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The Cobalt Play No One Is Talking About
- Published on April 4, 2018
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Lara Smith
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Independent Commodity Market Analysis, Business Strategy & Valuations and Always Seeking New and Exciting Opportunities
- At last a cobalt source in a stable jurisdiction
- Expectations for resource statement to exceed management guidance/estimates.
- Highly scaleable deposit, solid management team, encouraging metallurgy.
- Recommendation: BUY.
The demand for cobalt is by now well documented. All of us who follow the market closely have by now seen the very public negotiations between the world's largest cobalt suppliers and end users. Even downstream end-users several tiers removed from upstream cobalt suppliers, such as Apple have sat up and taken notice and made an effort to purchase cobalt directly from the suppliers so as not to be caught without.
There is no doubt, that right now, sentiment is such that we are expecting a deficit market, indeed we may already be in a deficit market and investors are taking note, while cobalt prices continue to shoot the lights out, trading at a whopping $42.52/lb (29 March 2018). On the other hand, new projects are not coming up fast enough and so any new project with some merit is bound to make inroads.
One project, which we believe has plenty merit and should perform well through the cobalt cycle, is little known
Celsius Resources (ASX: CLA) who are currently developing the Opuwu project in Namibia.
In December, ASX-listed Celsius Resources Limited (ASX: CLA) completed a drilling program spanning more than 17,000 metres and almost a hundred holes at its Opuwo Cobalt Project in Namibia. Opuwo is hosted in the Dolomite Ore Formation (DOF) within Neoproterozoic sediments of the Kaoko Belt in northern Namibia. Kaoko is considered by some as the western extension of the geological structure known as the Central African Copper belt, which contains 40% of the world’s cobalt and 50% of its copper.
Celsius has a 95% interest in Opuwo, which spans a massive 1,500 square kilometres. Highly encouraging
assay and
metallurgical results have been flowing in throughout February, demonstrating a very large and consistent mineralised system. In February we started
writing earnestly about this company, noting that it had confirmed mineralisation in a zone of more than 15km with strong potential for adjacent and parallel systems. The company has calculated an initial target of 33-41Mt grading 0.13-0.17% Co and 0.45-0.65% Cu over an 11km zone down to depths of 150-250m.
Highlights from these latest assays include:
- 10 m @ 0.13% Co and 0.45% Cu
- 7.49 m @ 0.14% Co and 0.79% Cu, including 5 m @ 0.15% Co and 1.01% Cu
- 6.66 m @ 0.12% Co and 0.50% Cu, AND 2.13 m @ 0.15% Co
- 6.30 m @ 0.12% Co and 0.57% Cu
- 5 m @ 0.14% Co and 0.81% Cu
- 5 m @ 0.14% Co and 0.56% Cu
- 5 m @ 0.13% Co and 0.72% Cu
- 6.08 m @ 0.10% Co and 0.58% Cu
- 4 m @ 0.15% Co and 0.59% Cu
Celsius reports closed circuit flotation recoveries of 80% at a concentrate grade of up to 1.5% cobalt are possible, as well as leach extractions of over 95% cobalt and 94% copper. Additionally, the site’s simple mineralogy was confirmed; cobalt is present as linnaeite and copper as chalcopyrite (significantly lower Capex and Opex) when compared to laterite or cobaltite operations). Mineralisation remains open along strike and at depth and has been extended by approximately 600 m to the west during this phase of exploration.
We expect that the company will go into a closed period next week before releasing its maiden JORC resource. So far, we've been able to get confirmation from management that the mineralisation is amenable to very good extractions and if I read between the lines, we should expect some very positive results. Around 74% of the value of Celsius’s project is in its cobalt content, with the remainder in copper. This is unusually biased towards cobalt (the vast majority of cobalt production is a by-product of copper and nickel mining) giving Celsius far greater exposure to cobalt than many of its competitors during a time of high pricing, and the fact this isn’t a pure-play offers some security against cobalt price corrections in the future.
High leach extraction of both cobalt and copper in a sulfuric acid medium has suggested that the classical processes of copper solvent extraction and electrowinning, as well as cobalt sulfate crystallisation, can be employed to produce saleable products at a modest leach temperature of 115 degrees Celsius, at relatively low total pressures of below 1.0 Mpa(g).
Other project attributes include excellent access to transport and power as well as proximity to Walvis Bay port facilities. In addition to building a large-scale cobalt project, Namibia offers a 10-year tax holiday should the company choose to develop a refinery in Walvis Bay.
In 2016 Apple conducted a survey of those cobalt refiners that had completed a third party audit and were said to be compliant from a conflict minerals and environmental perspective. Only six refineries got the stamp of compliance and none of these are in Africa. Celsius therefore has the opportunity to develop the only compliant refinery in Africa. Given that Africa represents the lion's share of global cobalt supply, a refinery in Walvis Bay, close to a port, would make sense.
Already since the beginning of March, Celsius' share price has moved up from 0.11cps to 0.14 cps in anticipation of the maiden resource statement. We believe that now, this week is a good time to climb in before the resource statement is published!
Disclaimer: Core Consultants' Pty Ltd does hold options in this company, and is due to purchase more!
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Lara Smith
Independent Commodity Market Analysis, Business Strategy & Valuations and Always Seeking New and Exciting Opportunities
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