Cobalt demand accelerating in batteries for
automotive electrification and stationary storage
Issued Capital: 300,085,257
LONDON, ON, April 25, 2017 /CNW/ - Fortune Minerals
Limited (TSX: FT) (OTCQX: FTMDF) ("Fortune" or
the "Company") (www.fortuneminerals.com) announces that
Hatch Ltd. ("Hatch") and Micon International Limited
("Micon") have been engaged to update the Feasibility Study
for the NICO Cobalt-Gold-Bismuth-Copper Project. Hatch has also
been retained to conduct additional engineering work. The
vertically integrated NICO Project consists of a planned mine and
concentrator in the Northwest
Territories and refinery near Saskatoon where concentrates from the mine
will be processed to battery grade cobalt sulphate, gold, bismuth
metal and oxide, and copper. NICO has already been assessed in a
positive Feasibility Study in 2014 but requires an update to
reflect current costs, commodity prices and currency exchange rates
to support efforts to arrange project financing in progress. The
Feasibility Study update is expected to be completed in early
summer. Fortune is working with PricewaterhouseCoopers Corporate
Finance Inc. ("PwC") to arrange the project financing.
NICO is a primary cobalt deposit with more than 50% of projected
revenues at current commodity prices coming from cobalt, now quoted
at more than US$26 per pound for
metal cathodes. The cobalt market has transitioned into a supply
deficit and demand is accelerating primarily due to consumption in
lithium-ion batteries used in portable electronic devices, electric
vehicles ("EV's") and stationary storage cells used to store
energy from the electrical grid. The NICO deposit co-products
include more than 1.1 million ounces of gold as well as 12% of
global bismuth reserves.
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Robin Goad, President and CEO of
Fortune, commented, "We are pleased to be working again with both
Hatch and Micon as we advance towards arranging project financing
for our NICO development and prepare for construction. NICO is
positioned to become a unique North American vertically integrated
producer of cobalt chemicals for the lithium-ion battery industry
with a highly liquid gold co-product."
Glen Koropchuk, Director of
Fortune and former COO of De Beers Canada Inc., said, Hatch was the
primary Engineering Procurement Construction partner for De Beers'
recently commissioned Gahcho Kué diamond mine in the Northwest Territories. With considerable
Arctic construction and logistics experience, Hatch is eminently
suitable to assist the Fortune team in updating the NICO
Feasibility Study and completing detailed engineering to support
project financing."
The 2014 Feasibility Study for the NICO Project was prepared by
Micon based on a previous financing proposal from China CAMC
Engineering Co., Ltd. and Procon Group, and comprehensive Front-End
Engineering and Design ("FEED") studies by Jacobs
Engineering and other consultants. Following completion of the 2014
Feasibility Study, Hatch reviewed FEED and optimized the layout for
the NICO concentrator and related facilities. Hatch also completed
a Procurement Study for the Saskatchewan refinery that identified
potential material savings for some equipment purchases. Hatch will
apply similar strategies to identify opportunities for capital cost
savings for the NICO concentrator and related facilities in the
Feasibility Study update. Hatch has also been contracted to
complete the engineering for the cobalt sulphate circuit based on
the flowsheet identified by SGS Lakefield Research Ltd. in a pilot
plant completed in 2012. Micon will be responsible for reviewing
the Mineral Resources and Reserves for the NICO deposit, mining
methods and schedules, and will lead the drafting of the
Feasibility Study technical report.
Cobalt Market
The cobalt market has had a 20-year compounded annual growth
rate ("CAGR") of approximately 6% and is now greater than
100,000 metric tonnes per annum. Growth has been primarily due to
the demand for cobalt in high performance rechargeable batteries
which now accounts for more than 50% of consumption, up from 1% of
a smaller market in the mid 1990's. Cobalt delivers superior energy
density for power, performance and charge life in lithium-ion
batteries and is therefore a key ingredient in most cathode
chemistries, including Lithium-Cobalt Oxide ("LCO"),
Nickel-Cobalt-Aluminum ("NCA") and Nickel-Manganese-Cobalt
("NMC"). Cobalt is also used in superalloys for aerospace
applications, high strength alloys for cutting tools, cemented
carbides, permanent magnets and surgical implants, pigments,
catalysts, and additives in agricultural products.
The cobalt market has transitioned into a supply deficit that is
expected to continue as demand growth continues to outpace supply.
Darton Commodities Limited is forecasting an approximately 11% CAGR
of battery demand for cobalt to 2022 - noting the impact of
transformative automotive electrification. And whereas a typical
smart phone battery contains between 5 and 20 grams of cobalt, EV
batteries usually contain between 4,000 and 14,000 grams.
Additionally, Tesla's Gigafactory in Nevada started commercial production earlier
this year and will require more than 7000 tonnes of cobalt per
annum when it reaches full production in 2018. Notably, more than
15 battery mega-factories have either been announced or are under
construction globally to meet the future demand for EV's and
stationary storage cells.
The future supply of cobalt is at risk due to geographic
concentration of supply and the predominance of production as a
by-product of either copper or nickel mining (98% of non-artisanal
cobalt mine supply). In order to meet the forecast future cobalt
demand, current copper-cobalt and nickel-cobalt mines would need to
more than triple their production and effectively cannibalize the
markets for their primary metals. The Democratic Republic of the Congo
("Congo") is responsible
for more than 60% of current cobalt mine supply and is a
politically unstable country. There has never been a regime change
in the Congo without violence or
civil war and political tensions were recently exacerbated when
President Joseph Kabila defied the
Constitution by refusing to cede power in 2016. China controls 52% of cobalt refinery
production and 84% of refined cobalt chemical supply following
China Molybdenum's purchase of the controlling interest in the
Tenke-Fungurume Copper-Cobalt Mine. Near surface oxide deposits in
the Congo are also transitioning
into deeper sulphide ores that require more expensive downstream
processing to recover the cobalt. Ethical sourcing of raw materials
has become an issue for the electronics industry because of the use
of child labour in some Congolese artisanal mines and concerns
about metals being used to finance conflicts under U.S. Dodd-Frank
and European Union Ethical Sourcing legislation. Some analysts
project these issues leading to a premium being paid for
non-Congolese cobalt production.
About NICO
NICO is a planned Canadian, vertically integrated, primary
producer of cobalt with supply chain transparency and uninterrupted
custody of metal from ore through to the production of battery
chemicals. The gold contained in the NICO deposit is also a highly
liquid co-product whose price is commonly countercyclical to cobalt
and bismuth prices. NICO also contains approximately 12% of global
bismuth reserves, a critical metal used in the automotive and
pharmaceutical industries and with consumption growing as an
environmentally friendly and non-toxic replacement for lead.
Bismuth also has supply chain concerns from dominant Chinese
production.
NICO has Proven and Probable Mineral Reserves totaling more than
33 million tonnes containing 82 million pounds (37,205 mT) of
cobalt, 1.11 million ounces of gold, 102 million pounds (46,279 mT)
of bismuth and 27 million pounds (12,250 mT) of copper that will
support a 21-year mine life at the planned 4,650 tonnes per day
mill throughput rate (see News Release, dated April 2, 2014). NICO will be mined primarily by
conventional truck and shovel open pit mining methods.
Approximately one third of the mill feed during the first two years
of operations will also be mined using underground blasthole open
stoping methods in order to process higher margin, gold-rich ores
from deeper in the deposit and improve project economics in early
years of the mine life. Notably, most of the preproduction
underground development work has already been established from
previous test mining operations.
Ores will be processed in the mill using simple flotation to
produce 180 tonnes per day of concentrate containing the
recoverable metals. This concentrate will be filtered, bagged and
trucked to the rail head at Hay
River for railway delivery to the Company's planned refinery
straddling the Canadian National Railway near Saskatoon. The refinery will recover metals
from concentrate using a combination of secondary flotation,
followed by pressure and atmospheric acid leaching, electro-winning
and precipitation of value-add metals and chemicals. Life of mine
average annual production is projected to be 1,615 tonnes of cobalt
contained in a battery grade cobalt sulphate, 41,300 ounces of
gold, 1,750 tonnes of bismuth contained in ingots, needles and
bismuth oxide, and a copper precipitate. Fortune has already
received Environmental Assessment approvals for the mine and
concentrator in the Northwest
Territories and refinery in Saskatchewan, and the major mine permits.
The previous Feasibility Study for NICO determined capital costs
for the development of C$589 million
excluding working capital and demonstrated an attractive rate of
return at base case commodity price assumptions. The Feasibility
Study is being updated to determine capital and operating costs for
the development at current costs, commodity prices, and currency
exchange rates.
NICO Project Finance Update
Fortune is working with PwC to arrange project financing for
NICO's construction (see Fortune's January
18, 2017 News Release). The current and forecast demand and
price for cobalt, together with the recent announcement of
government funding for a public all-weather road to the nearby
community of Whati, are critical enablers for successful mine
operations. The Company intends to secure the capital for
development through a combination of strategic partnerships,
conventional and supplier debt, product off-take and/or forward
sales of a portion of the contained gold.
The disclosure of scientific and technical information
contained in this news release has been approved by Robin Goad, M.Sc., P.Geo., President and Chief
Executive Officer of Fortune, who is a "Qualified Person" under
National Instrument 43-101. The technical report on the feasibility
study referred to above, entitled "Technical Report on the
Feasibility Study for the NICO-Gold-Cobalt-Bismuth-Copper Project,
Northwest Territories, Canada",
dated April 2, 2014 and prepared by
Micon, from which certain information in this press release has
been extracted, has been filed on SEDAR and is available under the
Company's profile at www.sedar.com.
About Hatch
Hatch has over six decades of business and technical experience
in the mining, energy, and infrastructure sectors. The firm has
9,000 staff with experience in over 150 countries and is well known
for the design and construction of mineral beneficiation process
plants and supporting infrastructure, including projects in remote
and cold climate regions and Arctic regions of Canada.
About Micon
Micon is a mining consultancy providing independent professional
advice to mining companies and their providers of capital, law
firms and government agencies. Staffed by senior mineral industry
consultants with extensive international experience in the fields
of geology, mining engineering, metallurgy, processing,
environmental management, market analysis and mineral
economics.
About Fortune Minerals
Fortune is a Canadian development stage mining company focused
on advancing the vertically integrated NICO
cobalt-gold-bismuth-copper project in the Northwest Territories and a related refinery
the Company plans to construct in Saskatchewan. Fortune also owns the Sue-Dianne
copper-silver-gold deposit located 25 km north of NICO and a
potential future source of incremental mill feed to extend the life
of the NICO mill. The Company also maintains the right to
repurchase the Arctos anthracite coal deposits in northwest
British Columbia that have been
purchased by a provincial Crown corporation.
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This press release contains forward-looking information and
forward-looking statements within the meaning of applicable
securities legislation. This forward-looking information includes
statements with respect to, among other things, the Company's plans
to develop the NICO Project (including the Company's plans to
secure project financing to start construction), the anticipated
timing for the updated feasibility study for the NICO Project, the
estimated capital costs for the construction of the NICO Project
estimated future production, anticipated growth in the
demand for cobalt, anticipated constraints on the supply of cobalt
and plans for the construction of an all-season road needed for
operations at the NICO Project. Forward-looking information is
based on the opinions and estimates of management as well as
certain assumptions at the date the information is given
(including, in respect of the forward-looking information contained
in this press release, assumptions regarding the Company's ability
to arrange the necessary financing to continue operations and
develop the NICO Project, growth in the demand for cobalt,
restrictions on the supply of cobalt and the proposed construction
of the all-season road, the economic environment in which the
Company will operate in the future, including the price of gold,
cobalt and other by-product metals, anticipated costs and the
volumes of metals to be produced at the NICO Project). However,
such forward-looking information is subject to a variety of risks
and uncertainties and other factors that could cause actual events
or results to differ materially from those projected in the
forward-looking information. These factors include the risks that
the Company may not be able to finance and develop NICO on
favourable terms or at all, the updated feasibility study may take
longer than anticipated, the capital costs for the construction of
the NICO Project may be greater than anticipated, the market for
rechargeable batteries and the use of stationary storage cells may
not grow to the extent anticipated, the future supply of cobalt may
not be as limited as anticipated, the Company's production of
cobalt and other metals may be less than anticipated and other
operational and development risks, market risks and regulatory
risks. Readers are cautioned to not place undue reliance on
forward-looking information because it is possible that
predictions, forecasts, projections and other forms of
forward-looking information will not be achieved by the Company.
The forward-looking information contained herein is made as of the
date hereof and the Company assumes no responsibility to update or
revise it to reflect new events or circumstances, except as
required by law.
SOURCE Fortune Minerals Limited
