First Cobalt CEO: Glencore Will Make a Good Ally as We Push the First Cobalt Refinery Forward

According to First Cobalt (TSXV:FCC,OTCQX:FTSSF) CEO Trent Mell, there are three things that are unique about his company: its management team, its asset location and its North American cobalt refinery.

In the interview below, Mell provides an overview of the company’s recently signed memorandum of understanding (MOU) with Glencore (LSE:GLEN,OTC Pink:GLCNF) and recently released Ausenco study results. Glencore and First Cobalt signed a MOU to negotiate a supply of cobalt feedstock and financing to recommission First Cobalt’s refinery in Ontario, Canada. According to Mell, First Cobalt has a 60 day exclusivity period to conclude a definitive agreement with Glencore.

Meanwhile, engineering by Ausenco was able to double the projected production capacity of the refinery to over 5,000 tonnes of cobalt in product per annum for US$37.5 million in capital costs. The study identified bottlenecks within the existing flow sheet that, if addressed, will allow the facility to significantly increase production over previous estimates of 2,500 tonnes per annum at US$30 million in CAPEX.

Mell also touches on the changes in the cobalt market within the past 12 months. According to Mell, as the cobalt price hit a 10 year high of over US$40 per pound, the market became oversupplied with artisanal production from marginal operations in the Democratic Republic of Congo (DRC). As the price declined, marginal operations became uneconomic and the supply picture is slowly coming into balance as demand for electric vehicles (EVs) continues to rise. He believes that we have seen a bottoming for the cobalt price and that the market will be on the rise again towards the end of Q3 2019.

Below is a transcript of our interview with First Cobalt CEO Trent Mell. It has been edited for clarity and brevity.

Investing News Network: Please provide our investor audience with an overview of First Cobalt, and what makes it unique in the cobalt space.

First Cobalt CEO Trent Mell: There are three things that make us unique. First of all, our team has worked for big companies and has been responsible for discovering, building and operating mines around the globe. We also have some non-mining people on our board, such as two-time governor of Idaho Butch Otter and automotive entrepreneur Henrik Fisker.

Secondly, we’re in North America. Approximately 70 percent of the cobalt mined today comes from the DRC, and 80 percent of the product that is used in EVs and lithium-ion batteries is refined in China. Our assets in Ontario, Canada and Idaho are in great jurisdictions and are easily manageable. Finally, we also have a downstream refinery, which is an unusual asset for a junior mining company to have. Cobalt refineries outside of China are rare, which puts us in a unique position.

INN: Please give us an overview of what’s changed in the cobalt space over the last 12 months. Why should investors be looking at cobalt now?

TM: In 2017, cobalt was the best-performing metal, which was followed by a sharp pullback in 2018. The market is now starting to recover. Cobalt prices have reached over US$17, and the outlook is strong. The initial pullback was due to concerns that artisanal production in the DRC would overtake the demand, but this doesn’t take into account the offsetting growth in demand for cobalt over the next five years.

For example, there was a 78 percent increase in the number of EVs sold in China in 2018, and year-over-year growth continues to be remarkable — even as sales of combustion engines stagnate. Automakers worldwide are spending US$300 billion developing the EV supply chain. We’ve heard stories that automakers, such as Audi (OTC Pink:AUDVF,ETR:NSU), are having trouble obtaining battery cells. I don’t think that cobalt prices are going to drop any lower, and I believe that we’ll see firmer pricing as people start looking towards the future.

INN: First Cobalt recently signed a MOU with Glencore. Could you please explain the significance of this milestone?

TM: It’s a huge milestone for us. Within the last year, we completed several studies on our refinery, reviewed permits and checked the condition of the equipment. We also completed metallurgical testing, and we received third party feed for testing. All of this has brought us to this point. There are no operating cobalt mines in North America, but we believe there will be. In the meantime, the DRC is sending mined cobalt to China for refining. We’re hoping to capture some of that market by being the only provider of refined cobalt in North America.

Before signing the deal with Glencore, we met with most of the big cobalt miners and some metal traders as well. For us, Glencore was the obvious partner — they’re the biggest cobalt producer in the world and have a big mining and smelting complex two hours away from us. I’ve worked with some people at Glencore in the past, and I think they will be great allies. We still need to sign the multi-year definitive agreement to get the refinery back into production, and getting this done will put us on track to become the only producer of cobalt sulfate in North America.

INN: What are the most important findings from the recently completed Ausenco study?

TM: Much like a mining project, we have to go through various stages of analysis. We did our initial review of the refinery last year. For this study, we assumed that we would use the existing flow sheet and that we would be treating the same types of mine concentrates that were historically treated there. With this baseline study, we then began to recognize that in the short term, it would make sense to source material directly from Africa, as this would get us into production more quickly. We engaged Ausenco to look at our plant and identify the bottlenecks.

Previously, we estimated we could produce 2,500 tonnes of cobalt and that it would take US$30 million in capital costs to restart the facility. Ausenco looked at the bottlenecks in the plant and modeled a restart scenario using much higher-grade feed from the DRC. This study concluded that for US$37.5 million in capital costs we could produce over 5,000 tonnes of cobalt — more than twice previous estimates. More work is required, but the results are extremely encouraging for us and our business partners.

INN: What’s next for First Cobalt, and how does that fit into the company’s long-term goals?

TM: We have a 60 day period to negotiate a definitive agreement with Glencore. We will need capital to restart the refinery, and we are hopeful that we can do so with little to no equity dilution. In the 18 to 24 months that it will take us to commission the refinery, we are confident that the market will be much more favorable.

The equity markets are tough right now, and we’ve been fortunate to secure a strategic partner. Corporate partnerships and private equity is where the capital is coming from in current markets and I couldn’t be happier with the work of my team. I hope people continue to follow our progress. We are also shareholders, and we are working hard to create value.

This interview is sponsored by First Cobalt (TSXV:FCC,OTCQX:FTSSF). This interview provides information which was sourced by the Investing News Network (INN) and approved by First Cobalt in order to help investors learn more about the company. First Cobalt is a client of INN. The company’s campaign fees pay for INN to create and update this interview.

INN does not provide investment advice and the information on this profile should not be considered a recommendation to buy or sell any security. INN does not endorse or recommend the business, products, services or securities of any company profiled. 

The information contained here is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Readers should conduct their own research for all information publicly available concerning the company. Prior to making any investment decision, it is recommended that readers consult directly with First Cobalt and seek advice from a qualified investment advisor. 

This interview may contain forward-looking statements including but not limited to comments regarding the timing and content of upcoming work programs, receipt of property titles, etc. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. The issuer relies upon litigation protection for forward-looking statements. Investing in companies comes with uncertainties as market values can fluctuate.