Formation Metals announced that as a result of low cobalt prices and market uncertainty, for the moment it will not be continuing with development at its flagship Idaho cobalt project.
In an unexpected move, Formation Metals (TSX:FCO), a Canadian mineral exploration, mine development and refining company, announced that at this time, it will not be continuing with underground development or any related construction at its wholly owned Idaho cobalt project.
The Idaho cobalt project is the company’s flagship project and has a production estimate of 1,525 metric tons (MT) of high-purity cobalt per year over a mine life of at least 10 years. Rick Honsinger, the company’s vice president of corporate communications, told Cobalt Investing News in a December interview that while that may not sound like much, “not all cobalt is created equal.” The high-purity cobalt contained in the mine is “the only type of cobalt that’s suitable for critical applications in the superalloy sector” and Formation had anticipated being able to produce 1,500 MT of that 6,000-MT market.
Mari-Ann Green, CEO of Formation, explained in a company press release that the halt in operations is based on weak prices and market uncertainty. “Although cobalt prices have recently exhibited signs of recovery, the weak prices seen over the last year, coupled with enhanced adversity to risk by potential financiers in these turbulent markets has made financing costs unattractive for the further development of the ICP at this time,” she said.
Prices for cobalt 99.8-percent grade dropped to $10.50 to $11.20 per pound in December, but since then have risen to between $13 and $13.75 per pound, according to Metal-Pages. The company had been basing its plans for the mine on a cobalt price of $22.52 per pound.
Green emphasized that this decision does not herald the end of the Idaho cobalt project, describing the move as a way to “preserve Formation’s cobalt, copper and gold resources until economic circumstances merit their extraction” and commenting that the company “will be ready when the markets recover.” She also noted that until then, Formation “will pursue those projects that have the best likelihoods of realizing cash flow in the shortest time possible under current market conditions.”
For now, that means focusing on generating cash through the Sunshine Precious Metals Refinery, which is located at the company’s Big Creek Hydrometallurgical Complex. It is currently processing copper/silver and gold concentrate as well as refining silver doré, according to Formation’s website. Formation also plans to conduct a strategic review of its precious metals properties.
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.