Stockhouse article on CCW: The Best-Kept Secret in Silver

Sep 25, 2019

“We take a distressed asset – in this case the Castle Mine which was a former high-grade silver / cobalt producer – put it together, fund it, and develop the asset.”

Frank Basa, CEO, Canada Cobalt Works Inc.

When it comes to the metals & mining sector, Stockhouse readers and investors know real value and opportunity if they see it.

As the price of silver moved up recently, investors have been searching for, and bidding up, the share values of silver exploration plays – especially those with high grades.

One proven high-grade silver situation that has remained hidden and ignored – mainly because of the company name – is the Castle Mine in northern Ontario, a past-producing high-grade silver-cobalt mine that is owned by Canada Cobalt Works Inc. (CCW) (TSX-V:CCW, OTCQB:CCWOF, Frankfurt: 4T9B).

The fact that the Company has a lot of silver seemed to disappear from investor radar screens two years ago when Canada Cobalt Works changed its name (from Castle Silver Resources) to make investors more aware of its super-high cobalt grades and that its proprietary Re-2OX technology can produce a battery-grade cobalt sulphate that is, and will continue to be, in high demand as electric car production expands over the next 10 years and beyond.

The Castle Mine was a prized silver asset of Agnico Eagle in the 1980s. The silver grade of the ore that was extracted (profitably) from the mine averaged 26 oz/ton – that works out to 891 grams per metric tonne – year-in-year-out for the entire 10 years that Agnico Eagle mined it.

The Castle Mine was shut down in 1989 but the mine hadn’t run out of silver. It was shut only because the silver price fell to US$6.50/oz and new management at Agnico Eagle decided to make a strategic shift into emphasizing gold.

Recent drilling has shown that Castle still has plenty of high-grade silver. A February 2019 CCW news release outlined “bonanza grades” at Castle from new silver-cobalt vein structures found during 2018 underground drilling – including 76.4 oz/ton (2,620 g/t) silver over 5.51 metres and much higher grades over shorter distances (ex. 385.2 oz/ton (13,208 g/t) silver over 0.5 metres).

The drill core also contained high-grade cobalt intercepts of 1.05 percent to 3.7 percent Co over an average core length of 1.77 metres (with these grades being in line with other recent tests conducted at Castle and well above the cobalt grades of under one percent found at most other deposits in North America).

More proof of the high grades is likely on its way – CCW announced recently that it plans to continue drilling underground this fall.

One key person who has always known about the high-grade silver and cobalt at Castle is CEO Frank Basa, who observed first-hand the grades of ore trucked in from Castle and other nearby mines when he was the metallurgist at Agnico Eagle’s Cobalt Camp mill in the 1980s.

Thus, when it came up for sale in 2010 – years before the recent run-up in the cobalt price – he jumped at the chance to buy the Castle Mine (with all its historical data on silver grades) for another company he was managing – Granada Gold Mine Inc. Castle was spun out with the Beaver and Violet mines into a separate company in 2015.

In the 1900s, during periods when it was being mined, Castle produced 9.5 million oz silver and 300,000 lbs of cobalt, while Beaver produced 7.1 million oz silver (average ore grade of 171 oz/ton silver) and 139,000 lbs cobalt.

Here is how Mr. Basa describes the opportunity at Castle in a recent interview:

“What we have are very high silver values, which a lot of our investors were surprised at. We normally get like 100, 200, 300 ounces a ton in our core while most people get, let us say, 10, 15, 20 ounces a ton. This mine is in the Cobalt Camp and the Cobalt Camp is known for high-grade. Compared to the past what we have is actually low-grade. In the history of the Cobalt Camp, it was not unheard of to have 1,000 or 2,000 ounces a ton in the core. But in recent drilling in the camp, we have the best silver grades so far.”

And what about mining Castle for the silver and cobalt?

“One way to look at it is that the silver by itself can pay the cost of mining. The price we get for cobalt and other metals will be on top of that, so Castle can be mined even if the cobalt price remains depressed.”

The favourable news doesn’t stop there.

While underground mining for silver-cobalt at Castle is the main goal, with permitting work underway for a 600-t/d mill on the property, the company is also working on the possibility of processing the abundant tailings on the site – essentially mining the easy-to-access waste left on the surface by past mining activity – to produce a silver concentrate that would yield near-term cash flow.

CCW recently reported that a 120-kg sample from the tailings pond with a head assay of 459 g/t silver was processed in the SGS testing lab into a high-purity flotation concentrate grading 18,486 g/t silver with an initial recovery of 70 percent. More testing is underway.

Aside from the apparent high-grade silver left in the tailings by old milling techniques, other things hidden from view at Castle until recently are the other metals. During all the past mining at Castle, the core was assayed only for silver. That’s all they wanted and processed for because they were making so much money in silver.

However, recent polymetallic assays on samples from Castle’s 1.7 km Level 1 tested up to 5.3 percent nickel with gold indicated as well.

In addition, CCW’s geophysical and geochemical work on the 78 hectare property discovered a prospective mineralized area – an apparent gold system – about 1.5 km east of the Castle mine shafts and adit (drill results pending).

The Re-2OX Process

What is it? Well, according to CCW it’s a proprietary and environmentally green hydrometallurgical process for the recovery of cobalt, precious metals, and base metals. As the EV super cycle intensifies, Canada Cobalt says it’s the only company in Canada’s cobalt heartland to produce a technical grade cobalt sulphate test product from its own feed. Significantly, Re-2OX skips the normal smelting process to create battery grade cobalt sulphate while nickel and manganese battery grade formulations are also in the pipeline.

In addition, the ability of Re-2OX to achieve exceptionally high recovery rates for silver, cobalt and nickel, while also removing 99 percent of arsenic, expands the potential of the Castle mine given Phase 1 underground results released in February 2019, and a second phase starting soon. Furthermore, Re-2OX is a value-driver for the company’s planned tailings programs at Castle and elsewhere in the district and will also be used by Canada Cobalt to immediately build a new model of “streaming” opportunities for the Company with respect to other battery metal projects while protecting the process.

Frank J. Basa, Canada Cobalt President and CEO, commented:

“We have a process. It is called Re-2OX. I can take cobalt, any cobalt ore or concentrate, and actually produce cobalt sulfate regardless if you have high arsenic or low values of cobalt. We have shown the world we can do it. The fact that SGS has demonstrated that Re-2OX can very efficiently recover a broad set of metals from arsenic-rich material, ranging from low grade to high-grade, further de-risks the Castle mine project and expands opportunities to build shareholder value. Further Re-2OX optimization will target the recovery of gold.”

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Castle Mine: Cobalt Camp

It’s been over one hundred years since weather-beaten prospectors came to Cobalt, Ontario in search of silver. They found it and for years the town boomed. Amid all the silver, miners also found cobalt, and named the town after it. Back then though it was a mere indicator; a sign that something of actual value was nearby.

During the recent run-up in cobalt, local residents commented that ignored and discarded cobalt could eclipse silver as the town’s best hope. The metal has become a key component in the electric batteries that power our phones and our cars. More than 60% of it is currently mined in the Democratic Republic of Congo in central Africa. But mining there has been plagued with concerns over human rights abuses, child labour and environmental issues, so Northern Ontario offers a safe and ethical alternative.

Basa is convinced there’s enough silver, cobalt, and other trace minerals in the ground around this small town in Northern Ontario to warrant hundreds of millions of dollars in investment.

The Second Silver Rush

Gold has long been the standard when it to comes to precious metals valuation, but silver has been, and will be, extraordinarily instrumental in past and future industrial growth. With the proliferation, popularity, and growing ease of innovations like solar power, gold may not be the frontrunner anymore. Silver, a metal with many names, is poised to become a major player in three core industries.

In what ways will the adoption of silver augment industry?

Few metals on earth match the versatility of silver – critical metal, technology metal, and precious metal – all wrapped into one. And at press time, it’s all yours for the modest price of under US$18 an ounce.

A long-term view of silver’s prospects, however, requires a closer look at its industrial role where silver can surpass gold in three industries – self-driving cars, solar power, and healthcare. And all will call for more silver over coming years, as the three industries are poised for major growth.

About the Castle Silver Mine Property

The Castle Silver Mine property is an old Ag-Co discovery with historic mining since the early 1900’s with excellent infrastructure. The 78 square kilometre property lies near the town of Gowganda within the Greater Cobalt Camp, acknowledged for its “exceptionally rich production history”, delivering over 500 million ounces of silver and 30 million pounds of cobalt throughout the 1900’s.

The Castle property has an adit and three mine shafts with respective depths of 149, 140 and 259 metres, with access to nearby power. The main power grid in the area crosses the property and a power substation was previously on the property, potentially providing an option for low-cost power for the project.

More importantly, a key advantage at Castle is that the mine is accessible through an adit (essentially a tunnel going into the side of a hill) which gives easy access to Level 1 where drilling and sampling under the company’s exploration permits has been conducted. With dewatering, the other 10 levels of the mine would also be accessible for drilling and mining as they were when Agnico Eagle mined it in the 1980s.

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