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 August 07, 2013
Cobalt: the "stand out" specialty alloy metal
    Publisher: Metal-Pages

 
THIS IS NOT AN OFFICIAL COMPANY NEWS RELEASE
- FOR THE INFORMATION OF SHAREHOLDERS AND INTERESTED PARTIES ONLY -

Cobalt: the "stand out" specialty alloy metal

LONDON (Metal-Pages) 07-Jul-13. Cobalt prices have generally outperformed the other specialty alloy metals so far this year. Compared to the other alloys that Metal-Pages Research analyses in its new monthly service -- The Specialty Alloys Market Briefing (see below for details), cobalt is the only specialty alloy metal where prices are higher than they started the year ($10.85/lb). Prices in early July touched $15.00/lb.

Despite its superior fundamentals, cobalt has not been immune to the bearish sentiment that is currently pervading the specialty alloy sector (and most other industrial commodities). The price for 99.8% material in early August is being quoted at $13.50/lb.

However, Metal-Pages Research believes that the cobalt market is well positioned from a fundamental standpoint to benefit from the expected acceleration in economic growth as 2013 develops and into 2014.

The supply side stands out with limited production gains

In the other specialty alloys markets, there has been a sharp rise in production and a typically price inelastic supply response to both weak demand and prices. For cobalt, most aspects of the fundamentals are more positive. On the demand side, cobalt has benefited from its more diverse end user base, given that it is not reliant on the stainless steel market.

However, It is the probably the supply side where the differences are greatest. According to Cobalt Development Institute (CDI), global refined cobalt fell by 6.1% last year to 77,189 tonnes. In contrast, refined nickel production increased by 13.5%.

The situation remains uncertain in the DRC where an export tax on cobalt contained in concentrate exports, which was first introduced in 2010, was due to be increased on July 15 by $40 a tonne to $100/tonne.

This comes against the background of a threat, which now appears to be receding, of a total ban on exports. Originally shipments were supposed to be stopped by the end of July. This has now been extended to the end of this year. Given the inability of the DRC to process the concentrates due to power shortages, we doubt whether the ban will be implemented; certainly not in full.

It is also not clear the level of shipments will be in the immediate future from Tenke Fungurume, which is majority owned by Freeport McMoRan. Last year, it has been estimated that cobalt hydroxide production was around 11,300 tonnes. The original target for this year was 12,700 tonnes. However, operations have been affected by intermittent power supplies. Deliveries in August and September could fall by as much 40%.

Poor power supply has also affected operations at the Big Hill smelter, which has a capacity of 5,500 tpy of cobalt, which is 70% owned by George Forrest International. They are unconfirmed reports that the plant is operating at below 50% of its capacity. Any protracted problems in the DRC would particularly affect the Chinese market, given its reliance on raw materials and intermediate products.

Prices should recover after the summer slowdown

Cobalt is the only specialty alloy metal that we estimate to be in a deficit position in 2013. Our supply numbers are slightly different than the CDI reflecting a higher number for China.

Nevertheless the cobalt market has been characterised by a number of years, when consumption growth has outstripped production growth, resulting in the market being in an estimated 200 tonne deficit this year.

Our supply demand balance projections suggest that the market will also be in a deficit next year (1,100 tonnes). The largest deficit should be in the early part of the year before the new laterite output will be fully up and running. We have assumed that there will be only limited disruption to supplies from the DRC against an improving economic background.

Under this scenario we have already seen the low for the year of $10.85/lb on January 3 and we could see a high for the year of $16.85/lb in Q4. Details of Metal-Pages Research's quarterly supply-demand balance and price forecasts out to the end of 2014 are given in The Specialty Alloys Market Briefing.

This research service also provides market outlooks under three different scenarios. To receive a copy of this report contact: info@metal-pages.com.

 
 July 30, 2013
A Rising Cobalt Price Improves The Outlook For Formation's Flagship Project In Idaho
    Publisher: Minesite.com
    Author: Ryan Jackson

 
THIS IS NOT AN OFFICIAL COMPANY NEWS RELEASE
- FOR THE INFORMATION OF SHAREHOLDERS AND INTERESTED PARTIES ONLY -

A Rising Cobalt Price Improves The Outlook For Formation's Flagship Project In Idaho

For Formation Metals, the cataclysmic slide in cobalt prices at the end of 2012 could not have come at a worse time.

In preparation for the commencement of underground development at the company's flagship Idaho cobalt project, Formation was just completing the necessary surface work.

Final funding was lined up, but the financiers lost their composure as the cobalt price appeared to be on a never-ending descent.

So the funding situation stalled, and Formation had no choice but to put the project on hold.

But if the prospects for cobalt looked bleak back in December, 2013 has brought a significant recovery.

Prices at the end of December hovered at around the US$10.00 to US$11.00 per pound mark, but since then cobalt has recovered to between US$14.00 and US$15.25.

"Although cobalt prices have come off slightly last week", says Formation's Rick Honsinger, "the chart clearly demonstrates that the commodity price for cobalt has bottomed out and is now rebounding. Everything is related to commodity prices and cobalt has been moving in the right direction and that's exactly the type of thing that will bring financiers back to the table."

But the recovery in the cobalt price is no surprise to Formation, as production has been scaled back after Chinese refiners found they could no longer turn a profit. And it's partly in anticipation of an improvement that Formation has been diligent in keeping up with all the requirements of its permits in Idaho while continuing work to maintain the project's ready for underground development status.

The plan is to produce 1,525 tons of super-alloy grade high purity cobalt metal annually over a minimum ten year mine life. That will amount to a whopping 3.3 per cent of the entire global cobalt supply and should be able to meet just under 15 per cent of the current demand from North America.

Additionally, the high purity cobalt which the Formation team intends to produce is the highest grade version of the metal and commands a premium over the medium grade cobalt traded on the LME.

What's more, even though the low cobalt price was enough to derail financing, the Idaho cobalt project is slated to be one of the world's lowest cost producers.

"It has a lot to do with the fact that we would be a primary cobalt producer and plan on being a fully vertically integrated mine to market operation", explains Rick. Formation should be able to produce cobalt profitably down to a price of US$7.73 a pound.

That means that even at the cobalt price lows of December there would still have been some meat on the bone for Formation once it had repaid the capital expenditures for construction. At today's prices the project would appear even more robust.

On the financial side, while Formation requires financing in order to proceed with underground development in Idaho, the first quarter financial statements reveal that the company is not exactly strapped for cash.

"We're in a relatively strong cash position," explains Rick. As of the 31st of May, Formation had C$11.3 million in the till as well as another C$2.73 million worth of precious metals in inventory.

Furthermore, the company Formation intends to divest a non-core, money losing asset to give it additional financial firepower should any choice acquisitions present themselves.

Back in June, Formation entered into an agreement with Waterton Global Resource Management for the sale of the Sunshine Refinery for US$9 million.

But that deal was terminated later in the month as precious metals prices fell dramatically. "When we started dealing with Waterton silver prices were closer to US$30 an ounce and then they fell below US$20", explains Rick.

But now Rick is pleased to report that Formation has a second unsolicited offer on the table for the refinery which is now under review.

"We are looking at that and it is an ongoing process. At this time, yes we feel that the sale of the refinery is a prudent move and it would allow us to wipe all debt off the table, divest ourselves of a money losing asset and get some more money in the door."

The refinery is currently in operation processing silver into high purity bullion. However, it recorded a significant loss of almost C$1.6 million for the fiscal year ended February 28, 2013.

Nonetheless, Rick points out that Formation's experience with the refinery has been very profitable and that the sale would be the final chapter in a highly successful business venture.

"We paid US$1.275 million for the refinery and a few years later we sold the tailings pond for US$4.6 million", he says. "And, since the commencement of commercial operations in 2007, the refinery did report total positive earnings of close to C$3 million. The whole refinery has turned out very cash positive from a relatively modest initial investment."

While Formation has faced a series of tribulations since the planned financing dissolved in December, the major external factor which weighed heavy on the company has been lifted and the future looks bright. "It's going in the right direction", says Rick.

"Right now we are right smack in the middle of summer so it's hard to say what's going to happen over the next month or so, but certainly if this trend maintains itself, I think come September we'll see renewed interest. It all depends on what cobalt prices do and right now the trend is heading in the right direction."

Meanwhile, the sale of Sunshine could inject additional capital into the company and management have expressed their interest in the additional opportunities which are available in the market.

While there's no clear indication that the Formation team have their eyes on a particular asset, Rick says: "We're always looking for opportunities and there are a lot of them out there; a lot of distressed assets from companies that are project rich and cash poor".

 
 July 25, 2013
Cobalt Prices Sink as DRC Delays Export Ban
    Publisher: Cobalt Investing News
    Author: Charlotte McLeod

 
THIS IS NOT AN OFFICIAL COMPANY NEWS RELEASE
- FOR THE INFORMATION OF SHAREHOLDERS AND INTERESTED PARTIES ONLY -

Cobalt Prices Sink as DRC Delays Export Ban

Making waves in the cobalt sector earlier this month was the Democratic Republic of the Congo (DRC), which revealed two weeks ago that it will be delaying a ban on the export of copper and cobalt concentrate until next year; the ban was originally intended to come into effect this month.

Instead, the country is pursuing an alternative that Moise Katumbi, governor of the DRC's Katanga province, employed during 2010: taxation. Cobalt concentrate exports from the DRC will now be subject to a tax increase of $40 per metric ton (MT), according to Metal-Pages. That means duties rose to $100 per MT on July 15.

As Cobalt Investing News reported, many are unsurprised that the ban is being pushed back. Aimed at encouraging miners to refine and process the affected metals within the DRC, since its announcement skeptics have stated that the region simply does not have enough electricity to run processing plants.

Prices for the metal saw an uptick after the ban's announcement, but in the past couple of weeks they have begun to move downward.

Price update

Cobalt tetroxide prices in China began dropping last week, Metal-Pages reported, with mainstream transaction prices for cobalt tetroxide 73-percent grade sinking from 171,000 to 176,000 renminbi (US$27,868 to $28,683) per MT to 171,000 to 174,000 renminbi ($27,868 to $28,357) per MT. One producer based in Southern China told the publication that "[c]urrent offer prices are in disarray," while another stated, "I am pessimistic about market outlook due to a lack of solid support from consumers."

Since then, cobalt tetroxide prices have continued to fall along with declining European prices. As of yesterday, cobalt tetroxide 73-percent grade was trading in a range of 170,000 to 171,000 renminbi ($27,705 to $27,868) per MT.

Similarly, Chambishi 99.8-percent grade cobalt fell midway through July, dropping 2,000 renminbi per MT to a range of 203,000 to 208,000 renminbi ($33,084 to $33,898) per MT. Prices for the metal sat at 200,000 to 208,000 renminbi ($32,595 to $33,898) per MT on July 23.

Mainstream transaction prices for cobalt chloride 24.2-percent grade came in at 52,000 to 53,000 renminbi (US$8,475 to $8,638) per MT, down 1,500 renminbi per MT from the previous week, on July 18, while 99.95-percent metal produced in China is stable at 210,000 to 212,000 renminbi ($34,224 to $34,550) per MT, said Metal-Pages.

Company News

Freeport-McMoRan Copper & Gold (NYSE:FCX) informed its customers towards the end of June that as a result of electricity supply issues, deliveries of cobalt hydroxide from Tenke Fungurume Mining (TFM), located in the DRC, will be lower in the second half of 2013.

That production reduction, along with the overall situation in the DRC, could eventually result in a rise in cobalt prices, Metal Bulletin reported at the time.

Junior company news

Formation Metals (TSX:FCO,OTCQX:FMETF), which at the beginning of May halted work at its Idaho cobalt project due to the weak pricing environment, said on July 12 that the project is still its main focus and "warrants renewed attention" due to the fact that cobalt prices have risen 52 percent since December 2012. Project permits are being maintained and mining and milling equipment maintenance is ongoing, the company's press release states. Additionally, optimization studies continue.

The news comes on the heels of the termination of Formation's agreement to sell its Sunshine Precious Metals Refinery to Waterton Global Resource Management for US$9 million. The transaction had been vigorously opposed by Dundee (TSX:DC.A), a major shareholder in the company.

Global Cobalt (TSXV:GCO) closed an earn-in agreement with Imperial Mining Holding for up to a 100-percent interest in the Altai cobalt properties, located in Russia. Further, it closed a debt financing for proceeds of up to US$4.67 million with Imperial; it will use the funds to advance the Altai properties, for working capital and to repay its debts. Erin Chutter, president and CEO of Global Cobalt, commented, "[w]e are very pleased to complete on this strategic acquisition as it positions us as first movers in a historic, mineral rich area of Central Asia with significant exploration and development potential. Coupled with the planned advancement of properties in Altai, Russia and Global Cobalt's current share structure, management is optimistic about what the second half of 2013 will provide in terms of corporate growth."

Fortune Minerals (TSX:FT,OTCQX:FTMDF) href="http://cobaltinvestingnews.com/2545-fortune-minerals-nico-mine-and-mill-approved-by-tlicho-federal-governments/">announced last week that the Tlicho government, along with the federal minister of aboriginal affairs and northern development Canada, has approved its Northwest Territories-based NICO gold-cobalt-bismuth-copper mine and mill. The decision allows the company to "complete the water licensing and land use permits process and to secure the primary permits required for the mine development." Subject to the completion of project financing and the receipt of all applicable permits, Fortune anticipates beginning construction next year. The company href="http://cobaltinvestingnews.com/2518-fortune-minerals-attains-tlicho-land-access-agreement-for-nico/">reported earlier this month that it is currently working with Deloitte & Touche Corporate Finance Canada to find at least one strategic partner to finance the project.

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.

 
 July 09, 2013
Cobalt and nickel - the tale of two metals
    Publisher: MetalPages.com
    Author: Neil Buxton

 
THIS IS NOT AN OFFICIAL COMPANY NEWS RELEASE
- FOR THE INFORMATION OF SHAREHOLDERS AND INTERESTED PARTIES ONLY -

Cobalt and nickel - the tale of two metals
Metal-Pages Research

LONDON (Metal-Pages) 09-Jul-13. Cobalt prices have generally outperformed the nickel price in recent times whether by declining less, or making gains.

The pattern for this year is that the relative performance has been particularly divergent with nickel prices registering yet further losses, while 99.8% cobalt has recently made new highs for the year of $15.5/lb on July 4 compared to $10.85/lb at the beginning of the year. All aspects of the fundamentals -- supply, demand and inventories -- are in a very different position for these two related metals.

It is the probably the supply side where the differences are greatest. According to Cobalt Development Institute (CDI), global refined cobalt fell by 6.1% last year to 77,189 tonnes. In contrast, refined nickel production increased by 13.5%.

The main percentage decline took place at CTT in Morocco where output registered a fall of 26.6% to 1,314 tonnes. The main source of lower output was China where problems of raw material supply contributed to a 14.8% decline in output to an estimated 29,874 tonnes from 34,969 tonnes in 2011. Production elsewhere was generally fairly flat apart from Umicore, where output (including its Chinese operations) rose by around 1,000 tonnes to an estimated 4,200 tonnes last year.

Output at Chambishi, (Zambia) improved by 11.9% to 5,435 tonnes. Going forward the increases to cobalt production look less threatening than for nickel as the latter industry has to cope with NPI and ferronickel, which do not yield cobalt as well as the by-product laterite projects.

Cobalt prices have benefited from a number of supply uncertainties. There are reports that the DRC government may double the export tax on cobalt concentrate exports, which was first introduced in 2010, to over $100/tonne. This comes against the background of a threat, which now appears to be receding, of a total ban on exports. It is also not clear the level of shipments in the immediate future from Tenke Fungurume, which is majority owned by Freeport McMoRan.

Last year it has been estimated that cobalt hydroxide production was around 11,300 tonnes. Operations have been affected by intermittent power supplies. Deliveries in August and September could fall by as much 40%.

Any protracted problems would particularly affect the Chinese market, given its reliance on raw materials and intermediate products. The country's imported 24,721 tonnes of cobalt ore and concentrate in May up from 16,305 tonnes in April. This was the highest level of imports since December 2011.

The demand side for the two metals also display sharp contrasts.

Nickel producers are suffering lacklustre demand from its key market -- stainless, while cobalt demand is improving in two major end uses -- the aerospace and the battery markets. The bottom line is the relative inventory position is very different.

-By Neil Buxton in London (info@metal-pages.com)

Metal-Pages Research will consider the prospects for the cobalt market in the launch issue of Specialty Alloys Market Briefing, where we provide quarterly supply demand balance and price forecasts out to the end of 2014. The monthly report will also provide annual forecasts under a number of different scenarios. To receive a copy of the launch issue contact: info@metal-pages.com. Full article can be viewed at https://www.metal-pages.com/news/story/72187/cobalt-and-nickel-the-tale-of-two-metals-metal-pages-research

 
 July 02, 2013
Recognizing Opportunity in Difficulty
    Publisher: AheadoftheHerd.com
    Author: Richard (Rick) Mills

 
THIS IS NOT AN OFFICIAL COMPANY NEWS RELEASE
- FOR THE INFORMATION OF SHAREHOLDERS AND INTERESTED PARTIES ONLY -

Cobalt

UK-based trading company Darton Commodities said, in its 2012-2013 cobalt market review, that: •The fundamental outlook for the cobalt market improved in 2012 •A structural price recovery is likely in 2013 as there was a five percent drop in global cobalt output in 2012 •During 2012, refined cobalt supply dropped an estimated 3,839 mt to 76,040 mt, 4.8 percent below 2011 •Global cobalt consumption grew an estimated 6.8 percent in 2012, reaching 73,900 mt •Consumption from the battery sector saw robust growth on the back of demand for tablet and smart phone devices, with cobalt usage breaching 30,000 mt •Demand from the super-alloy sector continued to see strong growth from the aerospace and industrial gas turbine markets, with demand reaching 14,800 mt •Strong demand growth in 2012 saw significant destocking of cobalt materials in China over the year •Darton estimated cobalt demand in China increased 13.7 percent from 2011 to 28,900 mt in 2012

"Demand growth led to a gradual but significant destocking of both unrefined and refined cobalt materials in China. Consequently, the overall supply and demand imbalance which has undermined the cobalt market for the past couple of years appears to have been restored resulting in a fundamentally more balanced market outlook for 2013." Darton Commodities

The Democratic Republic of the Congo (DRC) supplies 55 percent of the world's cobalt. With much of the world's incremental supply over the coming years expected to be sourced from the DRC expectations might be too high...

Crisis in the Congo is giving ahead of the herd investors an exciting investment opportunity.

Between an outright ban on the export of raw minerals, project ownership grabs, power shortages and armed conflict the DRC's resource sector is imploding. Most of the DRC's cobalt goes straight to China who refines it and sells it to the world, a major amount -- 20 percent - goes to the U.S. which imports 85 percent of its cobalt needs, expect both countries to be screaming for cobalt as a supply crunch gets underway because of the ongoing Congo drama.

The supply sides of both cobalt and uranium are shrinking while demand increases and security of whatever supply there is, is far from assured - perfect storms that bode well for investments in both cobalt and uranium.

Full article can be viewed at http://aheadoftheherd.com/Newsletter/2013/Recognizing-Opportunity-In-Difficulty.html

 
 June 11, 2013
Mineste.com Article on Proposed Sale of Sunshine Refinery from June 7, 2013 Interview
    Publisher: www.Minesite.com
    Author: Ryan Jackson

 
THIS IS NOT AN OFFICIAL COMPANY NEWS RELEASE
- FOR THE INFORMATION OF SHAREHOLDERS AND INTERESTED PARTIES ONLY -

See below or click on image above to read article

June 11, 2013 - MINESITE.COM - published today an interview conducted on Friday, June 7, 2013 with Formation Metals regarding the recent proposed sale of the refinery which is expected to bring an additional US$9.0 million for Formation Metals' treasury.

June 11, 2013

Formation Metals Brings In US$9 Million Through The Sale Of The Sunshine Refinery

By Ryan Jackson in Vancouver

Formation Metals has just put ink to paper and signed a binding agreement to sell the Sunshine Refinery for US$9 million cash.

It's quite a tidy sum considering the company's market cap currently sits around C$8.1 million.

When combined with the redemption of a US federal stimulus loan in the spring, which freed up US$9.5 million that was being held as collateral while simultaneously erasing US$44.5 million of debt, the asset sale will leave the company totally debt free, after the repayment of a C$5 million convertible debenture.

And there will be enough money left in the bank to make progress at the flagship Idaho cobalt project and to evaluate additional opportunities already within the company and in the market at large.

"It was a strategic decision and it provides us with a fair amount of cash for our treasury", says Formation's Rick Honsinger.

"It also pays off our debt which is always a good thing. We will have no debt, significant cash, and we not only have 16 acres of industrial land near the refinery where we can move the cobalt production facility to [for the Idaho project]; but we will also have the option to move the cobalt refinery potentially closer to a rail head and the mine site itself which would, at the end of the day, help reduce future operating costs for the Idaho cobalt project."

The assets being sold include the Sunshine Precious Metals refinery, copper refinery, and certain lands at the Big Creek Hydrometallurgical Complex. The refinery is currently in operation processing silver doré, primarily from Mexican producers, to high purity bullion. However, it recorded a significant loss in 2012.

While Sunshine has been profitable in the past, logging US$1.4 million in profit in 2011 Formation now believes that to make the project profitable once again will require substantial capital expenditures, significant working capital, a hedging program, and the ability to provide provisional payments - all things which Formation is unable or unwilling to do given the current market conditions.

At first, the plan was to retrofit the facility to process concentrate produced at the construction-stage cobalt mine, but technical studies determined that a new, purpose built, facility would be far more effective in that role.

With that realization, in 2012, the management team at Formation explored the possibility of expanding the operation at Sunshine to provide additional near term cash flow by moving into the precious metals concentrate processing business. But although the idea was sound, the market was still tricky.

"We felt the timing wasn't there", says Rick. "The refinery needed a relatively significant injection of capital in order to get all the circuits running up at full speed and regardless, despite our best efforts, we didn't have enough customers to fill those circuits. Many of our potential clients are feeling the same crunch in these markets and are having difficulty financing their mines and ramping up their own production in these depressed markets."

Even so, Rick is keen to point out that the endeavour as a whole, from the purchase of the refinery though to the sale, has been highly profitable for Formation.

"We paid US$1.275 million for the refinery and a few years later we sold the tailings pond for US$4.6 million", he says. "Now we've sold the remaining portion of the facility for US$9 million. It's actually US$13.6 million in cash that we've gotten back out of a US$1.275 million initial investment -- and since the commencement of commercial operations in 2007, the refinery did report total positive earnings of close to C$3 million... the whole refinery has turned out very cash positive from a relatively modest initial investment."

What's more the company's burn rate should now drop even further. "We're really running pretty lean and mean now", says Rick. "And to be able to get US$9 million on top of that and reduce our debt to zero as well as not have to worry about propping up a business that's costing money are really positive things." Meanwhile, Idaho stands ready and waiting for market conditions to turn better and for a development decision to be made once funding is secured.

The company is now evaluating possible site locations for a standalone processing facility, including a 16 acre package of industrial land which is already under company ownership. Other options to consider include a location in the vicinity of the mine site as well as a location nearby rail infrastructure; each could present benefits in a future production scenario and will be evaluated going forward.

"The cobalt project always has been and remains the core project", affirms Rick. "We were working on trying to get a business running at the refinery but we didn't want to get too far down that path and dig into the existing treasury. We got an opportunity to turn that into something that's positive, topping up our treasury and eliminating our debt."

Over the past year, Formation has taken Idaho into the later stages of development and now stands on the cusp of commencing underground development. A final, but very critical, raising of funds stands between the company and that goal.

Still, the company is now on a much firmer financial footing than it was, following the sale. "This affords us the opportunity to be able to go out and seek additional opportunities for the shareholders", explains Rick. "There are a lot of companies out there that are project rich and cash poor and we are turning that around a little bit here, making sure that we are cash rich enough to seek out potential opportunities."

In the mean time, Formation will continue to seek final project financing for Idaho and, looking to the markets, there may be opportunity growing in the cobalt sphere in particular. Precious metals prices may have declined dramatically in 2013, but cobalt prices have been on the rise.

So, with the Idaho Cobalt Project ready to become the only primary cobalt producer in North America, Formation's flagship project could soon present an even more compelling argument for investment and development.

IMPORTANT FORMATION METALS INC. DISCLAIMER: Please note that any opinions, estimates or forecasts regarding Formation Metals Inc.'s performance made by these media interviewee's and newsletter writers are theirs alone and do not represent opinions, estimates or forecasts of Formation Metals Inc. or its management. Formation Metals Inc. does not by its reference above or distribution imply its endorsement of or concurrence with such opinions, estimates or forecasts. In some instances, Formation Metals has paid a fee in connection with such media and newsletter coverage.

 
 May 06, 2013
Formation Metals puts plans on hold for cobalt mine in Idaho
    Publisher: Oregon Live - The Oregonian
    Author: Associated Press - John Miller

 
Formation puts Cobalt Project on Hold until Prices Firm


BOISE -- A proposed Idaho cobalt mine with government approval and support from environmental groups has nixed its project, for now, because it said the price of the metal is too low and risk-averse financiers are demanding unfavorable terms to lend it money.

Chief Executive Officer Mari-Ann Green of Formation Metals Inc. said the company's Idaho Cobalt Project aims to be ready when prices rebound and investors return.

In the meantime, however, her Vancouver, British Columbia-based company is in retrenchment mode, slashing jobs and salaries and focusing on boosting its separate business at its precious metals refinery near Kellogg in northern Idaho's Silver Valley.

Formation had aimed to construct the nation's largest cobalt mine in the Salmon-Challis National Forest to unearth the strategic metal used in jet engines, hybrid vehicle batteries, and prosthetic knees and hips. Now, the project -- and the 150 full-time jobs that were to accompany it -- is in limbo, at least until metals price improve and financing materializes.

"In order for the lenders to mitigate the risk, they increase the rates, for one," said Formation spokesman Rick Honsinger from the company's British Columbia offices on Monday. "One of our jobs is to try to get the best deal possible for our shareholders. Under these current market conditions, it's difficult to do."

Cobalt prices peaked at more than $50 per pound in 2007. That's about the time when Formation Metals said it could yield about $46 million of the strategic metal annually.

But since then, its price has languished, trading at around $12 per pound recently, according to a report from the U.S. Geological Survey based on prices from the London Metal Exchange.

The dip comes as the Chinese economy has slowed, leading the nation to purchase less cobalt, which has reduced demand and lowered prices all around, Honsinger said.

The Idaho mine project had secured permits from the U.S. Forest Service in 2008 and that same year won kudos from environmental groups, including the Idaho Conservation League, after striking a pact over how to manage and reclaim the site.

Robert Cope, a commissioner in central Idaho's Lemhi County that had hoped to see a boost to its local economy, pointed out other mines in the region are retrenching, too, with metals prices in the cellar.

Late last year, Thompson Creek Metals Co. Inc. in neighboring Custer County suspended expansion plans at its molybdenum mine in a move that will cut 100 jobs through 2014.

"It's not like this is the only mining outfit in the world that's cutting back right now," Cope said, adding he's optimistic Formation will reinvigorate operations as market conditions recover.

"Sometimes great ideas have to wait for their time to come."

As of December, Formation still hoped to begin underground construction using a $5 million cash infusion from a private investor to prepare for the work and winterize the project.

But work beyond that was predicated on larger financing that never materialized. Even so, the company isn't abandoning the project, Green said in a statement.

"The ICP is a valuable asset and we intend to preserve it for future development once conditions improve," she said.


-END-

 
 April 22, 2013
The Congo - An Analysis by Stratfor Global Intelligence
    Publisher: Stratfor Global Intelligence

 
The Congo Bans Copper and Cobalt Exports


Summary
The Democratic Republic of the Congo's government remains weak despite significant mineral wealth, and subnational political authorities as well as armed groups rival Kinshasa's influence throughout the country. On April 17, the government banned the export of unrefined copper and cobalt from the country in an effort to increase its total revenue and boost its income from the country's mining sector.

Analysis
Roughly the size of Western Europe, the Congo is Africa's second-largest country. It is one of the world's leading producers of copper and cobalt and is a sizeable producer of diamonds, gold and rare earth metals. Mining is the country's biggest contributor to total export revenue and to government revenue via taxes on those exports and on industry income. Total industry revenue from annual exports is estimated to be $4.4 billion, of which copper and cobalt exports account for roughly $3.4 billion. Annual crude oil production generates approximately $500 million worth of exports and diamonds generate about $220 million.

The government's share of total revenue is similarly dependent on mineral exports. Taxes on copper and cobalt mining alone have contributed roughly $450 million of the estimated $800 million generated in annual mining income taxes. Taxes on crude oil production, which total approximately $327 million, are the next-largest contributor in the extractive industry to annual government revenue.

The resources are concentrated in a country beset by a competition over sovereignty that goes back decades. Prior to Belgian colonialism, the territory largely comprised independent city-states and ethnic groups with no national unification. The Belgians stitched the landmass together to secure natural resource interests and address their own goals for territorial expansion. Following independence, authorities in the colonial capital, Kinshasa, took over colonial infrastructure and assumed the mantle of national sovereignty -- but that sovereignty did not go unchallenged for long. Within two weeks of the Congo's independence in June 1960, the province of Katanga declared its own independence, a bid defeated in 1963 through the deployment of U.N. peacekeepers.

The Congo has rarely experienced a period free of internal strife. More than 19,000 U.N. peacekeepers remain deployed in the Congo, tasked with maintaining the country's territorial integrity. Their presence does not guarantee peace, however, and Kinshasa must tread carefully in the face of internal rivals who could attempt to exert sovereignty over the natural resources that the central government depends on.

The concentrations of copper and cobalt found in Katanga make for a tenuous relationship between Kinshasa and provincial authorities roughly 1,609 kilometers (1,000 miles) away in Lubumbashi. Katanga province does not see itself as inherently subservient to Kinshasa; indeed, the province fought unsuccessfully for independence in the 1960s. Attacks continue by independence-oriented militias in Katanga province -- for example, militants launched an attack on army and police in Lubumbashi on March 23 that left 35 civilians dead.

To Lubumbashi officials, Kinshasa provides little value. Supply chain routes in Lubumbashi are integrated into southern Africa rather than central Africa. The province's inputs and outputs travel by road (and to a lesser extent, by rail) from the Congo through Zambia to South Africa and international markets. The Congo has alternative input-output routes through Angola and Tanzania, but Angola's Benguela railway is unproven, and Tanzania's Tazara line is unreliable.

Kinshasa must make sure it retains an upper hand in Katanga province so that the mineral-rich region does not renew its bid for independence. The provincial government is permitted a degree of autonomy, including assigning its own taxes on the mining sector, which have generated annual revenues of an estimated $25 million for provincial coffers. However, the province is not permitted to have a police force or other security units that are not under the control of the national government or the U.N. peacekeeping force that is stationed there.

While Katanga is the province with the highest concentrations of minerals, other provinces generate meaningful revenues that Kinshasa cannot ignore. The central government struggles with persistent rebel and armed groups in eastern Congo, including militias backed by Rwanda and Uganda. Rare mineral elements including tin, tantalum and tungsten are mined in the province of North Kivu, which is home to the Rwandan-backed M23 rebel group.

An estimated $85 million per year is earned through informal mining in North Kivu. While the M23 rebel group is a persistent threat, the province is not under the control of any one group. Therefore, what revenues are extracted there are likely broken up among competing authorities, including central government officials as well as rebel leaders and their patrons in Kigali. In Orientale province's Ituri district, informal gold mining generates an estimated $50 million in annual revenue. As with North Kivu province, no single authority controls the territory, and what revenues are generated there are also likely controlled by various interest groups, such as government authorities and Ugandan officials whose armed forces provide security in the area. Although the government cannot ignore these mining regions or abandon these revenues to rebel or rival hands -- such revenues have long sustained rebel and armed group activity in the Congo -- Kinshasa lacks the capability to unilaterally impose order in a region that is even farther from its seat than Katanga is.

Imposing a restriction on the exports of unrefined copper and cobalt is not necessarily a new policy. Kinshasa introduced a tax of $60 per ton on unrefined ore exports in 2010, which increased local refining capacity so that more than 60 percent of copper ore is now refined locally before being exported. While Kinshasa has made some gains in imposing a greater local value-added component to the country's mining sector -- an economic principle common across many mining jurisdictions -- the government must work to ensure it extracts greater relative revenues from the sector. This is crucial not only to the national economy but to provincial and local district economies as well.

 
 April 17, 2013
Congo bans exports of copper, cobalt concentrates
    Publisher: Reuters
    Author: Jonny Hogg

 

Congo bans exports of copper, cobalt concentrates


KINSHASA, April 17 (Reuters) - Democratic Republic of Congo has banned exports of copper and cobalt concentrates to encourage more value-added production, according to an order from the Mines Ministry obtained by Reuters on Wednesday...more on this story from Reuters Website
 
 April 02, 2013
Formation Metals' Corporate Video Update - April 2013
    Publisher: Formation Metals

 
THIS IS NOT AN OFFICIAL COMPANY NEWS RELEASE
- FOR THE INFORMATION OF SHAREHOLDERS AND INTERESTED PARTIES ONLY -

Formation Metals Inc.'s Corporate Video Update

The link below provides the viewer with an update on Formation Metals' Idaho Cobalt Project and the new concentrate processing business at the refinery. This update compliments the original video dated July 2012 and the subsequent video updates on the refinery and minesite in October 2012. These videos were produced entirely in-house.

Formation Metals update video Q1 - 2013



 
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