Broken Hill Grapples with Cobalt Blue Over Thackaringa Payment

- December 2nd, 2018

Joint venture partners Broken Hill Prospecting and Cobalt Blue have gotten into a spat over payments for the Thackaringa cobalt project.

Conflict has arisen between Broken Hill Prospecting (ASX:BPL) and Cobalt Blue (ASX:COB), the two joint venture partners behind the Thackaringa cobalt project in South Australia.

The former is currently refusing to contribute a 30-percent share of expected expenditures at the asset, with the root of the dispute dating back to the summer.

Feathers were first ruffled when the companies completed a prefeasibility study (PFS) for the project in July, which recommended advancing to a bankable feasibility study (BFS). Afterwards, engineering firm Wood performed a PFS gap analysis review, which suggested a 24-month period for BFS work.

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However, a farm-in agreement between the two companies had laid out a BFS timetable of 12 months. Cobalt Blue was opposed to that timeline, and the company opted out of the agreement. The company chose to retain a 70-percent interest in Thackaringa, with Broken Hill keeping a 30-percent share.

In November, Cobalt Blue presented a Q4 BFS budget that entailed $9.6 million in expenses, including ongoing drilling activities. Shortly afterwards, Cobalt Blue announced that Thackaringa’s management committee had approved work programs at the project, including the drilling campaign.

Despite the announcement, Friday’s (November 30) release from Broken Hill contests that it’s not liable under the project’s joint venture agreement to pay the 30-percent share that has been “cash called.”

The company maintains that resolutions “purportedly passed” by the management committee, as well as any actions taken by Cobalt Blue based on the resolutions, are “invalid or ineffective.”

Broken Hill’s release says it issued a formal notice to Cobalt Blue stating that it didn’t want to contribute to the joint venture activities and budget, but admitted it could lose part of its interest in the project due to a dilution mechanism in the joint venture agreement if the cash call turns out to be valid.

“[Broken Hill] again reiterates that the drilling activities underway at Thackaringa remain at the sole risk and cost of [Cobalt Blue],” Friday’s release concludes.

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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.

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