Explorex Resources Inc (CSE:EX) (OTCMKTS:EXPXF) (FRA:1XE) is on the cusp of graduating from the ranks of the junior miners -- a feat rare enough it merits comment.
"This is going to be a major transition that you don't see in the sector very often that a company can grow so robustly and in so quick a fashion," said president Mike Sieb at the Mines and Money Conference in London in November.
The group is acquiring the Hautalampi nickel-copper-cobalt deposit within the historic Outokumpu mining camp of eastern Finland. Hautalampi was the focus for pre-production development in the mid-1980s and has seen extensive engineering that supported a feasibility study in 2009.
Given the advanced stage of the deposit, the established infrastructure and nearby mine development and mine operation services, Explorex believes the project can be developed relatively quickly.
"Hautalampi provides Explorex with an excellent opportunity to fast track this historically defined asset within a mining friendly jurisdiction that has some of the best infrastructure in the world," said Explorex CEO Gary Schellenberg at another conference.
"We anticipate being able to provide an updated resource estimate followed quickly by economic studies, all in the environment of rising commodity prices," he added.
Chinese partnership strong
One of the key factors going in Explorex's favor is its partnership with Ganfeng Lithium Co. Ltd. of China.
The two began working together nearly a decade ago. At that time, Ganfeng'smarket capitalization was around $200 million. Today, it is an outfit worth more than $4 billion, making it one of the largest lithium manufacturers in the world.
With support from Ganfeng, Schellenberg explained he believes he and his team can "recast Explorex to a development-stage company in the coming year."
On the funding side, Explorex recently announced it had closed the first tranche of its previously announced private placement. On completion, the financing will consist of up to two million flow-through units priced at $0.32 cents per unit and two million non-flow-through (NFT) units priced at $0.25 cents per unit for total gross proceeds of up to $1.14 million. The first tranche, which closed in late November, consisted of 1,056,500 non-flow-through units for gross proceeds of $264,125.
Hautalampi will focus on cobalt
The focus at Hautalampi will be cobalt, which has relatively high electrical conductivity and low thermal conductivity and a high resistance to heat and corrosion, making it an integral element in rechargeable batteries achieving longer storage life — a primary objective in the electric-vehicle, or EV, market.
Currently, over half the world's cobalt production allocated to electric batteries, a number that is expected to rise significantly as auto manufacturers aim toward zero-emission electric vehicle production. Some 42% of global cobalt supply is used specifically in battery lithium-ion cells.
No mining project comes ready to dig. At some point, a project starts merely as an area staked for exploration with hard yards starting many years before the asset goes into production.
There are, however, characteristics that point to potential success at Hautalampi. Being in an area renowned for the metal or commodity you are looking for tends to be a good start.
But then it's no good making a world-class iron ore discovery if it's stranded hundreds of miles from the nearest rail spur required to ship it across half a continent to an as-yet-undeveloped export terminal.
Similarly, we've seen occasions where intrepid firms have literally hit the motherlode only to see their asset expropriated.
In other words, geography and political stability are important — obviously not as crucial as the geology — but they are critical components for success.
Strong infrastructure at Hautalampi
While it is located 375km northeast of the Finnish capital Helsinki, Hautalampi has a lot of the ingredients required for success.
The infrastructure is there, also on tap is a skilled workforce, while contractor availability in the immediate area is judged as excellent due to extensive historic mining activity at the Keretti copper-cobalt mine and current operations at the Kylylahti mine and Luikonlahti mill.
Finland consistently ranks in the top three of the Fraser Institute's top global mining investment survey and is highly ranked as an underexplored, stable jurisdiction.
The country only opened its borders to foreign mining investment in the mid-1990s, and all mining and exploration activities were conducted by state-controlled entities. It stands out for its expanding mining sector within the European Union where mining has generally declined over the years.
With the EU becoming increasingly concerned about dependency on imports for key raw materials, the Scandinavian country offers a potential pipeline of supply security.
The Hautalampi project, says Schellenberg, would also help "secure a supply of cobalt for Ganfeng."
Explorex acquiring assets
To achieve this, Explorex is in the process of acquiring assets, such as Hautalampi, with a real likelihood of integrating into the battery market-supply chain.
"We have re-written the terms of the LOI [letter of intent] to reflect a more standard earn-in agreement to acquire 100% and have developed a comprehensive work plan including the preparation of a current resource estimate and revision of the economic assessment under present-day commodity prices and opportune market conditions,” said Schellenberg.
Not wishing to rest on its laurels, Explorex is also busy preparing a drill program at the Kagoot Brook cobalt-manganese-base metals project in New Brunswick and casting around for further value-add acquisitions.
"Our goal is to position Explorex as attractive to both our strategic investors and investors at large with a spectrum of projects; offering advanced near-term development to early-stage projects with substantial discovery upside," the Explorex CEO said.
--Katie Lewis and Giles Gwinett contributed to this report