Fortune CEO bullish on cobalt despite price drop

Underground test mining at the Fortune Minerals NICO Project in the Northwest Territories. Source: Fortune Minerals Ltd.

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Fortune Minerals Ltd.‘s [FT-TSX] is shelving plans to look at the feasibility of proceeding with an expanded mill production rate its NICO cobalt-gold-bismuth-copper project in the Northwest Territories.

The move follows a drop in the price of cobalt, which has fallen to US$35,470 per tonne from US$47,000 in January, 2019 due to oversupply issues.

Fortune’s NICO deposit is located 160 kilometres northwest of the city of Yellowknife.  It contains an open put and underground proven and probable reserves of 33 million tonnes, containing 1.1 million ounces of gold, 82 million pounds of cobalt, 102 million pounds of bismuth, and 27 million pounds of copper.

At a previously planned mill throughput rate of 4,650 tonnes of ore per day, that material was expected to sustain a mining operation for 20 years. An April 2014 technical report envisaged a scenario where the site would be mined by a combination of open pit and underground methods, producing a bulk gold-cobalt-bismuth-copper-concentrate in a processing plant located at the mine site.

The estimated pre-production capital expenditures for the construction at NICO were estimated in the 2014 technical report at $346 million.

However, in early 2018, Fortune said it had engaged Hatch Ltd., P&E Mining Consultants Inc. and Micron International Ltd. to update the 2014 technical report and assess the economies of scale of a 30% expanded mill throughput rate.

It wanted to look at an expanded throughput rate after the price of cobalt quadrupled in value between early 2016 and 2018.

But the company has now put that scenario on the shelf. “After assessing the indicative economics of the expanded 6,000 tonne-per-day mill throughput rate, Fortune has concluded that the additional capital required to construct a larger project would not deliver a commensurate increase in cash flow to justify the expansion from 4,650 tonnes per day at prevailing cobalt and bismuth prices,” Fortune said in a press release.

“An environment that has seen curtailment from the world’s largest cobalt mines is not conducive for an expanded, capital-intensive project at this time,” said Fortune President and CEO Robin Goad. “However, the world continues to transition to electric mobility and will require new sources of cobalt that are independent of the [Democratic Republic of] Congo [DRC] to meet the increase in demand from the battery sector,” he said.

Fortune has attracted investor interest because it is one of only a handful of global companies that could be producing cobalt in the near future. It could also position itself as a possible supplier of “ethical cobalt” to consumers seeking an alternative to the DRC, currently the source of 50% of the world’s production.

Amnesty International has warned electric car companies to seek out alternatives to the DRC, which is well known for its mineral wealth, but also civil wars and corruption.

However, as Fortune Minerals traded Thursday October 3 at 8 cents on the TSX Venture Exchange, it is clear that NICO will not be developed unless Goad can find someone willing to provide project financing.

On Thursday, Fortune said it is evaluating a number of additional opportunities to optimize project economics. They include a new mine plan based primarily on low-cost open-pit mining, while augmenting production in early years of mine life with selective underground mining of gold-rich mineralized material located close to the existing decline ramp developed for bulk sampling in 2007 and 2008.

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