First Cobalt Corp
(TSXV: FCC)
(OTCQX: FTSSF)
CEO: Trent Mell
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About: US Cobalt is focused on the acquisition and development of high grade battery metal deposits in North America. The Iron Creek Cobalt Project, located in the prolific Idaho Cobalt Belt, is the focus of a 40-hole, 35,000 foot (10,700 metre) drill campaign to confirm a 1.3M ton grading 0.59% cobalt historical estimate (non-compliant with NI 43-101) and a Resource Estimate prepared in accordance with NI 43-101 is expected on the project in 2018.
INTERVIEW TRANSCRIPTS:
WSA: Good day from Wall Street, this is Juan Costello, Senior Analyst with the Wall Street Analyzer. Joining us today is Trent Mell, CEO for First Cobalt Corporation. The company trades in the TSX Venture and also on the Australian Stock Exchange under the ticker symbol, FCC, and now on the OTCQX ticker symbol FTSSF. Thanks for joining us today there Trent.
Trent Mell: Hi Juan, thanks very much for having me.
WSA: Yeah anytime. So starting off for some of our listeners that didn’t catch our interview from last year, can you provide us a history and overview of the company?
Trent Mell: Sure, sure. This company has been around for about a-year-and-a-half and really, we have taken it from nothing, from startup to the largest – I think we are the largest exploration company in the world by market cap — and poised to be a developer here soon. So we put the company together – let’s see the reality is that cobalt is an electric vehicle story and it is the choke point on the supply chain when you look at the growth and EVs what everybody is worrying about is “where do I get my cobalt?”
Right now, 60% or more is coming out of the Congo, out of the DRC, and 80% of refined production is coming out of China. And so our job was to try to find an alternative to that. Because even that supply while unstable is not enough for the growing market. And so we put together three companies, merged them last year to build up a very large land position in Ontario Canada in a town called Cobalt. We also acquired the only permitted refinery, a cobalt refinery in Canada that can produce battery material. Now we are in the middle of completing our next deal, taking us into Idaho which is a fabulous mining jurisdiction and there’s a cobalt camp there, and so we are acquiring US Cobalt. We should have that done by the end of May. And that will give us a really attractive asset in the US that we think we can fast track to production.
WSA: Right, so before we start talking about some of the you know, properties and news there, can you talk about the significance of being on the OTCQX?
Trent Mell: The QX just gives us that added visibility, more liquidity. We’ve got a real strong institutional investor base, but the retail is still half of our trading and so American investors are an important part of that. And now that we’ve got an Idaho property I think the interest in First Cobalt has only picked up. And a lot of people are looking for ways to play the cobalt market. Frankly there are not too many pure players out there, and so I think this listing on the OTC is only going to give us added profile.
WSA: Great, so bring us up to speed on some of the other recent news including the proposed acquisition and overview of some of the properties.
Trent Mell: Yeah. As we ended out last year we brought together half of what was once Canada’s—the world’s largest silver camp—they mined a lot of silver. They also mined a lot of cobalt 100 years ago in an era where you didn’t want the cobalt or didn’t need it. And so we have had lots of successes there. We own now 50 past producing mines and are drilling. Once we’ve done all our modeling and data compilation, our drilling has yielded interesting results this year. We now have a 200 meter strike area of mineralization that we are following up on. But the reality is that the production timeline in that camp is still uncertain because we got some work to do, so highly receptive.
But then we set our sights in Idaho, and US Cobalt basically have been drilling out a historic mine resource with something that had been identified in the 1980s. So they have managed to drill it out, confirm the mineralization that was drilled through the 70s and 80s. And I think they have gone much beyond that. So we are going to come up with a resource estimate. I think this little gem of an asset they have, has been underrated, underappreciated by the market. And so we wanted to get ahold of it now because I think that could become a flagship or at least the earliest path that we can bring the cash flow by using our refinery here in Ontario. And so the vision when you look at Cobalt, DRC, and China, our vision here is we got assets in Canada and the US and let’s get domestic production on this continent, because there is none, refine it on the continent, sell it back into the US auto sector high tech space.
WSA: Certainly and so what are the other key goals that you are looking at here over the course of the next 6 – 12 months?
Trent Mell: Yeah, in the short term we got to close the transaction. So it looks like we’ve got nearly unanimous support of shareholders thus far on the voting. The outcome is not really in doubt. But the stock, we need to do an all-share transaction like we are doing, the stock price of FCC has taken a bit of hit. And so May 17th is when the vote is taking place and May 31 the transaction will close. So I think in between that period once the vote has taken place we’ll start to see a correction. So for my investors, one, I think it is a great entry point right now. But that the ones that are in the stock you know, we are patiently waiting the transaction approval so we can get our stock back up over a dollar.
And then once that is done we have got a bunch of milestones here. I mean once we close the transaction of Iron Creek and our refinery are going to be pushing ahead hand-in-hand. We are looking at a restart in expansion of our refinery facility, again with the capital that’s going to be on that. And Iron Creek we are doing all the things that miners go to do, right. We are doing the baseline environmental work and permitting and basically trying to de-risk this asset so we can bring it into production. And then a key milestone end of September, early October will be the initial resource estimate, so we can show the world what the deposit contains. And I think people will be surprised by the quality of the project and how big it is and it can become.
WSA: Yeah sure. And what are some of the key synergies that you look at as far as your acquisition strategy?
Trent Mell: The hidden asset I guess in our company right now that we are trying to bring value to is our refinery. A unique feature – when you start looking at cobalt around the world, North America has a couple of things going for it. Like in Idaho it is a high grade deposit. It is a grade of the mineralization that you can see they are higher than you get in the Congo; they are much higher than you would get in Australia, almost unsurpassed, 0.5% cobalt grade is high grade by any measure. And so we’ve got that going for you, and what that means is you can develop these deposits. They tend to be smaller and there isn’t as much capital required to get them going because they are not hidden mass in a low grade open pit.
Conversely the challenge you have in North America is a lot of arsenic. Cobalt deposits, geologically in almost every deposit in North America has big arsenic content. As a Junior miner you can’t just produce a feed stock and hope to sell it off to a refiner in China that makes the battery material for you, you have to get the arsenic out. Our material here is 10, 20 times the import limit that is set, before you can import material into that country. And so our refinery is really in a good position, not just to treat our material that we hope to get out of Idaho and Ontario, but anybody else looking to go into production in this case, they should be looking at First Cobalt Refinery as the key to unlocking value for the deposits.
WSA: Right yeah. So in terms of cobalt, what are some of the key trends that you are seeing there in the sector? Obviously, it is well known for the batteries but what are some of the other uses, and how are you positioning the company and to capitalize on some of those trends?
Trent Mell: Well, traditionally it is used for dye and other chemical applications, magnets, and of course the aerospace industry. But the growth is really coming out of electric vehicle, lithium-ion batteries. Now you talk about the batteries per se, we have to include cell phones and laptops and those like portable devices because that still is actually bigger than the electric vehicle space. But the demand curve for cobalt has been growing at about 9% a year. And electric vehicle’s demand for cobalt is growing at about 25% a year. And so when you look at it, it’s a consumer driven response here on the demand side, the miner we can’t supply that quickly, right. It takes a while to discover things, the permits, to build and bring them into operation. And so when you look at the cobalt supply and demand balance as we call it in the industry, we are in a deficit situation this year, we’ll be in a deficit next year, and it is going to take the miners some five, seven, eight years I think to catch up to the trends in electric vehicles. So the real push right now for us is hurry up and catch up with the consumer demand and consumer interest in electric vehicle.
WSA: Yeah certainly and what would you say makes First Cobalt unique from some of the other players in the sector?
Trent Mell: Well, we have got – we were pretty quick to build up and scale — build up with a big asset base and of course our infrastructure. And we’ve got a team of people in our company that are not junior explorers; we all come from big companies. We’ve all operated around the world; we’ve made discoveries, building and operations. It is part of our pedigree. We’ve got a good balance sheets, $30 million in the bank. We are financed for the next couple of years, so we don’t have any pressure to go out and finance. We have got the right people in the chair, and with our market cap we have been able to attract some really good, solid funds and institutional investors that have our back. For investors looking to get exposure to the cobalt market, I think First Cobalt has the scale, the liquidity, and the team to provide a measure of comfort that we provide a good solution.
WSA: Perhaps you could talk to us about your background and experience Trent, and talk about the key management team there.
Trent Mell: Absolutely. So my own background I consider myself to be more of a business person, than a technical person and a miner. Having said that I’ve been in the industry for about 20 years. So I started my career as an M&A person more on the legal side of the business. And I cut my teeth at some of the bigger mining companies, Barrick Gold, Sherritt for example, and then worked my way into smaller and smaller companies where you could have more impact and frankly, deliver more value. So I worked at a company called AuRico which we eventually sold to Alamos Gold. At Falco Resources which is a junior I stepped aside so that my shareholder took the reins there. And in building this company I was pretty deliberate in identifying people that had a similar trajectory, people that weren’t junior miners that had worked kind of in big operations around the world. And the whole point of that is to try to get folks to know how to move the needle and know how to progress things at a certain pace. Frank Santaguida worked at First Quantum as a principle geologist, worked in the Congo, so he understands cobalt and knows the big deposits, and then Peter Campbell an engineer some 35 years’. He has worked on the Street, on the Sell-side as you call it. He has also been a mine engineer doing mine design and mine development earlier on in his career with Falconbridge which is now Glencore.
WSA: Great. So as far as investors in the financial community what are some of the drivers there that you want them to better understand about you guys?
Trent Mell: Well, I think when you look around cobalt worldwide there aren’t a lot of investable assets today. And that is because most of the cobalt, 98% of cobalt today that is being mined is a byproduct here. You are getting it as a secondary metal in a copper mine or in a nickel mine. And so we miners are playing catch up and when we have looked around the world with our team, we quickly identified Idaho frankly as a really strong, underappreciated jurisdiction for cobalt discovery. And I look across that belt, the cobalt belt within Idaho jurisdiction known for a 100 years of silver mining, and I see a lot of growth opportunities. But I don’t see a lot of people actively working that ground. And so you need a team that is going to grab the horse by the reins here and just move things forward, and that is what we are doing. This is our first acquisition in Idaho. I think if you watch us over the next four to six months, I think people are going to be totally impressed by what that asset hold.
WSA: Sure. So once again joining us today is Trent Mell the CEO for First Cobalt Corporation which as mentioned at the top trades on the TSX Venture taking the symbol FCC as well as on the Australian Stock Exchange, the same ticker, and now on the OTCQX FTSSF, currently trading at $0.58 a share, market cap is north of $130 million US. Before we conclude here, Trent to recap some of your key points. Why do you believe investors should consider the company as a good investment opportunity today?
Trent Mell: Well, cobalt was the best performing metal by far in 2017 and likewise I think the prospects to 2018-19 look very good. Cobalt is a mineral, but it is an electric vehicle story. You can take a gamble on one of the EV producers or you can go to the commodity which as I said earlier is kind of the choke point of the whole supply chain and it’s poised for a really good performance. And then when you look around the cobalt world, the big producers tend to be diversified so you don’t really have that exposure to the commodity directly; whereas with us we are again one of the biggest if not the largest in the space. And I think we provide a good risk reward opportunity in that sense.
WSA: Well we certainly look forward to continuing to track the company’s growth and report on your upcoming progress and we’d like to thank you for taking the time to join us today Trent and update our investor audience on First Cobalt Corp. It was great having you on as always.
Trent Mell: Thank you I appreciate the time.
