First Cobalt, Glencore agree framework for phased cobalt refinery restart

First Cobalt Corp has agreed on a term sheet with Glencore AG, outlining the framework for a phased approach to recommission a cobalt refinery in Ontario, Canada, in less than a year with an expansion to 55 tonnes per day in 2021.

The framework remains subject to a number of conditions and outline the key milestones to a long-term strategic relationship that could bring a reliable source of domestically refined cobalt to the North American market. The First Cobalt refinery has been on care and maintenance since 2015 and is North America’s only primary cobalt refinery.

Total capital investment under the three phases is estimated at approximately $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 cashflow generated under a long-term refining arrangement.

According to First Cobalt, the first phase entails a $5 million loan from Glencore to support additional metallurgical testing, engineering, cost estimating, field work, and permitting associated with the recommissioning of the refinery. This includes a definitive feasibility study for a 55 tpd refinery expansion.

The second phase envisions commissioning the refinery at a feed rate of 12 tpd in 2020 to produce battery grade cobalt sulfate for prequalification for the electric vehicle supply chain.

The third phase involves an expansion of the refinery to a 55 tpd feed rate by 2021 using the current site infrastructure and buildings. An independently commissioned report estimates that the First Cobalt refinery could produce 5,000 tonnes per year of contained cobalt in sulfate assuming cobalt hydroxide feed grading of 30% cobalt.

“This partnership will help First Cobalt achieve its stated objective of providing ethically sourced battery grade cobalt for the North American electric vehicle market,” First Cobalt chief executive officer Trent Mell said.

“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.”

First Cobalt has already signed confidentiality agreements with several automotive companies interested in securing cobalt for the North American market.

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 refinery.

A final decision to recommission the refinery is contingent on the outcome of a feasibility study its expansion 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 First Cobalt’s current projects, the company noted.

First Cobalt was created via the merger of four cobalt companies to create a vertically integrated cobalt company with assets in the US state of Idaho and the Canadian province of Ontario.

Fastmarkets MB assessed the price of cobalt sulfate 20.5% Co basis, exw China at 35,000-36,000 yuan ($6,442-6,587) per tonne on July 12, down by 1.4% from 35,000-37,000 yuan per tonne on July 10.

Andrea Hotter

ahotter@fastmarkets.com

Published

Andrea Hotter

July 16, 2019

17:33 GMT

New York