Cobalt Blue Holdings Ltd’s (ASX:COB) Board is confident it will be able to obtain funding to complete the next stages of the Thackaringa Cobalt Project without difficulty, including a bankable feasibility study (BFS).
COB’s Board considers that it has reasonable grounds for project financing and availability of funding as set out in the pre-feasibility study (PFS) released yesterday.
The quantum of funding required to produce a bankable feasibility study is the subject of a budgeting process which has not been finalised.
Projected costs from the BFS stage until the operations stage are outlined in the capital costs described in the PFS announcement.
The company has considered a range of options for funding prior to and during the expenditure of capital costs.
It is anticipated that finance will be sourced through strategic partnerships, including the use of debt and equity.
The reasonable financing and funding grounds include COB’s commercial strategy, its processing technology, attractive project returns, economically resilient operating costs and an extension of mine life.
The commercial strategy for Thackaringa is to examine an integrated mine/refinery concept.
Traditionally, cobalt mines have sold cobalt as a by-product of copper or nickel and received a fraction of the value of the contained cobalt.
Focus on battery-ready cobalt product
COB’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 COB 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.
Board and management have a strong track record of attracting partner interest and attracting new capital, particularly due to the processing technology.
Investment from LG International
This includes a US$6 million investment from LG International, the resources investment arm of LG Corporation, acting in cooperation with LG Chem, one of the world’s largest lithium-ion battery makers.
LG Chem possesses strong technical leadership in the development of next-generation batteries, in particular for fixed storage and Electric Vehicles (EVs).
It is also one of the world’s leading EV battery makers.
Under the First Mover partnership LG will provide capital and technical assistance to COB.
There are also attractive project returns.
Project capital costs are estimated at $550 million, including $66 million in contingencies, and about $24 million in pre strip.
The (production target) project return is $544 million delivering an IRR of 22%, well in excess of commercial cost of capital assumptions.
The project (production target) has a payback period of less than four years.
Examining capital intensity (US$/tonne cobalt production) at about US$115,000 per tonne, the project is a standout amongst its global peer group.
Resilient operating costs
Operating costs are also economically resilient.
The PFS delivered an operating cost (C1 US$/pound - net of sulphur) of about US$12.80/pound of cobalt and this is before upcoming cost optimisation studies (tailings and power).
The company believes that US$10-12/pound is a world-class benchmark and provides economic resilience.
The (real) cobalt price has dropped below US$12/pound only once in the last 40 years.
There is also potential to extend the project life by treating ore from inferred inventories from the known resources and from other sources beyond Thackaringa.
These represent opportunities for COB that would have significantly positive returns on capital.