Cobalt Blue higher after delivering major enhancements at Broken Hill Cobalt Project

Cobalt Blue Holdings Ltd (ASX:COB) is trading higher after delivering significant project enhancements for the Broken Hill Cobalt Project (BHCP) in far west NSW. A Project Update 2020 Study demonstrates “a capital-efficient, low-cost, long-life mine/refinery making a premium battery-ready product in a safe and stable jurisdiction”. It also reveals that COB, which is targeting the ethical production of high-grade, battery-ready cobalt sulphate, is the largest undeveloped cobalt producer in the world outside Africa. Reserves increase The ore reserve has increased 55% to 71.8 million tonnes at 710ppm cobalt in the probable category with contained cobalt up by 34% to 51,000 tonnes. The update follows news earlier this week that tests on BHCP ore achieved a series of product benchmarks for cobalt sulphate, elemental sulphur and mixed hydroxide precipitate, which will be used for offtake marketing purposes with commercial customers. This test program produced 20.8% cobalt sulphate suitable for the lithium-ion battery market with the added benefit to BHCP economics of 99% grade sulphur. Shares higher Shares have been as much as 15% higher today to 12 cents and are up from 9 cents on June 29. In the following interview, CEO Joe Kaderavek tells Proactive about the significance of the test results and the project update. Why are the recent Broken Hill Cobalt Project (BHCP) test-work results meaningful? CEO: Our cobalt sulphate results released this week demonstrate an ability to make a premium precursor product. We achieved a 20.8% cobalt content (purity), well in excess of the 20.5% payable benchmark for the precursor industry. The low levels of metallic impurities such as copper and iron, make this product highly desirable for future batteries, especially the nickel rich NCM622, NCM811 and NCA chemistries. These are the batteries powering tomorrow’s electric vehicles. Why release a Project Update? CEO: The original PFS was released in 2018. At the time we highlighted a number of project optimisation studies, with a focus on cost optimisation. Today, having released successful test-work (benchmark product) results, and armed with these strong project economics, we can now engage with commercial partners in a range of product and project discussions. Remember that lithium-ion batteries are highly customised chemical devices and can take 2-plus years to qualify into an electric vehicle design. Hence, there is strong desire to know more about the BHCP now, from a range of partners as they look to satisfy their long-term raw material needs. What are the key outcomes of the Project Update? CEO: Firstly, we were able to significantly compress our (cobalt sulphate) production costs from US$12.87 to US$9.34 per pound, that’s a 27% cost reduction and speaks to the solid margin the project will make at longer-term cobalt prices of US$20 to US$30 per pound. That cost performance places the BHCP in the top 15% of global cobalt production. Looking back, only one year in the last 40 has the cobalt price been under US$13/pound (2020 terms). Our cost performance provides a robust project, capable of operating through the economic cycle and delivering strong margins as battery demand steps up in future years. Secondly, we reduced project capital down by A$70 million to A$560 million. That’s the equivalent of US$400 million for a project producing 3,500-3,600 tonnes per annum of cobalt in battery-ready form. Simply put, that’s unheard of, and is 1/3 of the capital intensity of any other cobalt project in the world. Finally, we have extended the project life to 18 years, closer to our ultimate goal of 20+ years. So, what has the Project Update demonstrated? - A capital-efficient, low-cost, long-life mine/refinery making a premium battery-ready product in a safe and stable jurisdiction. What are the key milestones for your Broken Hill Cobalt Project? CEO: Looking ahead, our focus is upon engagement with commercial partners whilst finalising the BHCP feasibility study in early 2022. We have started construction of a Broken Hill-based Pilot Plant that will be commissioned by year-end. This plant will process 100 tonnes of ore into 100-200 kilograms of cobalt intermediate and cobalt sulphate product that will be delivered to project partners for purity and homogeneity testing. LG, Mitsubishi and Sojitz Corporation have already signed up as partners for this program. This will trigger more intensive discussions as we progressively de-risk the project by producing in-specification product on a larger scale. The test-work program will culminate in a Demonstration Plant on a much larger scale. This will allow us to deliver 100-200 kilogram samples to partners, from which they can manufacture test batteries. When our product passes testing, then COB will pre-qualify as a supplier to such ‘Battery Giga Factories’ globally. That will also allow us to engage with banks and other partners to discuss firm offtake and financing arrangements for the project. The BHCP development timeline to 2022 is also shown below: Where does COB see itself within the Australian Battery Industry? CEO: Samples of our cobalt sulphate will also be provided to the Australian Future Batteries Industries – Co-operative Research Centre (https://fbicrc.com.au), for processing into cathode precursor, along with other Australian sourced raw material – nickel sulphate (NiWest, IGO), lithium hydroxide (Tianqi Lithium Australia) and manganese sulphate (Pilbara Metals Group). The FBI CRC is a joint industry/government program that seeks to address challenges and opportunities for battery industry participants. We look forward to working with strong industry partners facing similar challenges, evolving to meet the global demand of the lithium-ion battery industry. COB will be taking an active role in the FBI CRC cathode precursor pilot plant, which is aiming to produce cathodes using Australian sourced raw materials. Conclusion: CEO: Thanks, look forward to updating the market further.