RE:Todays releaseEarlier I posted that I felt today’s news release was a very positive one and this is why.
First Cobalt and Glencore have agreed to discuss a long-term feed purchase contract rather than the tolling arrangement originally contemplated, providing First Cobalt greater leverage to the cobalt market by entering into offtake contracts with end users directly
A long-term feed purchase contract rather than a tolling arrangement provides FCC with a lot more flexibility. It removes the stronghold that Glencore had on FCC. FCC now has reassumed full control of the refinery which will appeal and probably meet the conditions to those providing financing. I strongly suspect Glencore having too much control via the original arrangement was the cause for the delays in financing. The Government want to see jobs and spin off deals within Ontario and Canada to participate. The original deal with Glencore was too restrictive and prevented FCC from making its own choices. This new arrangement also provides FCC with control over its profit margins. Another condition that investors like to see.
The maturity date on the Company's US$5 million loan with Glencore has been extended by one year to August 2022 , which better aligns with refinery commissioning
Glencore continues to provide support to ensure a technically viable design of the plant and smooth commissioning
This is a partner who is willing to work with FCC and understands the reasons for the delays. Corona has set back the clock for everyone.
In order to secure a diversity of supply, First Cobalt will supplement any feed provided by Glencore with other sources of ethical cobalt
This is great news for Canadian businesses and was probably a government mandate. The government cannot participate unless this condition is met.
Scale testing of cobalt hydroxide feedstock from Glencore's Katanga Operation (KCC) yielded recoveries in excess of 97%, significantly higher than the 93% recovery assumption in the Company's May engineering study
Timelines for pilot plant completion and submission of permit amendments remain on track while discussions for government support are well advanced
This is just gravy an not the real news in this release.
I think we need to read between the lines with this one. This release tells me that financing could only take place if the restrictive deal with Glencore was renegotiated. Nobody wanted to finance a company whose operations were controlled by a third party. This has now been negotiated and FCC will move forward.
I wouldn’t be surprised to see deal announcements in the near future. They can now accept feed from other sources and supply cobalt to whoever they want. We are much further long and better off than we were in my opinion.