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new direction","ecobalts-new-direction","article/ecobalts-new-direction",{"_uid":557,"date":558,"live":50,"tags":559,"editor":560,"content":570,"excerpt":890,"featured":50,"reporter":891,"_editable":895,"component":896,"seo_title":553,"categories":897,"visibility":904,"author_company":905,"data_vis_image":906,"featured_image":909,"seo_description":912,"author_full_name":905,"author_job_title":905,"formattedDate":913,"formattedArticleDate":914},"b3ea3847-26b9-46f2-a12f-c98ae8e49b3d","2018-02-25 00:00",[],[561],{"slug":562,"name":563,"content":564},"didi-bostock","Didi Bostock",{"job_title":565,"image":566,"bio":568,"linkedin":569},"Editor - Energy Transition & Economics",{"filename":567},"https://a.storyblok.com/f/287943243085208/512x512/2c5ca5c1a3/didi-bostock.jpeg","Didi is the Energy Transition & Economics Editor at Benchmark, covering a broad range of markets across the energy transition. His remit spans from downstream sectors such as BESS and EVs, through to midstream such as new technologies and battery production, to upstream critical minerals mining. He also leads on financial analysis across these supply chains, alongside in-depth policy analysis.\n","https://www.linkedin.com/in/didi-bostock-656342198/",{"type":571,"content":572},"doc",[573,580,585,598,601,606,613,618,623,628,633,638,643,648,651,656,661,666,671,676,683,688,691,696,701,706,711,716,722,727,732,737,740,745,750,753,758,763,768,773,779,784,790,795,800,805,811,816,821,830,836,841,846,851,856,861,867,872,875,880,885],{"type":574,"attrs":575,"content":576},"paragraph",{"textAlign":49},[577],{"text":578,"type":579},"With demand side pressure growing rapidly, security of cobalt supply continues to be a major concern for lithium ion battery producers and OEMs.","text",{"type":574,"attrs":581,"content":582},{"textAlign":49},[583],{"text":584,"type":579},"This coupled with increased scrutiny of cobalt sourcing across the entire supply chain following the well publicised illegal mining practices including human rights violations in the DRC has led to significant interest in cobalt development projects outside of the volatile African nation.",{"type":574,"attrs":586,"content":587},{"textAlign":49},[588,590,592,594,596],{"text":589,"type":579},"Following a recent site visit to eCobalt’s, Idaho Cobalt Project ",{"text":591,"type":579},"Benchmark Mineral Intelligence’s Caspar Rawles ",{"text":593,"type":579},"met with President and CEO, ",{"text":595,"type":579},"Paul Farquharson ",{"text":597,"type":579},"to discuss the project and the new direction they are taking to capitalise on this opportunity.",{"type":574,"attrs":599,"content":600},{"textAlign":49},[],{"type":574,"attrs":602,"content":603},{"textAlign":49},[604],{"text":605,"type":579},"Caspar Rawles: Can you give us a brief introduction to the Idaho cobalt project and its vital statistics please?",{"type":574,"attrs":607,"content":608},{"textAlign":49},[609,611],{"text":610,"type":579},"Paul Farquharson: ",{"text":612,"type":579},"The 100% owned Idaho Cobalt Project, known as the ICP, is eCobalt’s primary asset. It is the only advanced, near-term, environmentally permitted primary cobalt deposit in the United States. The ICP will produce ethical, transparent, and environmentally responsible cobalt products focused on the battery sector made in the United States.",{"type":574,"attrs":614,"content":615},{"textAlign":49},[616],{"text":617,"type":579},"The ICP is comprised of the Mine/Mill site located in Lemhi County near the town of Salmon, Idaho, and the Cobalt Production Facility (CPF), a stand-alone refinery facility to be located in Blackfoot, Idaho, approximately 200 miles south of the Mine/Mill site.",{"type":574,"attrs":619,"content":620},{"textAlign":49},[621],{"text":622,"type":579},"We have had a long history with the project, starting with initial drilling in 1997 followed by receipt of environmental permits in 2009, and initial construction in 2011 paused by a market downturn. We have spent over US$110 million on the project with approximately 90% of the earth and civil works completed at the mine site.",{"type":574,"attrs":624,"content":625},{"textAlign":49},[626],{"text":627,"type":579},"The majority of the milling equipment was also purchased. These factors put us in a strong position to start underground development, complete construction and achieve initial production in 2019 with commercial production by 2020.",{"type":574,"attrs":629,"content":630},{"textAlign":49},[631],{"text":632,"type":579},"We have recently filed a September 27, 2017 Feasibility Study (Feasibility Study), a NI 43-101 Technical Report, on the ICP to produce cobalt sulphate.",{"type":574,"attrs":634,"content":635},{"textAlign":49},[636],{"text":637,"type":579},"The project has a 12.5-year mine life with mineral reserves of 31.7 million lbs (14,500 tonnes) of cobalt, 42.8 million lbs (19,500 tonnes) of copper and 39,241 oz of gold. Since this is a primary cobalt project, 75% of total revenue comes from cobalt sales.",{"type":574,"attrs":639,"content":640},{"textAlign":49},[641],{"text":642,"type":579},"The total capital cost estimate is US$187 million and cash cost net of by-product credits is US$5.05/lb Co. Based on current cobalt price of $32.50/lb (LME- December 15, 2017 cash contract Co-99.3%-US$72,500/tonne or US$32.89/lb), the ICP’s after tax NPV (7.5% discount rate) and IRR per the Feasibility Study is US$218.4M and 28.7% respectively.",{"type":574,"attrs":644,"content":645},{"textAlign":49},[646],{"text":647,"type":579},"Since the release of the Feasibility Study, we have undertaken many optimisation studies to enhance the economics of the project including completion of a 5,000 ft, three-hole resource definition diamond drill program with the goal of upgrading a portion of inferred to indicated resources.",{"type":574,"attrs":649,"content":650},{"textAlign":49},[],{"type":574,"attrs":652,"content":653},{"textAlign":49},[654],{"text":655,"type":579},"We have also commissioned Micon International Ltd. (Micon) to evaluate an internal detailed mine design and production schedule to reduce planned dilution which may result in reduction of development and mining costs.",{"type":574,"attrs":657,"content":658},{"textAlign":49},[659],{"text":660,"type":579},"Most importantly, we will be pursuing production of a clean (low arsenic content) cobalt concentrate, an upstream precursor material for battery cathode production, instead of cobalt sulphate as identified in the Feasibility Study.",{"type":574,"attrs":662,"content":663},{"textAlign":49},[664],{"text":665,"type":579},"This new opportunity is being pursued in response to changes in battery supply chain dynamics and in-depth discussions with potential offtake partners.",{"type":574,"attrs":667,"content":668},{"textAlign":49},[669],{"text":670,"type":579},"We believe that a more simplified flowsheet to produce a clean cobalt concentrate product will result in material reduction in both capital and operating cost at the CPF and improve construction timelines. Overall, these optimization opportunities may result in material improvement to project economics. We have engaged Micon and SNC Lavalin to produce a new feasibility study in which project financing and development will be based in Q2-2018.",{"type":574,"attrs":672,"content":673},{"textAlign":49},[674],{"text":675,"type":579},"CR: From the site visit Benchmark undertook in October 2017 it appeared that you have much of the equipment needed for the mine already near site – do you have any major purchases remaining for the mine to go into production?",{"type":574,"attrs":677,"content":678},{"textAlign":49},[679,681],{"text":680,"type":579},"PF: ",{"text":682,"type":579},"Yes, additional equipment will have to be purchased for project development and commercial production. However, based on Feasibility Study estimates, the majority of remaining capital expenditures for the mine, mill, concentrator and CPF relate to development and construction costs rather than purchase of additional equipment.",{"type":574,"attrs":684,"content":685},{"textAlign":49},[686],{"text":687,"type":579},"Capital expenditures for the CPF can be significantly reduced, based on current high-level estimates, since we are pursuing a more simplified flowsheet to produce a clean cobalt concentrate.",{"type":574,"attrs":689,"content":690},{"textAlign":49},[],{"type":574,"attrs":692,"content":693},{"textAlign":49},[694],{"text":695,"type":579},"The Feasibility Study estimates were based on a complex flowsheet to produce cobalt sulphate. Equipment purchase for the mine is minimal since we intend to engage a contract miner for first two years of mining.",{"type":574,"attrs":697,"content":698},{"textAlign":49},[699],{"text":700,"type":579},"The mill equipment that you saw in storage during your visit was purchased in 2011. We had spent approximately US$16 million on this long lead time equipment during the initial phase of construction in 2011.",{"type":574,"attrs":702,"content":703},{"textAlign":49},[704],{"text":705,"type":579},"These are major components of the mill and concentrator including the ball mill, flotation cells, hoppers, grizzlies, etc. Other pre-construction works include installation of power to the pump back wells and support equipment related to the capture and treatment of mine and surface waters as well as discharge of treated waters as outlined in eCobalt’s National Pollution Discharge Elimination System permit, previously granted by the EPA.",{"type":574,"attrs":707,"content":708},{"textAlign":49},[709],{"text":710,"type":579},"We have also installed power-line poles to the mill, concentrator, tailings waste storage facility, water treatment ponds, septic field, laydown yard and the miner’s dry area. The stepdown power transformer is also onsite at the concentrator pads.",{"type":574,"attrs":712,"content":713},{"textAlign":49},[714],{"text":715,"type":579},"CR: At the time of the site visit you were looking at the option of producing a cobalt concentrate or hydroxide rather than a sulphate, can you elaborate why and have any further decisions been made on this?",{"type":574,"attrs":717,"content":718},{"textAlign":49},[719,720],{"text":680,"type":579},{"text":721,"type":579},"We made the decision to pursue cobalt sulphate production in 2015 since it had an attractive price premium and high demand, as it is used for precursor material for NCA and NMC battery cathodes. As such, the Feasibility Study was based on this business plan. We marketed our cobalt sulphate product, produced on a bench scale from the ICP’s ore material, to potential offtake partners over the past year.",{"type":574,"attrs":723,"content":724},{"textAlign":49},[725],{"text":726,"type":579},"Marketing feedback was positive yet each battery precursor manufacturer had its own product specification requirements and impurity tolerances.",{"type":574,"attrs":728,"content":729},{"textAlign":49},[730],{"text":731,"type":579},"Our flowsheet would be designed to produce cobalt sulphate that may only serve one or two customers. This valuable marketing feedback forced us to look at other upstream cobalt product options such as concentrate and hydroxide to service a wider customer base and to reduce technical risks.",{"type":574,"attrs":733,"content":734},{"textAlign":49},[735],{"text":736,"type":579},"We launched a marketing campaign shortly after the release of the Feasibility Study to talk to investors and potential offtake and strategic partners in North America, China, Australia and Europe.",{"type":574,"attrs":738,"content":739},{"textAlign":49},[],{"type":574,"attrs":741,"content":742},{"textAlign":49},[743],{"text":744,"type":579},"Consolidation of battery materials manufacturing in China to decrease cost and increase production capacity has reduced the premium of cobalt sulphate over cobalt metal. Due to this changing battery market dynamic, and in response to in-depth discussions with numerous potential offtake parties, we have determined that producing a clean cobalt concentrate product is the fastest route to production, generation of cash-flows and reduction of price and technical risks.",{"type":574,"attrs":746,"content":747},{"textAlign":49},[748],{"text":749,"type":579},"A clean cobalt concentrate is an upstream material for battery cathodes compared to cobalt sulphate which would eliminate the requirement to build the full CPF. Total capital cost estimate for the ICP per the Feasibility Study is US$187 million of which US$124 million (66%) is for the CPF.",{"type":574,"attrs":751,"content":752},{"textAlign":49},[],{"type":574,"attrs":754,"content":755},{"textAlign":49},[756],{"text":757,"type":579},"Operating cash cost, net of by-product credit is US$5.05/lb Co of which US$13.88 is direct cost before by-product credits and 34% of direct cost is related to the CPF.",{"type":574,"attrs":759,"content":760},{"textAlign":49},[761],{"text":762,"type":579},"Hence, costs related to the CPF is a major burden on project economics. In addition, the significant incremental capital investment required to build a full CPF is not now supported by the forecasted price differential between cobalt concentrate and cobalt sulphate. Initial offtake terms received have indicated attractive pricing for our clean cobalt concentrate product due to the ICP’s unique high cobalt content.",{"type":574,"attrs":764,"content":765},{"textAlign":49},[766],{"text":767,"type":579},"We have announced the new direction, to produce a clean cobalt concentrate, in our December 7, 2017 news release. We are very excited about this new path as it further de-risks the project and has the potential to significantly improve economics and improve our timeline to production.",{"type":574,"attrs":769,"content":770},{"textAlign":49},[771],{"text":772,"type":579},"CR: By choosing to produce cobalt concentrate how significantly can shorten the timeline to get the Idaho Cobalt Project into production?",{"type":574,"attrs":774,"content":775},{"textAlign":49},[776,777],{"text":680,"type":579},{"text":778,"type":579},"The timeline to commercial production would be reduced from around 21 months previously to being in initial production within 12 months from project construction commencement (planned for Q2 2018). According to the Feasibility Study, critical path to commercial production is construction and ramp up at the CPF. Production of a clean cobalt concentrate product would simplify the flowsheet at the CPF and reduce the additional circuits required to produce cobalt sulphate and other by-products.",{"type":574,"attrs":780,"content":781},{"textAlign":49},[782],{"text":783,"type":579},"CR: Under the project’s feasibility study, you have outlined a 12.5-year life of mine, is there scope to extend this in the future once the project is in production? ",{"type":574,"attrs":785,"content":786},{"textAlign":49},[787,788],{"text":680,"type":579},{"text":789,"type":579},"The existing mine life is based on the resources and reserves as outlined in the Feasibility Study. The Ram deposit, which hosts 100% of the reserves on the ICP, represents only a small fraction of the total ICP land package –less than 7% of the claim coverage. Furthermore, the extent of the mineralization of the Ram deposit itself remains undefined; the deposit remains open along strike and at depth.",{"type":574,"attrs":791,"content":792},{"textAlign":49},[793],{"text":794,"type":579},"Exploration drilling in late 2017 has the potential to expand the known resource and the resource will be further explored once underground operations commence. In addition, we have identified numerous other prospective targets on the property that have yet to be fully evaluated.",{"type":574,"attrs":796,"content":797},{"textAlign":49},[798],{"text":799,"type":579},"Three of these targets drilled returned drill assays above our current reserve cut-off grade. Historical resources on the East Sunshine and Sunshine deposits exist with development adits in place and numerous core drilling results in storage.",{"type":574,"attrs":801,"content":802},{"textAlign":49},[803],{"text":804,"type":579},"CR: In November 2017, you announced that the company were part way through 5,000 feet drill program, Benchmark also observed activity on this during the field visit in October. Do you have any preliminary results from this? If so can you elaborate? And if not when are you expecting to announce the results?",{"type":574,"attrs":806,"content":807},{"textAlign":49},[808,809],{"text":680,"type":579},{"text":810,"type":579},"We have recently concluded the 5,000 ft, three-hole resource definition diamond drill program. Assays were completed on two of three drill holes and results showed resource grade greater than Feasibility Study cutoff grade (>0.25% Co). We are very excited to share these results as it demonstrates the strength and depth of the Ram Deposit at the ICP.",{"type":574,"attrs":812,"content":813},{"textAlign":49},[814],{"text":815,"type":579},"These results were announced on December 14 and 18, 2017. This drill program is expected to have a positive impact on the project’s resource model. We have recently engaged Micon to produce an updated resource model by Q1 2018 to incorporate these assay results.",{"type":574,"attrs":817,"content":818},{"textAlign":49},[819],{"text":820,"type":579},"In addition, a fourth drill hole was completed in coordination with an independent geotechnical firm to provide rock mass data and acquire additional mineralized material for metallurgical testing.",{"type":574,"attrs":822,"content":823},{"textAlign":49},[824,826,828],{"text":825,"type":579},"CR: Security of supply is currently a top concern throughout the industry, with the likes of VW making very large, public procurement efforts to ensure they have the raw materials they will need for the future. ",{"text":827,"type":579},"At the same time, there is continued focus on the cobalt supply chain and responsible ",{"text":829,"type":579},"sourcing associated with untraceable cobalt from the DRC. This is all under a backdrop of rising demand driven primarily by the EV industry, do you feel there has been an increase in interest in not only your project but all projects which can add supply away from the DRC?",{"type":574,"attrs":831,"content":832},{"textAlign":49},[833,834],{"text":680,"type":579},{"text":835,"type":579},"Discussions with potential offtake partners and other industry stakeholders in addition to the increasing media attention that highlights the importance of transparent and socially and environmentally responsible cobalt production have demonstrated that there is significant interest in cobalt projects away from the DRC.",{"type":574,"attrs":837,"content":838},{"textAlign":49},[839],{"text":840,"type":579},"Since approximately 65% of global cobalt production comes from the DRC and where some of this production lacks transparency and is a product of artisanal mining as a result of social economic and political conditions, there is increasing attention and requirements by OEMs to source non-DRC cobalt.",{"type":574,"attrs":842,"content":843},{"textAlign":49},[844],{"text":845,"type":579},"Once in operation, our production would represent less than 2% of current global cobalt production. Our production is not going to disrupt current supply and demand dynamics and is a transparent, socially and environmentally responsible source of primary cobalt production located in the United States.",{"type":574,"attrs":847,"content":848},{"textAlign":49},[849],{"text":850,"type":579},"Global cobalt production is required to double within the next decade to meet demand driven by the EV industry. Given the natural constraints of cobalt supply where majority of cobalt deposits are located in the DRC as a by-product of copper and the remaining global supply as a by-product of nickel, these supplies are subject to geopolitical and copper and nickel price risks.",{"type":574,"attrs":852,"content":853},{"textAlign":49},[854],{"text":855,"type":579},"More projects need to come online to meet the lithium ion battery demand requirements. In response to the cobalt supply bottleneck and increasing price of cobalt, the market has witnessed a surge of new exploration projects in the past 18 months. There are only a handful of advanced projects which are expected to start production within the next couple of years, and are of ever increasing interest to those in the supply chain.",{"type":574,"attrs":857,"content":858},{"textAlign":49},[859],{"text":860,"type":579},"CR: Having been in your role at eCobalt (formerly known as Formation) for over 25 years you will have been through a number of cobalt cycles. Do you feel this current boom is different to previous ones? How has the industry changed since you started following cobalt? ",{"type":574,"attrs":862,"content":863},{"textAlign":49},[864,865],{"text":680,"type":579},{"text":866,"type":579},"The current market dynamic is very different from what we have witnessed over the past 25 years. Historically the cobalt market has been small with predictable growth rates and production was used in traditional applications such as superalloys, paints, tires, dyes, magnets, etc.",{"type":574,"attrs":868,"content":869},{"textAlign":49},[870],{"text":871,"type":579},"The strongest demand came from the superalloy sector. We filed a feasibility study in 2008 to produce high purity cobalt metal for this sector. Past price fluctuations were caused by political circumstances in the DRC and copper price risks; it wasn’t driven by strong cobalt supply and demand fundamentals.",{"type":574,"attrs":873,"content":874},{"textAlign":49},[],{"type":574,"attrs":876,"content":877},{"textAlign":49},[878],{"text":879,"type":579},"Demand in lithium ion batteries have been increasing over the past decade from consumer electronics. The fundamental shift in demand is now coming EVs and stationary power storage driven by government incentives and regulation, especially in China and Europe.",{"type":574,"attrs":881,"content":882},{"textAlign":49},[883],{"text":884,"type":579},"The demand for cobalt used in lithium ion batteries, particularly in EV applications is forecasted to require double current global production within the next decade. These conditions have created strong demand in cobalt that was not there in the past.",{"type":574,"attrs":886,"content":887},{"textAlign":49},[888],{"text":889,"type":579},"This may change the industry, adding more transparency to pricing and supply chain as cobalt becomes a more recognized commodity. Projects like the ICP – advanced, environmentally permitted, located in safe jurisdictions, and can achieve commercial production within the next few years are well positioned to thrive and grow in these conditions.","With demand side pressure growing rapidly, security of cobalt supply continues to be a major concern for lithium ion battery producers and OEMs. This coupled with increased scrutiny of cobalt sourcing across the entire supply chain following the well publicised illegal mining practices including human rights violations in the DRC has led to significant interest […]",[892],{"slug":562,"name":563,"content":893},{"job_title":565,"image":894,"bio":568,"linkedin":569},{"filename":567},"\u003C!--#storyblok#{\"name\": \"article\", \"space\": \"\", \"uid\": \"b3ea3847-26b9-46f2-a12f-c98ae8e49b3d\", \"id\": \"\"}-->","article",[898,901],{"slug":899,"name":900},"batteries","Batteries",{"slug":902,"name":903},"critical-minerals","Critical Minerals","private","",{"id":49,"alt":49,"name":905,"focus":49,"title":49,"source":49,"filename":905,"copyright":49,"fieldtype":907,"meta_data":908},"asset",{},{"id":49,"alt":905,"name":905,"focus":905,"title":905,"source":905,"filename":910,"copyright":905,"fieldtype":907,"meta_data":911,"is_external_url":51},"https://a.storyblok.com/f/287943243085208/e27a6e36c1/bm-screen-shot-2018-02-25-at-102410.png",{"alt":905,"title":905,"source":905,"copyright":905},"With demand side pressure growing rapidly, security of cobalt supply continues to be a major concern for lithium ion battery producers and OEMs. ","Feb 25, 2018","25th February 2018",[],[],1792773944833]