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Tuesday, September 12, 2017 Derek Macpherson

FCC Site Visit: Rediscovering a Historic Camp


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Last week we visited First Cobalt Corp’s (TSXV:FCC) properties in the historic Cobalt Mining camp. First Cobalt, recently announced mergers with Cobalt One Limited (ASX:CO1) and CobalTech Mining Inc. (TSXV:CSK) which on a pro-forma basis will make it the largest landholder in the Cobalt Mining camp. While previous mining in this camp was focused on narrow vein exceptionally high-grade silver, First Cobalt is focused on finding a primary cobalt deposit. While the exploration and resource development process is at an early stage, the camp is known to have economic cobalt grades. We believe the company’s unique attributes, including its land position and infrastructure are likely to see First Cobalt trade at a premium to other cobalt exploration peers. Important upcoming catalysts are likely to include exploration results and the completion of the proposed mergers.


Historic cobalt production but never a focus. The historic Cobalt mining camp, despite its name, is famous for spectacularly high-grade silver deposits. There are hundreds of mines in the camp, which had varying degrees of success; however, at many of these mines cobalt was produced as a by-product but never pursued as a primary element because of lower value and limited payability when these mines were operating. From the company’s pro-forma land package (Figure 1) more than 4.6 million pounds of cobalt was produced, along with over 74 million ounces of silver. While the historic cobalt production was meaningful, the focus of historic operators was silver which drove mine plans and development, suggesting there remains cobalt left to exploit in this premier jurisdiction.


Not looking for what was mined before. Historically, mining in this camp was from narrow high grade calcite-quartz veins hosting silver and cobalt mineralization, but this is not what First Cobalt is looking for. First Cobalt believes that mineralization (especially cobalt as well as silver, nickel and copper) extends beyond these discrete veins into the mafic volcanics; essentially as disseminated arsenides (and sulphides) hosted within stockwork zones and fine fractures. Because of the historic focus on silver, little is understood in the camp with respect to controls of cobalt mineralization in the camp but initial work by First Cobalt suggests that the company’s belief has merit. We note that despite historic cobalt production, the cobalt exploration process is at an early stage and more work is needed.

Exploration underway, first drill results expected in the near-term. The company has been aggressively exploring this summer near the past producing Keely-Frontier mines (past production 3.3 million pounds of cobalt, 19 million ounces of silver). The company has been working on updated geologic mapping, stripping and channel sampling (Figure 2), along with 7,000m of drilling (Figure 3 and 4).




Significant infrastructure already in this historic camp. Following the announced mergers, First Cobalt will own a permit 100 tpd mill (Figure 5) and a refinery. We note that while the throughput at the refinery is unlikely to be of sufficient size to be useful, it comes with 40 acres of tailings area (plus another 80 acres designated), permitted to hold tailings containing arsenic (Figure 6). Besides these important pieces of infrastructure, the properties are all accessible by all-weather roads and both the mill and refinery already have power lines servicing them.



Historic “muck piles” provide medium-term opportunity, but also likely to provide valuable data. Spread across these past producing mines are a significant number of muck piles, which we expect to be of value for the company (Figure 7). The company believes these could contain economic cobalt mineralization, and is planning a sampling program on some of these piles. Should enough ore be found in these stockpiles, the company has the equipment and tailings capacity to start a small operation. While this potential for small medium-term cash flow is unlikely to move the needle for investors, it should provide the company valuable metallurgical and geologic information for future project development.


Unique attributes are likely to see First Cobalt trade at a premium to other cobalt exploration peers. Based on the current share price, the pro-forma market cap would be ~C$120 million, which may seem steep for an exploration company at this stage. While First Cobalt from an exploration and resource development perspective is at an early stage; the camp is not and is known to have economic cobalt grades along with significant infrastructure. Uniquely, the pro-forma company’s assets, which includes a dominant land position in the camp, a tailings area permitted for arsenic, a 100 tpd mill and small refinery, all of which have significant value. In our view, the company’s pending exploration results along with the completion of the proposed mergers are likely to be important catalysts for the share price.

Site visit and note completed by Ed Thorose and Derek Macpherson.

Derek Macpherson | VP Mining Analysis
Victoria Ellis Hayes | Associate
 
Red Cloud Klondike Strike Inc.
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Company Specific Disclosure Details
First Cobalt Corp. - TSXV:FCC - 1
CobalTech Mining Inc. - TSXV:CSK  - None
Cobalt One Limited - ASX: CO1 - None

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