First Cobalt CEO sees company at critical mass for taking on the expanding battery market

Cobalt has become a critical component in the development and manufacturing of batteries for electric vehicles and forms a fundamental piece in the jigsaw for the next generation of the auto sector and other consumer and industrial applications. First Cobalt Corp (CVE:FCC) (OTCMKTS:FTSSF) has a key part to play in completing the jigsaw, being focused on creating a North American cobalt supply chain through both exploration and refining. The company is the owner of North America’s only permitted cobalt refinery located in Ontario, Canada which could produce over 25,000 tonnes of cobalt sulfate per year from third-party feed. It also has a cobalt exploration project at Iron Creek in Idaho, USA with the potential to provide future feed to its Ontario Refinery. Proactive sat down with First Cobalt CEO Trent Mell to get more information on what is driving the company forward. So, Trent, what is the history of the First Cobalt refinery? Well, the first core refinery was commissioned in 1996. And it ran intermittently until 2015 as a custom feed facility. It produced cobalt, but it also produced a nickel product, a copper by-product and some silver. So a pretty diverse suite of materials. As a custom feed facility, however, it didn't have the ambitions that we have brought to it now. So, our plans are to turn that around, expand it fairly significantly, and breathe new life into it as the one and only battery-grade cobalt sulfate producer in North America. The company also has the Iron Creek copper-cobalt exploration project in Idaho. That looks to be making good progress at a time when the new US President, Joe Biden’s administration is seeking to reduce reliance on foreign source-critical minerals. What are the next steps there? Yes, I think the Idaho cobalt belt where we're situated is America's one chance, and certainly the best chance, of finding a source of cobalt to satisfy domestic needs. We've got a large and growing mineral deposit that we've been quiet on for a couple of years now by virtue of just a lower commodity price and a focus on the refinery. But with the new administration and the big tailwinds we see in the market, both from EV growth and the cobalt price, our next steps are to get back to drilling it. Right now, we’ve got a decent sized resource - inferred and indicated of over 5 million tons of high grade - but I want to double that. So, we need to drill. We've got lots of target and frankly it's just a question of some time and money to go and prove that out. First Cobalt has said is confident that cobalt will remain a critical material in electric vehicle battery production for at least another 10 years despite comments we sometimes hear about developments in cobalt-free batteries. Can you elaborate on what the future chemistries will be for EV batteries? Yes, we hear a lot of talk about what the future might look like - solid-state, cobalt-free - but I lived the same experience when I was in the Palladium market. Palladium went on a bit of a tear in the late 2000s and people were saying it was going to come out of it, but of course, it never did. Supply and demand just adjusted. And it is the same with cobalt in batteries. We know that the growth rate of electric vehicles globally is going to appreciate at about 26% per annum looking out to 2030. And the cobalt market is expected to grow 14% per year in tandem with that need. And that's backstopped by some research by Bloomberg New Energy Finance that shows that looking at 2030, 85% of electric vehicles will have some measure of cobalt in their cathode. And so, what that means is you've got the other 15% being your LFP or lithium iron phosphate batteries, but those typically are entry-level vehicles that you would see in China and maybe increasingly in the third world countries. But for the western purchaser, the NCM cathode and the NCA cathode are the cathodes that are going to prevail, because that's what gives you safety, gives the battery life and keeps the integrity of the battery. And perhaps most importantly, it gives you the long-range that particularly North Americans need to see before they'll purchase an EV. So longer-term, the company has said it may expand its refinery to recycle black mass from lithium-ion batteries. What's your competitive advantage in this emerging market? We're 18 months away from first production of battery-grade cobalt sulfate at the refinery, and investors should view this as Phase One of a multi-phase process as we look to enter into the battery recycling market. Our competitive advantage is that we have a $100 million head start and all the existing infrastructure. To add, most importantly, with ownership of the permanent site and have good buy-in from the community, we have a huge running advantage on the continent. Phase One sees 5,000 tonnes of cobalt being produced per annum starting in October of next year. Phase Two is going to be battery recycling. We're doing some metallurgical tests on that right now. And we'll have some news on that over the course of the summer. But longer-term, there's a lot we could do. We could produce a nickel sulfate in addition to the battery feed. We could partner with a precursor manufacturer and produce precursor here on the facility. We can also take this expertise and apply it to a new plant in America or Europe. So, while my team is focused on executing on the project that we have before us, we've got a couple of executives that are trying to do some whiteboarding on what the future could look like. But up here in Ontario, with this permanent facility, we've got so much land and so much opportunity to grow just within our four walls that's going to be our focus for the next couple of years. Get the cash flow and use that leverage to keep growing further. And through time what that means of course is that First Cobalt is no longer just a cobalt company - we're producing cobalt, but we're also producing nickel, copper and, depending on the metallurgy tests, you might also see us recover lithium or manganese and graphite. So, we have a multi-commodity opportunity and an opportunity as well to partner with electric vehicle makers on what we call the closed-loop supply chain by taking spent batteries and putting them back in the ecosystem. So, there is a lot going on. What do you consider your main strength as First Cobalt CEO? Well, I think we've got a critical mass here of assets and people. The asset we know - it's a permitted facility that's got an operating history. To add to that we've assembled a world-class team of people that have all come out of bigger mining companies and bigger processing companies, so all of us have worked at what I call the majors around the world. And put all that together with a very favourable environment then I think you've got the right ingredients. Then you overlay the macro backdrop for the market that we're in. 80% of refined cobalt today comes out of China and if you were to stack up what that looks like, we would be the second-largest refiner excluding China with about a 27% market share, once we layer in the recycling. The only ex-China competitor you have currently is Umicore’s Kokkola refinery in Finland. And we saw what the European market did last year, more than doubling in terms of EV penetration. Western OEMs are starting to look at the supply chain and lockdown raw material needs and for us here in Canada there's a real opportunity not just to service America in the long term, but in the short term to fill a gap that we see opening up in Europe as that market matures rather quickly. So, what should investors expect from the company over the current year? Well, I think over the short term, the next quarter or two, it is receipt of our final permits. We’ve had to amend our permits to go to a different feedstock at a much larger footprint. And then thereafter, in tandem with that, is the conclusion of our US$60 million financing. We've got the equity component financed, with US$45 million in debt, and we are in advanced negotiations, so we'll conclude that. We're already in pre-construction but once we have that financing the actual construction activity will begin. So that's looking out in the next 90 days. And then beyond that - not long beyond that - we'll start talking a bit more about black mass and battery recycling and how that could fit into our future plans. I've also been pretty open about wanting a US listing - though we may need to clean up our capital structure a little bit to see that - which will give us exposure to growing US institutions. And then beyond that we've got Iron Creek, where we're going to be drilling this summer and this fall. And I've been very clear, I want to double that resource. I don't know if we'll do it all this season, but that's a resource that we're getting zero value for and I think in a growing and strengthening cobalt market, we should start to get some credit. So that's what I would call the known. The unknown are all of the more strategic initiatives that we're assessing - and there are many of them - which are going to allow First Cobalt to become something more than just a cobalt company when we start to look two, three, five years out In conclusion, I think it's down to execution. We’ve laid out for the world what it is we need to do. Our job now is ensuring we to execute our strategic plan, keep on track with regards to our timelines, all which will build on our already strong credibility with the investment community. I'm proud of our record over the last 12 months. We have done everything we set out to do pretty much on schedule and in time, investors will see our valuation increase because of this. And so I would ask investors just to follow us and keep us honest. Contact the author at jon.hopkins@proactiveinvestors.com