Battery Metals

Weighted average annual production is set at 2,771,000 pounds of cobalt, 4,533,000 pounds of copper and 3,600 ounces of gold over the course of a 12.5-year mine life and with a cobalt cut off of 0.2 percent.

It’s been a quiet year for Canada’s Formation Metals (TSX:FCO), but that changed Wednesday when the company released a preliminary economic assessment (PEA) for its Idaho cobalt project (ICP). 

The ICP is made up of a mine and mill in Lemhi County, Idaho, as well as a cobalt production refining facility that will be positioned along a railhead in Southern Idaho. The PEA is based on an underground mine with a target production rate of 800 tons per day; underground selective mining via cut-and-fill methods will primarily be used to get material out of the deposit.

The plan is for the cobalt-coppergold concentrate produced by the ICP mine and mill to be  shipped to the cobalt production refining facility. Cobalt- and copper-bearing sulfides will then undergo hydrometallurgical processing to produce cobalt sulfate heptahydrate. Other marketable by-products will also be produced.

Weighted average annual production is set at 2,771,000 pounds of cobalt, 4,533,000 pounds of copper and 3,600 ounces of gold over the course of a 12.5-year mine life and with a cobalt cut off of 0.2 percent. That equates to life-of-mine production of 35,356,415 pounds of cobalt, 57,384,700 pounds of copper and 46,858 ounces of gold. In total, the project holds combined measured and indicated resources of 3,480,000 tons and an inferred resource of 1,675,000 tons.

Looking at what that output will mean for finances, Formation states that life-of-mine gross revenue is pegged at $983 million, with life-of-mine net after-tax cash flow clocking in at $258 million. Meanwhile, the operation’s pre-tax net present value is set at $148 million at an 8-percent discount, with an internal rate of return of 27.7 percent, while its post-tax net present value, also at an 8-percent discount, is estimated at $113 million with an internal rate of return of 24.07 percent. Finally, initial capital costs sit at $147 million, with total life-of-mine capital costs coming in at $201.4 million.

Formation is pleased with the PEA, and Paul Farquharson, president and CEO of Formation, said in Wednesday’s release that the company has already begun metallurgical test work suitable for a feasibility study on samples from the project. He also said Formation remains confident in the cobalt market, noting, “[t]he Company is optimistic about the future of the cobalt market and believes the ICP will be well positioned to meet the growing demand for battery grade cobalt chemicals in the [United States].”

Indeed, in explaining the rationale for the cobalt prices used in the PEA — $14.50 per pound for cobalt and $19.50 for cobalt contained in cobalt sulfate heptahydrate — Formation notes that those numbers are supported by price quotes from both American and Chinese suppliers. In addition, the company states that the cobalt price has a “robust” future and by mid-2016 should reach between $17.50 and $18.

Formation’s news was released after market close Wednesday, meaning its share price has not yet reacted to it. However, at least one of the company’s peers has stepped forward to offer congratulations. Global Cobalt (TSXV:GCO), which is currently in the midst of a business reorganization, issued the following message on Twitter Wednesday afternoon:

Investors will no doubt be waiting to see what happens Thursday morning. At the end of the day Wednesday, Formation was up an impressive 73.68 percent year-to-date.


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

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


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