eCobalt Solutions (TSX:ECS) announced an update on the progress its made in optimizing the Idaho Cobalt Project (ICP). The company has decided to take
a new direction with its cobalt product and is expected to produce a clean (low arsenic) cobalt concentrate that is expected to reduce capital and
operating costs at the company’s Cobalt operating facility. This new direction has followed changes in battery supply chain dynamics and in-depth discussions
with potential offtake partners.
eCobalt to produce clean cobalt concentrate. Initial plans for the company included the production of cobalt sulphate, however, a clean
cobalt concentrate has been found to allow the fastest route to production, generation of cash-flows and reduction of costs and technical risk to the
project. The change has the potential to reduce both operating and capital costs. We note that of the US$187 million outlined in the feasibility study,
US$124 million was for the cobalt processing facility. Additionally, 34% of the direct operating costs are related to cobalt processing facility. As
such, the shift to producing a clean cobalt concentrate, versus cobalt sulphate have the potential to benefit project economics.
Further drilling confirms mineralization. As per the company’s resource and reserve optimization, the company stated that the three-hole,
5,000-foot drill program is on schedule. It was also indicated that all three holes intersected mineralized zones in the feasibility study and are
expected to make a positive impact on the company’s resource model. The company is also in progress of drilling a fourth hole to provide rock mass
data and acquire additional mineralized material for metallurgical testing and detailed engineering. The assays are pending and are expected to be
released in an updated resource model in Q1 2018.
Cobalt market fundamentals improving ICP economics.
The company also highlighted that based on today’s LME cobalt price of US$30.00/lb
(Co-99.3%), the project’s after tax NPV (7.5% discount rate) and IRR per the feasibility study is US$183 million and 25.5%, respectively. We continue
to believe eCobalt is well-positioned in the improving cobalt market to take advantage of rising prices, as the demand for electric vehicles and lithium-ion
batteries grows. The project’s location in the U.S., places it in a mining friendly jurisdiction with low political risks. We view eCobalt as one of
the few companies positioned to meet the near-term increase in cobalt demand, taking advantage of the current upswing in metal prices.
Derek Macpherson | VP Mining Analysis
Victoria Ellis Hayes | Associate
Alex Pitcher | Associate
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eCobalt Solutions Inc. - TSX:ECS - 1,2,3,4
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