Cobalt 27 Strikes First Royalty Deal on Dumont Nickel-Cobalt Project

Cobalt 27 Capital (TSXV:KBLT) acquired its first royalty deal on all future nickel and cobalt production from RNC’s (TSX:RNX) Dumont project, the company announced on Thursday (February 22).

The deal is valued at a total of $70 million, and is for a 1.75-percent net smelter return royalty on output from the Quebec-based project.

Dumont contains the world’s largest undeveloped reserves of nickel and cobalt, both key elements in the lithium-ion batteries used to power electric cars, RNC President and CEO Mark Selby said in a statement.

“[It is] also fully permitted and construction-ready, close to existing infrastructure, and located in one the world’s most desirable mining jurisdictions in Quebec,” Selby added.

The project is expected to start production by 2020 to meet the growing needs of the electric car market. As demand for electric cars surges in the next few years, the need for raw materials such as nickel and cobalt will also increase.

Wood Mackenzie forecasts that nickel usage in electric car batteries will be between 60,000 and 80,000 tonnes this year, and 220,000 tonnes in 2025. Meanwhile, Benchmark Mineral Intelligence says nickel supply will need to climb to 350,000 tonnes by 2026 to meet demand from the electric car sector.

Dumont is a nickel sulfide project, which makes it ideal for producing nickel and cobalt material feed to be sold directly into the battery industry, Cobalt 27 said. In all, only 50 percent of the world’s nickel mine supply can be used for battery manufacturing.

The Quebec project has proven and probable reserves of 1.18 billion tonnes of ore containing 3.5 millions tonnes of nickel and 126,000 tonnes of cobalt. With an initial mine life of 33 years, the project has the potential for significant future expansion of up to an additional 30 years.

“[Dumont] ranks among the top battery metals projects in the world and one of only a few nickel-cobalt projects that will be built this cycle,” said Anthony Milewski, chairman of Cobalt 27.

The project is owned by a joint venture between RNC and private equity firm Waterton Global Resource Management. The royalty sale has yet to be closed, and is subject to approval by the TSXV.

Looking ahead, Cobalt 27 said it is currently negotiating additional cobalt streaming and royalty agreements where cobalt is mined as a by-product metal. It intends to finalize the first of several cobalt streaming agreements over the next year.

On Thursday, shares of Cobalt 27 closed up 5.07 percent in Toronto at C$12.81. Meanwhile, shares of RNC rose 4.17 percent to close at C$0.25.

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.