In return for a one-off investment in the construction-ready project, Cobalt 27 will receive royalties on production of the key battery raw materials, which is forecast to begin in 2020. The investment is the first to be held by Electric Metals Streaming, a newly-formed, wholly owned subsidiary of Cobalt 27.
“With today’s announcement, Cobalt 27 continues to be ideally positioned to take advantage of the early stages of the technology metals upcycle where large-scale base metal producers are actively seeking to leverage cobalt by-products to fund mine expansion and repay debt using alternative, non-dilutive sources of capital,” Anthony Milewski, chairman of Cobalt 27, said in a statement.
Production at Dumont, in the Abitibi region of Québec, Canada, is expected to commence at a rate of 33,000 tpy nickel, and 1,000 tpy cobalt, both in concentrate.
Production will increase to average 51,000 tpy nickel and 2,000 tpy cobalt from year five. The project amounts to the world’s largest developed, permitted, and construction-ready reserves of nickel and cobalt, Cobalt 27 said.
The operating interest in Dumont is held by Royal Nickel Corporation Minerals.
The nature of the reserve means the material produced at Dumont can be fed directly into the battery sector. Nickel sulfate, suitable for battery applications, requires class-one nickel, fed by sulphide and laterite deposits.
“The production profile of the company will make it a critical source of raw materials from a safe jurisdiction to both the automobile and grid storage industries at a time when few development-stage projects exist globally, [but] almost no such projects exist in stable jurisdictions,” Cobalt 27 said on February 22.
Cobalt prices have soared over the past 18 months as a results of tight supplies and anticipated demand from the forecast electric vehicle boom.
Metal Bulletin’s benchmark low-grade cobalt price was assessed at $38.15-39.30 per lb, in-warehouse, on Wednesday February 21, up 71% compared with a year ago.
“As the second-largest nickel reserve and the largest undeveloped cobalt reserve globally, [Dumont] ranks among the top battery metals projects in the world and is one of only a few nickel-cobalt projects that will be built this cycle,” Milewski said.
Concerns over political instability in the DRC, and the use of child labor in artisanal cobalt production have amplified worries over the availability of the raw material to meet forecast demand from the electric vehicle sector.
In addition, proposed changes to the DRC’s mining code, including an increase in royalties and taxes, have put mining companies active in the region in “wait-and-see mode”, Glencore ceo Ivan Glasenberg said on 21 February.
“At a time when the DRC, which produces [more than] 65% of the world’s cobalt, grows ever-more unstable, OEMs, battery manufacturers, and automobile companies, are increasingly focused on sourcing nickel and cobalt in stable, conflict-free jurisdictions,” Milewski added.
Royalties will be paid quarterly in US dollars once production begins. The agreement includes a $15 million buyback option for Dumont to repurchase 0.375% of the 1.75% NSR. The repurchase option can be exercised on the third, fourth or fifth anniversary of the original royalty agreement.
The terms of the Repurchase Option imply a $70 million value for the whole 1.75% NSR.
Proven and probable reserves at Dumont are 1.18 billion tonnes of ore, containing 3.15 million tonnes of nickel and 126,000 tonnes of cobalt.
The initial life of mine is 33 years. The NSR has an initial 60-year term, with automatic 60 year renewal, and covers nickel and cobalt, as well as platinum and palladium.
Cobalt 27 has agreed a 1.75% net smelter return (NSR) royalty on future production of all metals, including nickel and cobalt, from the Dumont nickel sulphide project in Canada.