By Peter Kennedy
eCobalt Solutions Inc. [ECS-TSX, ECSIF-OTCQX] has arranged a $26 million bought deal financing to advance development of the company’s 100%-owned Idaho Cobalt Project located 26 miles west of Salmon, Idaho, which could soon rank as the only primary producer of cobalt in the United States, eCobalt CEO Paul Farquharson has said.
Farquharson is referring to the fact that the majority of the world’s cobalt is mined as a byproduct of copper and nickel.
Under the terms of the financing, the underwriters have agreed to purchase 20 million units of the company at $1.30 per unit. The underwriting syndicate led by TD Securities has been granted the option to buy an additional three million units at the same price for a period of 30 days after the closing date, potentially raising the total proceeds to $30 million.
eCobalt shares eased 12% or $0.175 to $1.28 in early trading Wednesday February 14. The 52-week range is $2.10 and 85 cents.
News of the bought deal financing comes just days after the company announced an updated resource estimate for the Idaho Cobalt Project, where total measured and indicated resources have increased to 3.87 million tons at 0.59% cobalt, up from 3.44 million tonnes at 0.59%.
In the new estimate, inferred resources have also increased to 1.82 million tonnes at 0.46% cobalt from 1.54 million tonnes at 0.50%.
In a February 7, 2018 news release, the company said these new estimates will be incorporated into a new, optimized feasibility study that is expected to be completed in the second quarter of 2018.
Cobalt has become a much sought after commodity in recent years. Due to its key role in the production of rechargeable batteries used in the manufacture of electric vehicles, the price of cobalt has more than tripled to over US $36 a pound since early 2016, reaching the highest level in 10 years.
eCobalt said its Idaho Cobalt Project “will ethically produce environmentally sound battery grade cobalt salts and remains the only advanced stage, near-term environmentally permitted primary cobalt deposit in the United States. Initial production is anticipated by 2019.
An earlier feasibility study (announced in September 2017) estimated that an underground mining operation could generate 2.4 million pounds of cobalt, 3.3 million pounds of copper, and 3,000 ounces of gold annually over a 12.5-year mine life.
Aside from the underground mine and mill, the feasibility study envisioned the construction of a cobalt production facility that would feature a hydrometallurgical refinery located on a railhead in Blackfoot, Idaho.
The result would be a vertically integrated project designed to produce cobalt chemicals for the rechargeable batteries market, in addition to by-products of copper concentrate, copper sulphate, magnesium sulphate and gold.
The initial capital cost would be $186.7 million, according to the 2017 feasibility study.
However, having invested $120 million in the project so far, the company has since decided to pursue a new direction that would see it producing a clean (low arsenic content) cobalt concentrate product (and by-product of copper/gold concentrate) instead of cobalt sulphate.
“Consolidation of battery materials manufacturing in China to decrease cost and increase production capacity has reduced the premium in the price of cobalt sulphate over cobalt metal,” said Farquharson.
“Due to these changing battery market dynamics and in response to discussions with numerous potential offtake partners, the company has determined that delivering the clean cobalt concentrate product is the fastest route to production, generation of cash-flows, and reduction of price and technical risk to the project,” he said.
Rechargeable batteries represent 49% of cobalt consumption (in the form of sulfate) and the market is growing at a compounded annual rate of 11.7%, the company said.
Farquharson went on to say that a clean cobalt concentrate is an upstream material for battery cathodes, compared to cobalt sulphate.
Switching to a clean cobalt concentrate would eliminate the requirement to build a full cobalt production facility. This is expected to result in substantially reduced capital and operating cost for a more simplified flow sheet.
The company said laboratory scale testing in 2017 showed that arsenic removal can be done from Idaho Cobalt Project ore concentrates by conventional roasting methods. This supports the company’s new plan to produce a clean cobalt concentrate that is desirable to potential off-take partners.
Meanwhile as the company works to complete the new optimized feasibility study, it said discussions are ongoing with potential off-take partners as well as pilot testing of Idaho Cobalt Project ore to provide additional engineering confidence in the project’s ability to produce a clean, high value cobalt concentrate.
The Idaho Cobalt Project is located near US Cobalt Inc.’s [USCO-TSXV] flagship Iron Creek Cobalt project.
Iron Creek is located in the southeast portion of the Idaho Cobalt Belt. It was discovered in the 1940s and has been explored by a number of companies, including Hanna Mining and more recently Noranda Exploration Inc. Previous operators completed 30,000 feet of diamond drilling and 2,000 feet of underground drifting.
US Cobalt has spent US $4 million on the property, which contains an estimated resource of 1 million tonnes, averaging 0.61% cobalt and 0.30% copper. But due to the age of geological work that was used to arrive at these estimates, they do not comply with NI 43-101 standards of compliance.