FT FINANCINGSeveral postings on this board recently havebeen highly critical of FT management for not having obtained financing to begin construction. The criticism is not deserved. Management has been consistent over the last two years that financing is dependent on road approval and a feasability study that is up to date. They have been involved in financial discussions to be able to select the best proposals when the road and feasability studies are resolved.
Some of the criticsm seems to have resulted from the Vale streaming deals for its Labrador mine. That and other recent deals with producing mines can not be compared to the FT financial situation.
The Vale mine has been producing nickel and cobalt concentrates for several years and refining
them in southeast Newfoundland. The funding they obtained is to convert from an open pit mine to an underground mine while production, and revenues, continue. And Vale has several other operating mines. FT obviously is a riskier situation.
I tried to find some comparables to FT. I found two that are shovel ready or better but also have signficant differences.
CSE- ECobalt. One of Jims favorites, which most of us know well, has not yet closed offtake or stream financing. An updated feasability study is due this month which may help. They have been financing some construction by issuing shares. In my opinion they have been able to keep their share price relatively high because they can claim to be the only US pure cobalt producer close to production.
CLQ - Clean Teq Holdings. An Australian water treatment company, listed on the TSX, that has developed environmentally friendy ore/concentrate treatment technology. It also owns a nickle cobalt mine comparable in size and CAPEX to FT.
The mine is a shallow open pit deposit with 20 year mine life and planned production of 3,100 tonnes cobalt and 18,200 tons nickel per year. Both will be processed and sold as hydrated sulphates. In Aug 2017 they signed a 5 year offtake agreement for 20% of both cobalt and nickle sulphate hydrates with Earspring, a Chinese company 27% owned by the Chinese government. Prices to be LME prices.
Surprisingly there is no direct funding in the deal. However, there is a clause that the offtake can be increased to life of mine if Earspring buys 25% of CLQ on favorable terms. (Another Chinese company already owns !5% of CLQ). My guess?? is that 25% could be at least $400 Million. The agreement might also be helpfull to secure a development loan.
FT. Although it is still in the ground I believe that the FT cobalt will continue to increase in value even if the price does not increase because it is located in Canada. I believe that the Chinese will honour their present contracts for batteries and battery materials, but to meet their EV and clean energy storage goals they will soon clamp down on exports. They are motivated by the ever-present smog and cost of serious health and environmental problems that coal and oil based fuels cause
Because the European and US EV production goals are 1 or 2 years behind the Chinese goals they have not been as aggressive in securing battery metals but I believe that some arrangement will be made to get FT cobalt ouy of the ground soon. I hope that it favors current FT shareholders. GLTA Bob