The PFS justifies proceeding towards commercial development of the project near Broken Hill and a bankable feasibility study will now be undertaken.
It has also established a maiden probable ore reserve of 43.6 million tonnes at 819 ppm cobalt.
Cobalt Blue’s CEO Joe Kaderavek comments to Proactive Investors on the maiden ore reserve and PFS outcomes.
Proactive Investors: What is the significance of the announcement today?
Joe Kaderavek: COB is proud to deliver a comprehensive PFS that showcases the Thackaringa Cobalt Project.
Investors can finally see, albeit currently assuming a short mine life, the quality and value of the Thackaringa project and our proprietary process.
The project will now move into a bankable feasibility study.
Proactive Investors: What are the key focus areas over the next 12 months?
Joe Kaderavek: The PFS is a technical document, and we have intentionally used achievable targets and independent third-party experts to help set inputs and targets. For example:
1. Recoveries - the study assumed a conservative baseline of 85.5% cobalt and 64.4% sulphur recovery. This compares to COB corporate targets of 90% and 75% respectively.
2. Tailings Storage Facility (TSF) - the study assumed a significantly negative TSF NPV -$160 million. We believe there is considerable scope to reduce this burden.
3. Power - represents almost a quarter of our site costs, this is a key cost reduction focus for us in the next phase.
4. Mine life extension - our production target case was sub 13 years. The additional value generated by extending mine life to at least 20 years is enormous.
There are strong catalysts for the company over the next 12 months.
In the near term, a tailings optimisation study will be commissioned, whilst in the background, large-scale test work for our unique process will begin.
A comprehensive site drilling program is planned from Q3, in part aimed to prove up the long-term cobalt resource on site.
Power studies will run in parallel, and the use of distributed energy storage (lithium-ion batteries) to ‘shave’ peak power loads is being examined.
In addition to our Thackaringa focused technical studies, we will continue to assess the fit of our proprietary technology in processing cobalt in pyrite ores.
For example, recent technical cooperation with one of our neighbours, Havilah Resources, has delivered encouraging technical results. The technology delivers significant step out potential for the project.
Proactive Investors: What’s the significance of the PFS corporately?
Joe Kaderavek: Put simply, larger investment institutions see the delivery of a PFS study as a minimum technical hurdle before a company is ‘investable’.
They can see the upside, but simply cannot take the risk, constrained by their investment mandates.
We already have some smaller institutions on the book, but this event changes our appeal and puts us in front of global blue-chip funds. It’s a very exciting time for the company.
Proactive Investors: How competitive is Thackaringa globally?
Joe Kaderavek: Let me answer that in two ways.
1. Operating costs – The PFS delivered an operating cost (C1 US$/pound - net of sulphur) of approximately US$12.80/pound of cobalt. This is before the upcoming cost optimisation studies (tailings and power).
We have consistently believed that US$10-12/pound is a world-class benchmark and provides economic resilience (the ability to operate under depressed market conditions). The (real) cobalt price has dropped below US$12/pound only once in the last 40 years (see chart below).
2. Capital costs – The PFS delivered a capital cost of $A550 million (including $A66 million in contingencies) and approximately A$24 million in pre-strip. That’s approximately US$115,000 per tonne of installed cobalt capacity.
Compare this to an average of US$350,000 for greenfields project candidates identified (source: CRU) over the next decade. In simple terms, that’s 1/3 of the capital intensity of our global peer group with zero copper or nickel risk.
Proactive Investors: Please recap your overall commercial strategy
Joe Kaderavek: The Thackaringa Cobalt Project strategy is to examine an integrated mine/refinery concept.
Traditionally, cobalt mines have sold cobalt as a by-product of either copper or nickel and received a fraction of the value of the contained cobalt. Cobalt Blue’s strategic focus is on the battery industry and producing a battery-ready cobalt product (cobalt sulphate) at sufficient purity to enter the production chain directly.
This allows Cobalt Blue to sell directly into the battery industry and specifically to cathode precursor manufacturers representing the front end of the industry. The long-term commercial strategy is to extract the maximum cobalt margin.