Stockhouse Editorial: Canada Cobalt Works: The Next-Generation Cobalt Company, August 9, 2018
The Next-Generation Cobalt Company
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Jeff Nielson, Stockhouse |
Canada Cobalt Works Inc. (TSX: V.CCW, OTCQB: TAKRF, Forum) is not your typical junior cobalt mining company. Let’s start with the name. Canada Cobalt works.Many of these junior cobalt exploration companies are still looking for mineralized ore. Of those that have identified mineralization with significant cobalt credits, almost all are years away from any path to production.
Canada Cobalt Works has identified cobalt-rich mineralized ore. Existing underground infrastructure provides immediate access to the ore, and CCW is the only company in the Cobalt Camp permitted for underground operations. It has processing facilities in place for a cobalt bulk sampling program that is already yielding very high grades. More on that later.
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However, this is just the starting point in illustrating the differences between CCW and virtually any of its peers. Another strong component of Canada Cobalt is its proprietary technology for processing cobalt (and other metals). This is a separate story by itself, and Stockhouse investors should look for more here in upcoming months.
Lastly, the Company’s operational strategy sets it apart from other junior cobalt companies. Canada Cobalt lives and breathes mining efficiency – getting the absolute most from each dollar of capital. In the current, tough conditions for junior mining, this will be music to the ears of investors.
That’s the overview. A closer examination of operations provides investors with more reasons to be enthused with the opportunity here. Understanding this Company requires looking to the top: President and CEO, Frank Basa. Simply put, no other mining executive has a better understanding of the geology and mineralization of Canada’s Cobalt Camp.
Basa is a career mining professional, with over 30 years of global mining experience, including accreditation as a hydro-metallurgical engineer. Part of this extensive resume includes time spent with Agnico Eagle Mines in the 1980’s, where Basa played an integral role in AEM’s mining operations in the Cobalt Camp.
Newer mining investors will be in need of clarification. Canada’s Cobalt Camp is located in Northern Ontario, centered around the towns of Cobalt and Gowganda. Further clarification: Canada’s “Cobalt” Camp was primarily a silver mining district.
How and why did this mining region get dubbed the Cobalt Camp? It’s because the cobalt mineralization in this district is combined with silver – high-grade silver. Roughly 98% of the world’s cobalt comes as a byproduct of other metals mining, with 95% of this supply coming from copper and/or nickel mining. Canada’s Cobalt Camp is unique.
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This Camp is composed of narrow veins of high-grade silver/cobalt mineralization, with smaller quantities of other metals, including gold, nickel, and copper. Within this Camp, CCW’s flagship property is the Castle Mine Silver/Cobalt Project, situated on a massive 28 square kilometer land package. This was one of the highest-grade producing mines in the Camp, with historic head grades of 26+ ounces per ton of silver.
Agnico Eagle was the previous operator of this mine during Basa’s tenure with AEM. He worked on the metallurgy of the Castle Silver Mine. Frank Basa knows this property, geology, and ore as well as he knows his own backyard.
This intimate, hands-on knowledge of the Project pays dividends for the Company (and its shareholders) in a number of ways. Along with his practical understanding of the property, Basa has a detailed understanding of what data is available – and what data is missing.
Specifically, at the time that this high-grade silver mine was in operation in the 1980’s, the cobalt mineralization was regarded as almost a throw-away. For this reason, none of the drilling intercepts indicate the (relatively) high concentrations of cobalt mineralization that are present, only the silver.
Having worked on this mine, Frank Basa didn’t merely know that the ore possessed robust cobalt mineralization. He’s seen this cobalt.
Most of the “cobalt” projects with which investors are familiar are lower grade ore, with cobalt byproducts of 0.10% percent cobalt – or less. Not at Castle Mine. Walk down the fully functional adit into the Mine’s underground workings and you can see “cobalt bloom”: visible cobalt mineralization in this high-grade ore.
As noted previously, this is narrow-vein high grade geology, with well-defined veins. What makes this completely different from bulk-tonnage mineralization is that Canada Cobalt can be much more selective in how and where it chooses to conduct mining operations. Specifically, with the price of cobalt sky-high while the price of silver remains severely depressed, management is currently focusing on identifying veins with the highest percentages of cobalt for its near-term extraction work.
How much ore is available? At present, there is no precise answer to that question.
Agnico Eagle never produced a resource estimate while mining the Castle Silver Mine. This will shock many mining investors who are used to a more conventional mining model: drilling out and defining a resource (via a resource estimate), and then mining that deposit.
However, many mines and mine developers have successfully chosen a simpler rout: identifying robust mineralization and then immediately moving to some form of extraction operations. Investors looking for other examples of this approach need to only focus on one name, Chester Millar.
This Mining Hall of Fame legend has been successfully developing new mines with this approach (mostly gold mines) for fifty years. In a lively interview, Millar was unapologetic regarding his unconventional methods for mine development.
“My way of doing things is generally speaking not acceptable by the Toronto Stock Exchange.”
Millar has a simple strategy.
“Be in the gold mining business, earn profit, and show growth.”
The interview clarified this strategy further.
Most mining startups are focused on expensive exploration programs and feasibility studies in the hopes of de-risking a project and selling out to a larger company. Millar prefers to skip drilling and start mining. “My Feasibility Study is done by doing things. I will actually mine and produce gold. That to me is better than any Feasibility Study because it isn’t a study, it’s proven fact.”
Frank Basa is taking this same Old School approach to developing the Castle Mine. CCW doesn’t need to invest millions of shareholder dollars just to determine if mineralization is present. The Company’s technical team can see (cobalt) mineralization.
Here it is important to note that Agnico Eagle didn’t cease mining operations at the Castle Mine because that company ran out of high-grade ore. Operations ceased because the price of silver had been driven to an extreme low.
In real dollars, this was a 600-year low in the price of silver. It not only forced Agnico Eagle to close the Castle Silver Mine, it drove more than 90% of the world’s silver mines out of business.
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A recent Stockhouse article noted that silver remains grossly underpriced and is in a long-term supply deficit. Serious doubt remains as to how long the world can continue to cannibalize silver stockpiles. Only a radical upward repricing of silver could ever restore balance to this market.
While the Company waits for more rational pricing in the silver market, the current focus is cobalt. Management has engaged in two important initiatives to put CCW into a position where it can immediately begin to generate revenues as it develops this Project.
On July 25, 2018; Canada Cobalt announced that its new pilot plant processing facility is now being brought online. This is conventional crushing and gravity screening, so why the need for a pilot facility?
New technology.
Frank Basa knows the Cobalt Camp. But he is also an accomplished metallurgist. The Company’s CEO has designed a (proprietary) technique for processing cobalt from mineralized ore, dubbed “Re-2OX”. It boasts several superior attributes versus existing technology. At the top of the list is that Re-2OX processing replaces the need for a smelter.
Re-2OX is clean, green technology. And it is highly efficient. A partnership with SGS Lakefield Canada is working to fully commercialize this technology and provides a processing facility. Testing to date has yielded cobalt recoveries of 99% (as well as 81% nickel). Processing to this level of purity also makes it possible to produce cobalt sulphate – the building block for lithium-ion batteries and the electric vehicle industry.
Building a smelter is prohibitively expensive. Even seeking access to an existing smelter for processing can punish margins. Canada Cobalt is a next-generation cobalt company, with proprietary technology that can dramatically improve the economics of cobalt-rich ore in Canada’s Cobalt Camp.
The Castle Silver/Cobalt Mine allows the Company to combine exploration with monetization of this ore, with maximum efficiency. In a conference call with Stockhouse Editorial, management explained the dynamics.
With functional underground infrastructure and numerous visible targets for drilling, CCW doesn’t need to waste valuable capital drilling down (sometimes) hundreds of meters just to reach mineralization. Here, the drill-bit sinks immediately into mineralized ore – saving enormous sums on drilling.
In terms of advancing this Project, think “bootstrapping”. Old School mining professionals like Frank Basa are part of a Renaissance in this mining philosophy. With mining valuations currently compressed even in the stronger metals markets, it has never been more important for mining companies to be able to stretch each dollar of capital.
And the market likes what it has been seeing…
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Moving forward, the first level of the Castle Mine is now fully opened up for mining operations (out of a total of 11 mining levels). Here Frank Basa isn’t alone in providing operational leadership. Director Jacques Monette’s 40+ years of underground mining experience covers every facet of the industry. He currently plays an active role as a mine manager for this Project.
Drilling commenced in June, in addition to the bulk-sampling program mentioned earlier. Results are pending. In a June 8, 2018 news release; the Company reported that five composite bulk samples have already been extracted, tested and reported.
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Assaying of the bulk samples has shown cobalt grades from 1.05% to 5.2% (averaging 2.3%). High grade cobalt. Silver assays range from 167 g/t Ag to 240 g/t. High grade silver. And one sample also yielded an assay of 10.1 g/t gold. These impressive grades come from what CCW describes as “waste rock”.
Taking mine development to the next level requires additional milling capacity. While management isn’t ruling out toll milling as an option, the current plan is to construct its own 600-tpd mill, financed by Granada Gold Mine Inc. (a sister company of Canada Cobalt).
While many junior mining companies have struggled to get traction, CCW is moving forward on its cobalt production with a well-defined strategy that is receiving strong support from the market. Investors viewing how far this Company has come already need to focus on one fact. Canada Cobalt Works is just getting started.
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