CBLT Inc. (TSXV:CBLT) has a large portfolio of cobalt projects throughout Canada
Angela Harmantas | March 28, 2018 | SmallCapPower: The astounding rise in cobalt prices over the past two years has caught many mining insiders by surprise. Thanks to market foresight and some savvy business deals, Canadian junior CBLT Inc. (TSXV:CBLT) has already created value for shareholders by acquiring several cobalt properties in the Gowganda district of northeastern Ontario. And the Company is only just beginning to explore.
Most cobalt is mined as a by-product of copper or nickel mining. Strong growth in the rechargeable battery and aerospace industries are fueling cobalt demand and, with current supply, the global cobalt market is expected to shift from surplus to deficit. The large, mineable cobalt deposits are found in politically sensitive parts of the world. The Democratic Republic of Congo (DRC), producing around 60% of the world’s supply of cobalt, is mired in stalled elections, human rights issues and the lasting effects of a devastating war. “I’ve said before that the four horsemen of the apocalypse graze their steeds in the Congo – it’s a horrible place to be and the more supply chain interruptions that there are, the higher the cobalt price goes,” said CBLT’s CEO Peter Clausi.
In addition, on March 9, the DRC president signed a new mining law that raises taxes and royalties on mining operations, including a potential increase in the cobalt royalty from 2% to 10%, and also removes a clause in the previous mining law that protected mining companies for 10 years in the event of any legislative changes. In a bid to mitigate the economic impact, international mining companies operating in the DRC are meeting with the DRC government, but the uncertainty is still cause for concern.
One of the biggest critics of the global cobalt supply chain, Amnesty International, is pushing to impose an ethical solution that could impact the DRC’s production dominance moving forward, suggesting a 15% decrease in the cobalt supply. However, with few other cobalt by-product mines coming online, there appears to be limited options to source cobalt from other jurisdictions in the near-term. This issue offers significant opportunities for cobalt-focused explorers, such as CBLT Inc., to shine.
In early 2016, cobalt was not generating the amount of excitement seen today. The price per tonne was trading around US$20,000 (US$10/lb) and its importance to battery production was overshadowed by lithium – another key ingredient. As Mr. Clausi explains, the team originally set out to look for lithium projects but inevitably came across cobalt. “The mathematics of cobalt were fascinating. Demand is increasing, supply is dropping, there are no stockpiles and there’s no government intervention that can help.”
When CBLT acquired its first cobalt property, the price was about $12 per pound. “We anticipated that the cobalt price would hit $35 by the end of 2017, and we were told we were nuts. It closed 2017 at $34.50,” said Mr. Clausi. “Our call now is that it will probably hit about $50 a pound, and then flatten out as the market digests.”
In 2017, CBLT bought five assets in Gowganda for $114,000. In December 2017, CBLT announced that one of those five assets sold for $100,000 – 50% in cash and 50% in stock – to Winmar Resources Ltd., an Australian Securities Exchange (ASX: WFE) listed company. Since the sale, Winmar’s stock has increased 500%, adding another $200,000 to the sale price. That makes the rest of the portfolio ‘more than free’ to CBLT. And the Company has let the market know there is more M&A activity on the way.
In June 2016, CBLT acquired Copper Prince, a geologically-unique property in Sudbury, Ontario at a total cost of $31,000. Cobalt is typically associated with copper and nickel in VMS-type deposits and, in northern Ontario, cobalt is usually found with silver and a high level of arsenic, making it difficult to mine economically. However, CBLT’s Copper Prince property is one of the only known properties where gold and cobalt are found together in a quartz vein. “The structure is the unique part, because gold and cobalt are not something that are commonly found together,” Mr. Clausi explained. The flip side to having a property with unique geology is finding people who have worked on a similar project, which is true for CBLT. The Company already completed an induced polarization (IP) survey, some magnetic (MAG) surveying and more surface sampling to understand the deposit, and plan to drill in 2018.
While Copper Prince is CBLT’s flagship property, there are several other projects that CBLT is hoping will bring value to shareholders, including the Chilton Cobalt project in Quebec, with a 1km long mineralized zone of nickel, copper, cobalt and chromium. Outside of cobalt, recent sampling from Otto Lake in northern Ontario returned 2.3 g/t gold, in an area with no known historical work. CBLT also has properties in British Columbia that are currently being evaluated.
Meanwhile, the fundamentals for cobalt prices continue to strengthen. Apple Inc. (NASDAQ:AAPL) recently announced its intention to become a more vertically-integrated company by sourcing cobalt directly from miners – other major manufacturers might soon follow. In March 2018, Gem Co of China announced it was purchasing 52,000 tonnes of cobalt from Glencore over a three-year period. With global mine production estimated at just over 110,000 tonnes of cobalt per year, the Glencore/Gem Co agreement will further dry-up the supply chain.
For now, the Company’s eyes are focused on Copper Prince and unlocking the value in the quartz vein. “When I tell geologists that we have gold and cobalt with virtually nothing else in a quartz vein, they don’t believe it,” said Mr. Clausi. “But our lab samples and assay results prove that we do.” At Copper Prince, the Company intends to prove up the mineralization with another drill program later this year while it continues to be a project generator and look at other cobalt properties in Canada.
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