Capstone talks up cobalt option in Chile

Capstone Mining Corp. [CS-TSX] has released a Preliminary Economic Assessment (PEA) for the recovery of battery grade cobalt at the company’s proposed Santo Domingo copper-iron-gold-cobalt project in the Region 111 area of Chile. The project is owned 70% by Capstone and 30% by Korea Resources Corp.

Capstone is a Canadian-based metals mining company with a focus on copper. Its two producing mines are the Pinto Valley copper mine in Arizona, and the Cozamin mine in Mexico.  Santo Domingo is a fully-permitted open pit project with scoped life-of-mine average throughput of 60,000 tonnes per day.

The Santo Domingo Project is located 50 km southwest of Codelco’s El Salvador copper mine, and is expected to be ready for a construction start in 2020.

Capstone said the PEA opportunity outlines the potential for a copper-iron-gold mine with battery-grade cobalt sulfate production, resulting in a Net Present Value at an 8% discount rate of $1.66 billion after tax.

While the average expected annual life-of-mine production remains unchanged at 140 million pounds of copper, 4.2 million tonnes of 65% iron and 17,000 ounces of gold, new by-product cobalt production of 10.4 million pounds annually has served to improve the project economics, the company said.

The base case project capital expenditure remains unchanged at $1.51 billion. However, the cobalt option would require an incremental investment (to begin two years after the start of construction) bringing the total capital expenditure to $2.1 billion.

Capstone shares were unchanged at 71 cents on Thursday and now trade in a 52-week range of 41 cents and 93 cents.

“If Santo Domingo was in operation today, refined production of 4,700 tonnes of cobalt per year would make Capstone the fourth largest battery-grade cobalt producer outside China, and the largest in the Americas,” said Capstone President and CEO Darren Pylot.

“It would also be one of the lowest cost producers in the world,” he said. Pylot went on to say that it is exciting to think about what this refining complex could do to open Chile’s vast potential in cobalt. “For financial flexibility, we have structured the cobalt recovery option as a delayed investment decision, timed to begin approximately two years after construction begins on the copper-iron-gold concentrator,” he said.

“When a strategic partner is selected, we could look to advance cobalt production earlier.”

The cobalt PEA comes after Capstone recently released positive drilling results, including high-grade copper and silver values from its Cozamin polymetallic mine in Zacatecas, Mexico.

Capstone said the expansion and infill drilling results included some of the best ever drilling results from the Cozamin Mine, which is expected to achieve a 50% increase to annual copper and silver production of 50-55 million pounds and 1.5 million ounces respectively by 2021.

The aim of the program is to double the existing reserve base. Mineral Resources and Reserves will be updated in late 2020, the company said.