Cape Lambert Resources Limited (ASX:CFE) (FRA:HM5) executive chairman Tony Sage believes that despite recent price volatility, the fundamentals of the copper and cobalt markets remain strong.
This strength, he said, augured well for Cape Lambert, which is focused on these battery metals in the Democratic Republic of Congo (DRC).
The battery metals entrepreneur told Proactive Investors that the volatility was due to Chinese commodities market participants manipulating markets.
Both commodities are used in electric vehicles, along with lithium, manganese, nickel and graphite.
Sage recalls a time of deep fluctuation in iron ore prices, back in 2011, which was also influenced by the Chinese.
The price went from US$20 and US$100 per metric tonne to drop back to a steadyish US$60/tonne before exploding to US$180/tonne.
These days the iron ore price is US$73.50/tonne after reaching a US$191.90/tonne ceiling in February 2011 and US$37/tonne low in December 2015.
Cobalt as a by-product
Cape Lambert’s high-profile chairman believes market participants’ efforts to toy with pricing can only go on “for so long”.
Speaking to Proactive Investors at the International Mining and Resources Conference in Melbourne four weeks ago, Sage said cobalt was the mineral “everyone” was after.
He said, “The cobalt price has gone from about US$20,000 to US$98,000 (per tonne) and came back to be sitting in the mid-60s because of spot price dealings by China.
“As a trader, if you try to get cobalt now it is very difficult.”
Fundamentals ‘still strong’
In the past eight weeks, the cobalt price has slipped below the US$60,000 a tonne mark, trading at US$55,000/tonne on Monday, November 26, 2018.
Sage said, “The market fundamentals for copper and cobalt are still strong.
“A lot of people don’t realise that when you are looking at an electric vehicle, there is four times more copper than in an internal combustion engine vehicle because it is the conductor that puts the power through.
“Everyone in the world has priced that in and they believe the copper price, as well as cobalt, will continue to rise as more companies build 100%-electric vehicles.”
The copper price is US$2.73 a pound, with the mineral’s ceiling price being US$4.58/pound, experienced in February 2011, and bottom price of US$1.94/pound being experienced in February 2011.
Sage said, “In the DRC where 65% of the world’s daily supply comes from, it is extremely difficult to find new deposits.
“Back in its heyday the Congo was producing around 50% of the world’s copper so there are a lot of tailings dumps that are rich in cobalt because it was previously not extracted as it was not a necessary mineral. Also, the technology to extract cobalt was not there.”
About 99% of cobalt produced is a by-product of copper or nickel, with the DRC supplying about 58% of the world’s supply — a 64,000-tonne annual cobalt figure in 2016 and 2017.
Thirty-eight per cent of the world’s cobalt is a by-product of copper projects, with the DRC’s copper-cobalt supplies drawing attention.
The central African country is a growing area of supply as the cobalt price sits high, with Glencore PLC (LON:GLEN) (JSE:GLN) (FRA:8GC) (OTCMKTS:GLNCY) Randgold Resources Limited (LON:RRS) (JSE:RNG) (FRA:RGRA) (NASDAQ:GOLD) and China Molybdenum Luoyang Co Ltd (HKG:3993) (SHA:603993) (FRA:D7N) (OTCMKTS:CMCLF) operating and developing projects there.
The DRC and Zambian locations of projects belonging to Cape Lambert and its investment Fe Limited
Kipushi project in the DRC
Cape Lambert’s primary focus is the Kipushi Cobalt-Copper Tailings Project in the DRC, from which it aims to recover cobalt from old tailings left behind in the hunt for copper.
Sage said of this asset, “We found this fantastic tailings dump right near a flotation plant with an electricity supply.
“We are now finalising a drilling program which will tell us exactly how much of the minerals are there along with the grades.
“We then plan to build a leaching plant at the location where the electricity is and aim to be in production within 12 months of starting to build that plant.”
The Kipushi tailings dam in the DRC extends for a kilometre and is 400-metres wide
The company has ambitions to produce thousands of tonnes of material a year at the project near the town of Kipushi in the Katanga Copper Belt of the DRC.
Kipushi project is only 30 minutes away from the established mining town of Lubumbashi, on mostly-sealed roads.
A 3D view of the proposed 1 million tonne a year Kipushi leaching plant
The tailings dam extends for a kilometre, is more than 400-metres wide and up to 15 metres deep in areas.
Sage said, “What we expect to produce is around 2,900 tonnes per annum of cobalt and about 7,500 tonnes per annum of copper (dry basis).
“If you use today’s prices, that is close to US$205 million of contained metal produced each year and the operation could last as long as five years.”
An updated flow sheet for Kipushi Leaching Plant separates out separate cobalt-rich and copper-rich high-grade mixed hydroxide precipitate products to attract a wider market
Given there are about 2,204 pounds of copper in a tonne, the expected copper production would be worth approximately US$45 million a year at this week’s pricing.
Cape Lambert expects relatively low costs of production at the project with Sage saying, “The operating costs are reduced as there is no requirement for crushing or grinding.
“It is basically reprocessing the tailings in a very simple process. It is easy to build the plant, the technology is already there — it’s now just a matter of quantifying the resource, which will then be used to help attract funding.”
The town of Kipushi, Cape Lambert’s nearby tailings project and the site for a leaching plant
Once the project’s resources are quantified, Sage expects them to be reflected in Cape Lambert’s share price.
Four finance partners have been going over the deal, with Cape Lambert’s target start time for construction being the December 2019 quarter. That would mean expected first production by about late 2020.
“We are very confident that as soon as those (Kipushi project) numbers come out, the share price will better reflect the value of the project and we will be off and running.
“We are in talks with several offtake partners who are just waiting on drilling results.
“We have covered only part of the whole tailings dump with 173 holes, with an initial volume calculation of 2.7 million tonnes of tailings available from the area drilled.”
Aerial view of the proposed Kipushi leaching plant adjacent to the existing flotation plant
The market is already undervaluing the company through its stake in multi-listed European Lithium, according to the chairman.
“The (Cape Lambert) share price doesn’t even reflect the value of the stake CFE holds in European Lithium.
“We are looking at a market cap of just on $20 million with $13 million of that representing one stock that we hold in EUR.
“We are completely undervalued.”
Workers take stock at investment European Lithium’s flagship Wolfsberg Lithium Project in Austria
Cape Lambert’s current market capitalisation is $20.23 million, after having 1.012 million shares on issue in late October 2018.
Its partly held asset European Lithium has a $60.26 million market cap.
Western Australia-based Cape Lambert has a 12% stake in the Sage-led European Lithium which has the Wolfsberg Lithium Project south of Vienna as its flagship asset.
Cape Lambert’s other investments include a 39.33% stake in Sage’s Fe Limited, which has the Kasombo Copper-Cobalt Project, also on the DRC’s Katanga copper belt, as its lead asset.
FEL’s market capitalisation is $5.192 million.
Looking over high-grade mineralisation at investment Fe Limited’s Kasombo Copper-Cobalt Project
Kitwe project in Zambia
Cape Lambert’s Zambian asset, the Kitwe Cobalt-Copper Tailing Project, is near a large copper mine owned by Glencore.
Sage said the Kitwe tailings project was more copper focused, with the tailings dump hosting a large amount of copper at a high grade.
Kitwe Cobalt-Copper Tailing Project on a map of Zambia and the DRC
Sage said, “In a recent drilling program, we found that the cobalt wasn’t as high as reported numbers and one option we are now looking at is to sell the project as a primary copper venture.
“The mine next door has been operating for many years and is down to around 0.9% copper while our grade is more than 1%.
“It looks like re-treating the tailings for them would be a lot more profitable.”
The tailings dam at Kitwe Cobalt-Copper Tailings Project in Zambia is 750 metres by 650 metres and up to 15 metres high
Cape Lambert is doing an internal study.
Sage said, “We are doing an internal study on how much it would cost us to establish a mobile processing plant there.”
Cape Lambert will hold its annual general meeting in the Perth inner city suburb of Leederville at 9am Western Standard Time this Thursday, November 29, 2018.
— with John Miller