First Cobalt Corp. [FCC-TSXV; FTSSF-OTCQB; FCC-ASX] is moving to enhance its position as a pure-play North American cobalt company by acquiring all of the issued and outstanding shares of US Cobalt Inc. [USCO-TSXV, USCFF-OTCQB].
Under the terms of an arrangement agreed to by both companies, all of US Cobalt’s issued and outstanding shares will be exchanged on the basis of 1.5 First Cobalt common shares for each US Cobalt shares.
The exchange ratio represents a 61.8% premium to US Cobalt’s closing price and a 58.5% premium based on both companies’ five-day volume-weighted average trading prices, both as at March 13, 2018.
Upon completion of the transaction, existing First Cobalt and US Cobalt shareholders will own approximately 62.5% and 37.5% of the combined company respectively. That’s assuming that all US Cobalt options and warrants are exercised prior to completion of the transaction.
The agreement strategically positions First Cobalt as a leading non-Democratic Republic of Congo (DRC) cobalt company with North American projects located in close proximity to infrastructure as well as electric vehicle and technology hubs such as Michigan and California.
The combined company will have projects in Ontario, and Idaho, which, once they reach the production stage, could be major cobalt suppliers for the electric vehicle market, which now depend mostly on supply from the DRC.
US Cobalt shares rose 3.2% or $0.04 to $1.29 Thursday on volume of 2.36 million. First Cobalt jumped 7.69% or $0.08 to $1.12 on volume of 1.63 million.
Vancouver-based US Cobalt, which is exploring in the state of Idaho, recently popped up in a Canaccord “watch list” after the company raised $6 million from a bought deal private placement of 10.8 million units priced at $0.53 per unit.
Canaccord was part of an underwriting syndicate that received a cash commission of $345,000.
Proceeds of the private placement financing were earmarked to fund a second phase of drilling at US Cobalt’s 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.
It means that more drilling work will need to be carried out in order to confirm the validity of these estimates.