| June 30, 2010 Formation Metals Explores Funding Options For The Idaho Cobalt Project Publisher: minesite.com Author: Daina Lawrence | |
| It's been 13 years in the making, but Formation Metals is gradually getting closer and closer to going into production at its Idaho Cobalt Project. First things first, though, the company needs money to get it built. "We have been exploring all the avenues, options and alternatives we have for mine finance since last summer", says Mari-Ann Green, Formation's chief executive. At the moment, it looks like an off-take deal, also known as a streaming deal, is favourite, although she's quick to stress that there are no [official] negotiations [we can announce in a news release] happening at this time. What would be on offer, though, would be a percentage of the byproduct from Formation's cobalt property, namely of the copper and/or gold, in return for a lump sum up front. "It's good in these types of markets because then you don't have to talk about your market cap," says Mari-Ann. Mari-Ann reckons the signing of such an off-take agreement will be a sizeable first step in the right direction. Following that, the company will then raise commercial debt, and then finally raise funds through issuing new equity. With C$10 million already in the bank, thanks to a financing deal completed in May, Mari-Ann appears anxious to get the ball rolling on the rest of the finance for the Idaho project. That C$10 million is referred to in company documentation as an "interim" raising, and has allowed the company to get on with phase one of construction. The overall capital requirement for full construction at Idaho has been put at around C$138 million, so there's a little way to go yet. But there's no doubt that there's value on offer. According to a technical report from Samuel Engineering, based on Formation's own feasibility study, the Idaho Cobalt Project has an NPV of just over US$87 million, and should deliver average net cash flow around US$33 million over a ten year life, on the basis of a projected cobalt price of US$22.52 per pound, which is not far off where the metal's trading now. Idaho currently boasts a diluted, proven and probable reserve of 2.636 million tons at 0.559% cobalt, 0.596% copper and 0.014 ounces per ton gold using a 0.2% cobalt cut-off. There's also 1.12 million tons inferred at 0.585% cobalt, 0.794% copper, and 0.017 ounces of gold per ton. That all adds up to contained metal of 42.6 million pounds of cobalt, 49.1 million pounds of copper and 56,000 ounces of gold. It's on those numbers that the projected mine life currently stands at 10-plus years. But Mari-Ann says she is confident there is room to expand well beyond the estimated lifespan, especially since project is open along strike and at depth. What's referred to in Formation's marketing literature as a "district potential" of 50 million tons certainly sounds mouth watering enough, but let's wait and see. As things stand, the mine already has plenty of strengths. It will be capable of producing a greater than 99.8% high purity cobalt metal, with specifications suitable for critical applications in the aerospace sector such as use in the manufacture of jet aircraft engines, as well as in the next generation of lithium-cobalt-ion rechargeable batteries that will be used in electric and hybrid-electric vehicles. High purity cobalt metal sells at a premium over the 99.3% purity cobalt metal, which has been traded on the London Metals Exchange since February 22nd of this year, in spot, three, and fifteen month contracts. Located in Salmon, Idaho, Formation's project has the advantage of being close to its US customers. That, and the fact that the company's hydrometallurgical complex will be close by in Big Creek, makes Formation Metals confident it can keep its costs down compared to other North American companies who ship their product to refining plants in Europe and beyond. Plus, this beautiful, rustic town is easy to recruit in, according to Mari-Ann. The majority of the project team is already assembled and ready to start on production whenever the financing is complete. -END- | |
