TORONTO, July 15, 2019 /CNW/ - First Cobalt Corp. (TSX-V:
FCC, OTCQX: FTSSF) (the "Company") is pleased to announced that it
agreed on a term sheet with Glencore AG outlining the framework for
a non-dilutive, fully funded, phased approach to recommission the
First Cobalt Refinery in Ontario,
Canada. The framework remains subject to a number of
conditions and outlines the key milestones to a long-term strategic
relationship that could bring a reliable source of domestically
refined cobalt to the North American market.
Highlights
- Objective is to establish a collaborative long-term partnership
to supply refined cobalt for the North American market
- Phase 1 entails a US$5 million
loan from Glencore to support additional metallurgical testing,
engineering, cost estimating, field work, and permitting associated
with the recommissioning of the First Cobalt Refinery, including a
definitive feasibility study for a 55 tonnes per day (tpd) refinery
expansion
- Phase 2 envisions commissioning the Refinery at a feed rate of
12 tpd in 2020 to produce a battery grade cobalt sulfate for
prequalification for the electric vehicle supply chain
- Phase 3 involves an expansion of the Refinery to a 55 tpd feed
rate by 2021, using the current site infrastructure and
buildings
- Total capital investment under the three phases is estimated at
approximately US$45 million and
Phases 2 and 3 remain subject to the findings of the studies
undertaken during Phase 1. Capital invested will be repaid by First
Cobalt from cash flow generated under a long-term refining
arrangement.
Trent Mell, First Cobalt
President & Chief Executive Officer, commented:
"Transitioning to cash flow as a North American refiner is
our primary focus and today's news demonstrates that we are moving
closer to achieving that objective. Glencore has been supportive
throughout the process and we look forward to working closely with
their technical team on a successful execution.
This partnership will help First Cobalt achieve its stated
objective of providing ethically sourced battery grade cobalt for
the North American electric vehicle market. An operating refinery
in North America can benefit all
North American cobalt projects, as it significantly reduces the
capital cost of putting a new mine into production."
On May 21, 2019, First Cobalt and
Glencore signed a memorandum of understanding outlining the terms
of a potential partnership to produce refined cobalt for the North
American market. Since that time, the parties have conducted due
diligence and held extensive discussions to develop a business plan
for the First Cobalt Refinery. The term sheet announced today
outlines a phased approach that could see the refinery operational
in less than a year and expanded to 55 tpd in 2021.
During Phase 1, Glencore would provide US$5 million advance to First Cobalt to complete
detailed engineering and estimating, metallurgical testing, field
work and permitting associated with the advancement of the First
Cobalt Refinery. In particular, this phase includes delivery of a
definitive feasibility study for a 55 tpd refinery expansion.
Commencement of Phase 1 is subject to a number of conditions
precedent, including execution of a loan agreement and related
documentation, completion of any remaining due diligence, execution
of a term sheet outlining a framework for commercial terms for
Phases 2 and 3, and any required regulatory approvals.
The second phase would entail recommissioning the Refinery in
2020 under existing permits at a feed rate of 12 tpd, subject to
the results of additional studies and an economic analysis to be
completed during Phase 1. The parties believe that there are many
advantages associated with an early restart with a smaller
throughput. The 12 tpd scenario will allow the parties to assess
various refined product options, including producing a battery
grade cobalt sulfate for prequalification with an electric vehicle
manufacturer.
The third and final phase is the expansion to 55 tpd as
contemplated in a report by Ausenco announced on May 28, 2019 and available on the Company's
website at
https://www.firstcobalt.com/projects/first-cobalt-refinery/refinery-studies/
The Ausenco report estimates that First Cobalt could produce 5,000
tonnes per annum of contained cobalt in sulfate assuming cobalt
hydroxide feed grading 30% cobalt.
A final decision to put the First Cobalt Refinery back into
production is contingent on the outcome of a feasibility study for
a 55 tpd expansion scenario that is expected to be completed later
this year. A restart of the Refinery will be linked to a long-term
feed supply or exclusive tolling agreement with Glencore and not on
near-term development of any of the Company's current projects.
Under the terms of the US$5
million advance for Phase 1, Glencore AG would loan funds to
First Cobalt's wholly-owned subsidiary, Cobalt Camp Refinery Ltd.,
which would be guaranteed by First Cobalt and secured by a general
security agreement and a pledge of the shares in Cobalt Camp
Refinery Ltd. The loan will have a two-year term and can be
extended for an additional year at First Cobalt's election. The
loan interest rate would be LIBOR + 5%, with interest payable
semi-annually in arrears until maturity. First Cobalt will have the
ability to defer interest and have it added to the principal amount
outstanding on each interest payment date. Glencore would retain an
option to convert the outstanding loan and interest balance at
maturity into common shares of First Cobalt at a fifteen percent
discount to the 10-day volume weighted average price.
Should the parties proceed to Phases 2 and/or Phase 3, the
intention is that the Phase 1 loan would be rolled up into a larger
accordion financing facility, the terms of which are still under
review. The accordion facility would be used for recommissioning at
12 tpd and for the capital expenditures in connection with an
expansion to 55 tpd.
The parties continue to work on the loan documentation and a
number of commercial details. Glencore anticipates providing 100%
of the feed requirements under both the 12 tpd and 55 tpd scenarios
under a tolling agreement. First Cobalt will also enter into a
services agreement with XPS - Expert Process Solutions, a
Sudbury-based metallurgical
consulting, technology and testing facility affiliated with
Glencore, in order to provide technical support to the First Cobalt
team. A tendering process is nearing completion to designate lead
third party firms to oversee advanced metallurgical testing, the
feasibility study and permitting.
About the FCC Refinery
The First Cobalt Refinery is a hydrometallurgical cobalt
refinery in the Canadian Cobalt Camp, approximately 600 kilometres
from the U.S. border. The First Cobalt Refinery has the potential
to produce either a cobalt sulfate for the lithium-ion battery
market or cobalt metal for the North American aerospace industry or
other industrial and military applications.
The First Cobalt Refinery is the only permitted primary cobalt
refinery in North America. The
Company recently completed testing of third-party cobalt hydroxide
as a potential source of feed, confirming that the existing
processes in the First Cobalt Refinery are capable of producing a
high purity, battery grade cobalt sulfate. With no cobalt sulfate
production in North America today,
the First Cobalt Refinery has the potential to become the first
such producer for the American electric vehicle market.
A study by Ausenco defined the production capacity, capital
costs and operating costs associated with recommissioning the
Refinery in Ontario, Canada using
third party cobalt hydroxide and another third party feed source.
Ausenco has since lowered their operating cost estimates by
approximately 30% due to lower reagent costs, based on actual
quotations rather than estimates. The study does not comment on the
economic viability of operating the Refinery, and instead is an
estimate of the costs associated with recommissioning. A copy of
the study is available at www.sedar.com and on the Company's
website. A feasibility study will assess the economic viability of
the Refinery operating at 55 tpd.
A corporate video featuring the First Cobalt Refinery in
Ontario, Canada is available on
the Company's website at
http://www.firstcobalt.com/investors/media-gallery/videos/.
Corporate Update
In connection with services rendered for the quarter ended
June 30, 2019, the Company has issued
612,800 Deferred Share Units ("DSUs") in lieu of cash compensation
that directors would have been entitled to. In accordance with the
Company's Amended and Restated Long-Term Incentive Plan (the
"Plan"), the DSUs were priced based on today's closing price of the
Company's common shares on the TSX Venture Exchange. DSUs vest
immediately and may not be exercised until a director ceases to
serve on the Board. A total of 76,563 DSUs were also granted to
certain officers of the Company in lieu of incentive payments.
These same officers have also agreed to a 5% reduction in their
base salaries to reflect current market conditions and to reduce
the Company's cash outflows.
The Company has also agreed with certain insiders to cancel an
aggregate of 1,283,482 incentive stock options held by them, which
will result in an 11% decrease in total number of options
outstanding. Following the cancellation, there are currently
11,398,333 stock options outstanding under the Plan.
About First Cobalt
First Cobalt is a Canadian-based pure-play cobalt company and
owner of the only permitted primary cobalt refinery in North America. The Company is exploring
a restart of the First Cobalt Refinery in Ontario, Canada, which could produce 5,000
tonnes of cobalt sulfate or metallic cobalt per year. First
Cobalt's main cobalt project is the Iron Creek Cobalt Project in
Idaho, USA, which has Inferred
mineral resources of 26.9 million tonnes grading 0.11% cobalt
equivalent, or an alternative underground-only scenario of 4.4
million tonnes grading 0.3% cobalt equivalent. For further
information regarding the resource estimate for the Iron Creek
Cobalt Project, readers are encouraged to review the technical
report prepared for the Company, dated effective September 18, 2018 (as amended), a copy of which
is available on SEDAR and on the Company's website.
On behalf of First Cobalt Corp.
Trent Mell
President & Chief Executive Officer
Neither TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in policies of the TSX Venture
Exchange) accepts responsibility for the adequacy or accuracy
of this release.
Cautionary Note Regarding Estimates of
Resources
Readers are cautioned that mineral resources are not economic
mineral reserves and that the economic viability of resources that
are not mineral reserves has not been demonstrated. The estimate of
mineral resources may be materially affected by geology,
environmental, permitting, legal, title, socio-political, marketing
or other relevant issues. The mineral resource estimate is
classified in accordance with the Canadian Institute of Mining,
Metallurgy and Petroleum's "2014 CIM Definition Standards on
Mineral Resources and Mineral Reserves" incorporated by reference
into NI 43-101. Under Canadian rules, estimates of inferred mineral
resources may not form the basis of feasibility or pre-feasibility
studies or economic studies except for Preliminary Economic
Assessment as defined under NI 43-101. Readers are cautioned not to
assume that further work on the stated resources will lead to
mineral reserves that can be mined economically. An Inferred
Mineral Resource as defined by the CIM Standing Committee is "that
part of a Mineral Resource for which quantity and grade or quality
are estimated on the basis of limited geological evidence and
sampling. Geological evidence is sufficient to imply but not verify
geological and grade or quality continuity. An Inferred Mineral
Resource has a lower level of confidence than that applying to an
Indicated Mineral Resource and must not be converted to a Mineral
Reserve. It is reasonably expected that the majority of Inferred
Mineral Resources could be upgraded to Indicated Mineral Resources
with continued exploration."
Cautionary Note Regarding Forward-Looking
Statements
This news release may contain forward-looking statements and
forward-looking information (together, "forward-looking
statements") within the meaning of applicable securities laws and
the United States Private Securities Litigation Reform Act of 1995.
All statements, other than statements of historical facts, are
forward-looking statements. Generally, forward-looking statements
can be identified by the use of terminology such as "plans",
"expects', "estimates", "intends", "anticipates", "believes" or
variations of such words, or statements that certain actions,
events or results "may", "could", "would", "might", "occur" or "be
achieved". Forward-looking statements involve risks, uncertainties
and other factors that could cause actual results, performance and
opportunities to differ materially from those implied by such
forward-looking statements. Factors that could cause actual results
to differ materially from these forward-looking statements are set
forth in the management discussion and analysis and other
disclosures of risk factors for First Cobalt, filed on SEDAR at
www.sedar.com. Although First Cobalt believes that the information
and assumptions used in preparing the forward-looking statements
are reasonable, undue reliance should not be placed on these
statements, which only apply as of the date of this news release,
and no assurance can be given that such events will occur in the
disclosed times frames or at all. Except where required by
applicable law, First Cobalt disclaims any intention or obligation
to update or revise any forward-looking statement, whether as a
result of new information, future events or otherwise.
SOURCE First Cobalt Corp.