCM (Engineering, Procurement, Construction, and Management) with Ausenco in the coming days.

Mark Trevisiol, Vice President, First Cobalt responsible for running operations at the Glencore smelter based in Sudbury, Ontario. He has a background working at Kidd Creek Zinc Plant and experience with running a custom mill.

Based on the DFS (Definitive Feasibility Study) carried out at the site, First Cobalt was able to surpass their CapEx (Capital Expenditure) and increased it further based on the project's requirements.

The site is scheduled to start generating revenue by October 2022. Currently, they are involved with obtaining the necessary permits and so far, they have acquired three key permits along with a closure plan. The remaining 2 permits are most likely to be obtained within the next two months.

The permits for the Take Water supply have already been obtained, and the company is working towards the installation of essential amenities to commence operations. 

Capital Raised

First Cobalt currently has CAD $19M in funds and has invested $3M in the pre-construction stage. Additionally, CAD $10M was raised as part of investments from the federal and the Ontario government. They are looking to raise an additional $10M from the market while also working towards $45M in debt financing. 

The growth observed in the markets has facilitated these efforts as the company continues to move towards being fully financed. First Cobalt recently invested in a crystallizer for the SX plant. They are currently in talks with CIBC and the DRC, working towards debt funding.

The company is looking to raise $65M, out of which $60M will be allocated to CapEx and the remaining $5M towards contingency and working capital. 

Exploration Agreement with Kuya Silver Corp.

First Cobalt is currently in possession of several million shares at Kuya Silver Corp. and plans to manage it based on the mining results. Given the financial stability, the company isn't under pressure to offload shares and is open to the possibility of a Joint Venture. The company currently has a 30% carry agreement from the discoveries made at the Kuya site.

The company has claims in the Kerr Lake area as well which is around the existing refinery and is looking to further expand the claim. Currently, the company is guiding the exploration of narrow veins based on the property's structure. 

The Glencore Deal 

First Cobalt struck a deal with Glencore through share allocation which eliminated the company's $5M debt. Mark Trevisiol is the Chairman at First Cobalt and is currently working towards building a refinery at the site.

The Sudbury crew is highly experienced and is working closely with a dedicated technology center. The company was able to gain claims over the offtake through purchases made from Glencore, IXM, China, and Mali.

The company is currently in talks with battery supply chain providers, and government agencies in the US and Canada which may lead to lasting collaboration in the years that follow. 

2021 Targets

First Cobalt is looking to mine the area surrounding the refinery gate and plans to acquire 4 major operations in the DRC, namely Mutanda, KCC, Tenke, and RTR. These sites offer easy leach at grades ranging in 30% and higher, which will complement the company's overall output for the coming years. This area has historically provided an uninterrupted supply of Copper and Cobalt.

The company's 4 mines will be audited along with the supply chain by a third party as part of the responsible minerals initiative. They are seeking to provide a lasting supply chain where the material can be tracked to its original source and reduce the intermediary trading which significantly benefits the supply and demand through substantial price point reductions.

Once the plant is operational, the company also seeks to explore Nickel products. The company has made significant strides since their first drilling operations in 2018, and they no longer have any supply chain issues. To maintain sustainability, the company is focused on key sourcing and traceability.

The DRC's initiative to create a cooperative operation through a million artisanal miners has greatly benefitted the exploration in the region.

The remainder of 2021 is targeted towards bringing the equipment to the site, obtaining the remaining permits, signing the PCM, and financing. This will allow the company to further de-risk the site and gear up for production next year. The company intends to explore the potential of this project rather than limiting it to a Steam or Royalty. 

Marketing Strategy

Michael Insulan joined First Cobalt as Vice President, Commercial. He was previously working with ERG, the world's second-biggest Cobalt miner with a diversified portfolio of base metal production. Michael served as an in-house Cobalt expert at ERG. Michael has a strong network across Asia and Europe and currently, he is working as an in-house marketing expert.

He has helped First Cobalt getting into a discussion with various battery supply chain companies, battery manufacturers and chemical companies, and OEMs, which eventually lead to a deal with Stratton giving 100% rights over the supply. 

The Rising Demand for Cobalt

The Electrical Vehicle industry is set to grow exponentially in the coming years and the demand for Cobalt is consistently rising.

As the world moves away from fossil fuels and towards battery-powered vehicles, German automotive manufacturers are seeking a consistent supply of Cobalt and are looking to strike 10-15 year contract deals with suppliers.

The North American Advantage

The Canadian government's first investment in upstreaming the supply chain was awarded to First Cobalt. The company is looking towards creating the first battery park in the North American region along with a recycling facility.

The company had a first movers' advantage along with benefitting the proximity to the US. Given the 26.5% tariff that China has to pay, First Cobalt can provide supply without these tariffs as it's based out of North America. In Europe, China has to pay 6.5% in VATs and tariffs, while the North American suppliers aren't charged tariffs. This further puts the company in a strong position across international and home markets. 

The company plans to install a precursor plant on-site in the next 4-5 years. This will further streamline the development process as they would no longer require solid Cobalt or Nickel as the materials can be directly utilized in a solution form, which in turn reduces a step in the developmental process and effectively cuts overall costs.

To find out more, go to the First Cobalt Website