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8.8¢ cobalt blue holdings limited

Key Info on COB, Update, page-31

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sailorlion

2,812 Posts.

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08/05/18

08:51

Post #: 32944048
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Originally posted by Duncan04 ↑

This is an update from a March 18th thread based on new info and to the best of my understanding. Thanks to @mlives from which I borrow some write up.

There are a handful of cobalt hopefuls on the ASX aiming to get up and running. There are a lot of excited and confused investors out there because Cobalt is "so hot right now". Reality check - I suspect very few projects will actually get built. COB will. Why?

1.COB's management: hardworking and no ramp up
CEO Joe Kaderavek was head of resources at Deutsche Bank Equities and International Equities Analyst at BT Funds Management. He's been careful and measured in building up the case for the resource, doing larger testing samples and using lower grades in the testing to show the viability of COB's Thackaringa. His conservative and robust approach is very deliberate and will be attractive to institutional investors and lead to improved study results and news flow in the future. I like the fact that the mgmt is letting the results speak for themselves.

2.Resource size: Very good+ Further potential Upside in Mineral Resource:
As per March19thASX release,72% of the resource is now in the indicated category= further derisk the project and the overall Cobalt resource is up 23% for now at 61,000 tonnes of contained cobalt which is already one of the bigger deposits in Australia.
To my knowledge the latest resource upgrade does not include any of the new geophysical targets (T2, T3 and T4 mentioned in ASX release of Nov 22nd2017). I would consider them as free options at the moment. I believe the mgmt does not want the technical team distracted from the core resource right now. But the anomalies look very good and should very likely help in a further increase of the mineral resource thus easily enabling a 20 Years LOM (life of mine).

3.Cobalt concentration: key advantage with Gravity separation process:
The difference between sulphide and laterite ore is huge. COB can perform a simple gravity upgrade (refer to ASX releases). This is a very low cost way of separating out the pyrite (containing the cobalt) and the waste material using a coarse crush of around 1mm. In other words COB would return 80% of the waste back to the pit with minimal processing.
This spiral gravity separation technique on the quartz increases the original concentration by 5 times to 0.4-0.5%. See graph below.
The refinery then processes only this remaining 20% of the material(at a 0.4-0.5% Co feed) That’s the equivalent of the head grade of Glencore top mine in DRCongo. FYI 0.5% = 5000ppm. You simply can’t do this with a laterite (AUZ, CLQ, ARL etc) where most of the ore goes to the refinery. Also remember that the refinery is where the bulk of the cash costs are incurred.

4. Refining process: the key Temp/pressure levels of the leach circuit:
I encourage holders to carefully read the latest April 11th Investor Presentation on COB website, and the key page 22 as it shows another major difference with laterite projects and this was the 1sttime numbers were mentioned. See https://www.cobaltblueholdings.com/presentations/
COB will leach at only 5-10 atmospheres and 130 Celsius versus HPAL 50 atmospheres and around 250 Celsius for Ni/Co laterite = Large savings in operating costs. @ Mlives recently pointed out that the COB leach occurs under similar conditions to a kitchen coffee machine.
Also as per March 5thASX release the calcine and leaching phases tests results are excellent with 96% of Cobalt extraction on a reliable basis. “The key process steps have been validated”. To top it up COB is now producing samples of Cobalt Sulphate.

5.Technical Partner: LGI-COB agreement signed (ASX release March 23rd)
LGI will provide technical assistance (to produce the end prodcut Cobalt Sulphate among others ) andhas just bought for $7.8M shares of COB. That LG, a huge conglomerate from Korea has put money in COB before even the PFS is a very big vote of confidence and they even paid a 15% premium to market price at the time they struck the deal with COB. For the record LGI is the investment arm of the LG group: one of its key subsidiaries is LG Chem which is among the top 5 EV battery manufacturers in the world.

6.Location, Location, Location: ideal
Beside being in the safe haven of Australia, COB is less than 25Km from the town of Broken Hillvia the Barrier Highway = no need for specific camp etc. Also the railway line to Port Pirie goes through COB site, further reducing infrastructure and operational costs. There will just be a need for a 22Km water pipeline as well as 66KV power line.
Finally, surveys have shown that the likely location for the processing plant would be less than 2km from current deposits.

7.Intellectual property : nice potential with coming patent
Here's the kicker... COB have also worked out how to refine Cobalt without sulfuric acid byproducts and submitted this pyrolysis process for patent (a fairly long process that is due to come through later this year). This IP is ANOTHERasset the market is not pricing in. The pending patents not only allow COB produce their own low cost Cobalt for an estimated $12 per pound (NB - current prices are around $40 per pound), but COB should also be able to leverage that IP for working partnerships with Sulfide Cobalt deposits all over the world- This is happening now with HAV and monetizing their IP could turn out to be very valuable.

8.Costs: Low
Opex:There has been guidance on C1 cash cost break even (net of sulphur) at around US$12/lb. My take is that they will come close at PFS and then do better at BFS after more defined engineering studies. The mgmt seem also focused on the economic longevity (and 20 years Life Of Mine too) that is important for COB to obtain project financing.
Capex:no guidance yet so we’ll have to wait for the PFS next month but the info above regarding the location, gravity separation process results and specs of the leach circuit point to a much lower OPEX than laterite projects.

9.Sovereign Risk: Close to Nil
DRCongo‘s mines produce around 55% of all worldwide Cobalt supply. Earlier this year, the Congolese national assembly passed legislation for high taxes (50%) on so-called super profits on all existing mines as well as possibly increasing the royalty fee from 2% to 10% on all "strategic commodities" which was much higher than anticipated and will likely include cobalt.
DRC also throws up ethical dilemma for big companies' reputations with poor worker conditions including child labour etc., it's also less predictable due to persistent extreme violence and war in the east of the country.
To top it up, last week a key Cobalt miner, Glencore’s major subsidiary operating in DRCongo has seen its share price plummet by around 70% following court cases with current and past shareholders linked to the country’s gvt/president. There is a real risk of disruption to its production facilities. All these events play into COB’s hands.They highlight the safe haven in which COB will be operating, Australia. Serious customers will definitely favorably look at COB as it would not face such issues.

For me COB has a quality management, solid fundamentals and now a great technical partner. Do not forget it is a rare pure Cobalt company in safe Australia.
These are the reasons why I am invested in COB but do your own research. No time yet to incorporate info from yesterday‘s Quarterly report but at first glance all seems in order and does not contradict the above.

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Excellent analysis, compare to other cobalt companies, COB still too much undervalued

COB Price at posting: $1.13 Sentiment: Buy Disclosure: Held
2 Upvote

0 Great analysis

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