First Cobalt to Become North America’s Primary Producer of Cobalt Sulfate

Toronto-based First Cobalt‘s (TSX:FCC) cobalt refinery could be producing cobalt sulfate by late 2020 to early 2021, according to a feasibility study published on Monday (May 4). 

With an initial capital cost of US$56 million and yearly production of up to 25,000 tonnes of battery-grade cobalt sulfate from third-party feed, the Ontario refinery is expected to become North America’s first producer of cobalt sulfate at a time when supply chain security has become a critical issue.

Cobalt is a key element in electric car batteries, but even though most production comes from the Democratic Republic of Congo (DRC), more than 79 percent of refining capacity is in China.

As electric vehicle (EV) sales increase, cobalt demand from nickel-cobalt-manganese batteries, which are used in EVs, will increase from approximately 20,000 tonnes in 2019 to over 730,000 tonnes in 2040, according to Benchmark Mineral Intelligence.

The firm forecasts that demand for cobalt in lithium-ion batteries will dominate all other demand categories, and expects a structural deficit in the space within the next five years.

“The outlook for electric vehicles and the push by automakers to develop shorter supply chains creates an excellent opportunity,” First Cobalt CEO Trent Mell said on Monday. “With most of the world’s cobalt refining capacity located in China, there is strong demand for a North American alternative.”

According to the feasibility study, the after-tax net present value of First Cobalt’s refinery is estimated at US$139 million using an 8 percent discount; it has a 53 percent after-tax internal rate of return, which represents a payback period of only 1.8 years. Operating costs are set at US$2.72 per pound.

“The study shows strong asset-level economics that position the refinery to be competitive globally and provide attractive investment returns,” Mell said. “Our focus will now turn to working with Glencore (LSE:GLEN), our strategic partner, on implementing a new, ethical and transparent supply chain.”

The report on the refinery is the result of a deal the Toronto-based company inked with the top cobalt producer; Glencore plans to provide feedstock for the refinery from its DRC assets and is prepared to provide capital to recommission and expand the facility. Discussions have also been ongoing with potential automotive offtake partners, as well as several lenders that are interested in providing a portion of the capital cost along with Glencore.

First Cobalt is working to restart its refinery in the fourth quarter of this year, and plans to then expand production in the second half of 2021.

“We now need to continue our discussions with Glencore, with financing partners and try to figure out what the execution plan looks like,” Mell said during a conference call on Monday.

The company will now work on three scoping studies to help identify the optimal scenario for a demonstration plant. It will also asses other sodium management technologies and options, and will derisk the environmental approval timeline.

Aside from the refinery, First Cobalt is currently developing the Iron Creek cobalt asset in Idaho.

Shares of First Cobalt were trading at C$0.16 on Monday. The company’s share price is up almost 18 percent since the start of the year.

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

Editorial Disclosure: First Cobalt is a client of the Investing News Network. This article is not paid-for content.