On May 4, First Cobalt Corporation announced the results from its independent feasibility study to produce cobalt sulfate, essential for manufacturing electric vehicles, at its self-titled cobalt refinery near Cobalt Ontario, a first for North America.

The project objective is to produce 25,000 tonnes of cobalt sulfate, produced as a crystal powder, per year and 5,000 tonnes of refined cobalt per year, which would represent five per cent of global refined cobalt production and 100 per cent of North America’s cobalt sulfate production. Per the feasibility study led by Ausenco Engineering Canada, the refinery is projected to make US$37 million of pre-tax free cash flow in its first full year of production at a price assumption of US$25 per pound.

Project costs are estimated at US$56 million of initial capital and an operating cost of US$2.72 per pound of cobalt produced, which according to First Cobalt is globally competitive. According to the feasibility study, the refinery will have a payback period of less than two years and a net present value of US$139 million after tax at an eight per cent discount rate and a 53 per cent internal rate of return after tax.

“This is an important milestone in our efforts to disrupt the existing cobalt supply chain,” First Cobalt president and CEO Trent Mell said. “The study shows strong asset-level economics that position the refinery to be competitive globally and provide attractive investment returns. The outlook for electric vehicles and the push by automakers to develop shorter supply chains creates an excellent opportunity.” Last December, for example, General Motors partnered with LG Chem to build a US$2.3-billion plant for electric vehicle batteries in Ohio. LG Chem already has one other plant in Michigan. Panasonic has been producing batteries in Nevada in partnership with Tesla since 2016.

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As demand for cobalt used in battery electric vehicles is projected to increase from 20,000 tonnes in 2019 to over 730,000 tonnes by 2040, according to the company, North American companies are eager to access their own supply chain. The First Cobalt refinery would be North America’s only refined cobalt producer and supplier for the North American electric vehicle market. China currently produces 79 per cent of the world’s refined cobalt sulfate and is projected to increase production over the coming years, according to a report by Benchmark Intelligence Group.

The First Cobalt refinery was first permitted in 1996 and operated until 2015, when it was placed on care and maintenance by previous owners, and produced 12 tonnes per day of cobalt carbonate, nickel carbonate and silver precipitate.

Glencore provided US$5 million in loans for the first phase of the project, including the feasibility study. According to First Cobalt, the framework agreement stipulated that Glencore would provide “up to 100 per cent of the capital required to recommission and expand the facility.” The two companies are still discussing the commercial arrangements, financing and economics of the project while First Cobalt is reviewing potential offtake agreements with automotive companies and lenders besides Glencore to help with capital costs for this expansion to cobalt sulfate production.

The company says it will continue de-risk and advancement work on the project throughout 2020. At the end of 2019, it had $4.4 million in cash.