The FAST-Mover in the Cobalt Sector

Sit down for a one-hour interview with Peter Clausi and one term which doesn’t enter the equation is boredom. Dubbed “Captain Cobalt” by some pundits in the mining industry, it doesn’t take long to discover the two passions in his professional life: cobalt and increasing shareholder value.

Clausi’s vehicle for satisfying those aspirations is CBLT Inc., formerly Green Swan Capital Corp. CBLT's CEO provided some background on the Company and then he wanted to talk about cobalt. Why cobalt? Clausi could educate for hours on the subject, so some brevity is in order.

By now, most investors are very familiar with the lithium-ion battery story, with the new electric vehicle market being one of the main drivers in the soaring demand for these batteries. What most investors may not realize, though, is the primary ingredient in lithium-ion batteries is cobalt.

It’s one of several metals used in significant quantities to fabricate these batteries along with nickel, aluminum, manganese, and of course lithium. So why is Peter Clausi (and other mining industry analysts) so bullish on cobalt? Even more than demand, cobalt is a supply story.

Specifically, the supply of cobalt is severely constrained by several factors. At the top of the list is that cobalt is a relatively rare metal. In some ways it is more like rare earths than the conventional metals with which investors have more familiarity.

In terms of mining, cobalt practically never occurs in high enough concentrations for primary mining of that metal. Instead, almost all of the world’s cobalt comes to us as byproducts of other mining. More than 97% of the world’s supply of cobalt is currently produced as byproducts of copper and/or nickel mining. Cobalt is also found along with gold and molybdenum, and very rarely with other metals.

Across the planet, there are only a handful of “cobalt mines” either in production or under construction. What this means is that no matter how quickly demand rises there can be only a muted response on the supply side (at present). Mining companies are not going to spend $100’s of millions (or more) constructing new copper and nickel mines just to extract the small percentage of cobalt which is typically encountered.

In economics, markets of this nature are described as “inelastic” with respect to price. Irrespective of how high the price of cobalt rises, incremental supply can only increase slowly.

The price of cobalt has been soaring in recent months, currently pushing $26/lb. This is more than double the price of one year ago, in line with CBLT's call on cobalt. With the cobalt market now steadily sliding toward a supply deficit, there are no fundamental factors standing in the way of much larger gains.

[reproduced courtesy of InfoMine.com]

To try to meet this future supply gap, junior mining companies (mostly Canadian) are hunting for new sources of this metal. Where is CBLT looking for cobalt, and why? Clausi elaborates.

Canada is the best place in the world to find and produce cobalt in an ethical transparent supply chain. It has history, infrastructure, mining wisdom, trained labour, and well-known mining laws.

To get more specific, north of the town of Cobalt is the Gowganda Region. This region has historically produced over 1.4 million pounds of cobalt, in addition to over 60 million ounces of silver, and that only accounts for about 10% of the cobalt taken from the Cobalt Embayment. In Gowganda CBLT owns over 28 square kilometres of prime exploration lands. That will be a focus of our summer 2017 work program.

CBLT also owns cobalt assets in the world-famous Sudbury Basin and in mining-rich southwest Quebec, both of which will be worked this year.

New exploration for any metal is a time-consuming endeavor. This means engaging in cobalt exploration initiatives as quickly as possible is all the more important. Mining exploration companies like CBLT understand this.

CBLT’s first cobalt acquisition was the Copper Prince property in Sudbury. Mining investors recognize the Sudbury area as a world-famous destination for base metals mining. What’s on the table over the short-term for Copper Prince in terms of exploration?

Last year we ran a ground exploration program followed by a successful short drill program in November, showing continuity of mineralization throughout the targeted area. This summer CBLT intends to track some interesting geology from Ed's Watering Hole to the east, with drilling possibly taking place in the fall.

The Company has followed up the acquisition of Copper Prince with several more-recent acquisitions:

• Aug.29, 2016: acquires Dryden Cobalt property, four large, unpatented claim blocks

• February 21, 2017: acquires the Otto Assets, 33 mining claims contained in four claim blocks in Larder Lake Mining District, Ontario
• February 28, 2017: acquires Chilton Cobalt property in the Grenville Province in Quebec, nine claims totaling 497 hectares in size
• March 28, 2017: acquires Gowganda property, four large claim blocks encompassing 2,800 hectares

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The Otto, Chilton, and Dryden land packages are all early-stage properties which have previously seen little work. Phase 1 exploration at Chilton in Quebec has now been completed (sampling and VLEF survey). The plan was then for the focus to shift to the Company’s two Sudbury properties and Gowganda.

The Gowganda acquisition has compelled CBLT to re-think its near-term priorities. Gowganda is a huge land package which has seen previous exploration work.

Previous sampling at Bloom Lake in Gowganda produced high-grade assays of silver (from 219 g/t Ag to 603 g/t) and copper (11.0% to 14.7%), as well as cobalt readings from 0.3% to 0.9%. A single drill hole at United Reef in Gowganda produced an intercept of 1,250 g/t Ag over 3.0 meters. Given those robust historical numbers, the Company has decided that exploration of Gowganda is also a priority. Clausi explains CBLT’s near-term strategy.

We expect a lot of strong news from Gowganda this summer. The Bloom Lake prospect will receive more attention than the others, but we intend to carry out a first phase of exploration on all our Gowganda assets this summer.

To do more of these acquisitions, CBLT announced a $1 million private placement in April. This quickly turned into an un-brokered placement when one of the Company’s shareholders stepped forward and expressed a strong desire to fund almost the entire financing.

We take pride in our continual shareholder engagement. CBLT has ongoing transparent conversations with the shareholders about our goals, risks and dynamics, which allow us to move fairly quickly when needed. This fast financing was one example of that.

As an early-stage exploration Company, financial support of this nature is an expression of faith in the management of CBLT. Peter Clausi certainly has help.

Dr. Tom McCandless serves on the CBLT Board. Dr. McCandless was previously Chief Mineralogist for Ashton Mining of Canada and Stornoway Diamonds Corporation. He played a prominent role in the discovery of the Renard diamond deposit, soon to be Quebec’s first diamond mine. Altogether, Dr. McCandless has more than 30 years of experience as an economic geologist.

Edward Stringer is another Director for CBLT. Stringer’s experience in mining and mineral exploration spans four decades. He has held senior positions with several public and private mining companies and currently serves as President and CEO of Colibri Resource Corporation.

Director Judy Baker has a quarter century of experience in the mining industry. As the possessor of an Honours degree in Geological Engineering as well as an MBA, Ms. Baker boasts expertise in mining operations as well as capital markets and finance. From 2007 to 2009, she was President, CEO, and a founder of Canada Lithium. Between June 2011 and January 2014, she served as CEO (and founder) of Superior Copper.

This veteran management team is currently focused on finding, exploring, and vending prospective cobalt-related properties to a cobalt-starved world. How high could cobalt prices go?

At present, more than half of the world’s supply of cobalt comes from the Democratic Republic of Congo (DRC). This is a problem. The DRC is a poor nation which has been plagued by political instability and corruption. Among the allegations against the current regime is the use of child labour.

At the beginning of March, Apple announced it would cease buying DRC cobalt production. Amnesty International is working to implement a boycott on DRC cobalt. What would this mean to the cobalt market? What would it mean for cobalt prices?

The 2008 price spike was an obvious short-term aberration. What is happening now is a global story driven by basic economics: the demand is far outstripping the supply, and as a result, prices rise. Since there is no short term source and the demand will not drop off, expect higher cobalt prices for an extended period. If you like lithium, you have to love cobalt.

[reproduced courtesy of InfoMine.com]

The price-spike in the cobalt market in 2008 was a temporary event which caused a relatively brief interruption in the supply chain, and this occurred before the increased demand for cobalt in relation to lithium-ion batteries. Any “boycott” of DRC cobalt today would cause a supply crisis in the cobalt market with no end in sight. A triple-digit price for cobalt would be a virtual certainty. Clausi connects the dots.

The wild card here is international politics. Both Amnesty International and The Enough Project have been shining light on the human tragedy that is Africa’s War. Over 6 million people have died in the Congo area since the late 1990’s, in bloody conflicts over the mineral wealth that should have been their salvation.

If cobalt has an ethical supply chain imposed upon it, whether by being declared a ‘conflict mineral’ in North America or otherwise, then supply from the Congo will drop further, with an immeasurable impact on the price of cobalt. In our view the 2008 price increases will be mere blips compared to where cobalt could go.

CBLT will continue to create shareholder value with the pen and with the drill bit. The world is clamouring for Canadian cobalt.

The world needs cobalt. Equally, the world needs new sources for cobalt which provide greater certainty of supply and fewer moral objections than accessing cobalt from the Democratic Republic of Congo.

To ensure an adequate supply chain for the rapidly emerging market for electric vehicles, the world needs more cobalt fast. This is the mission of CBLT Inc.: the fast-mover among junior cobalt exploration companies. Further information can be found here.