March 2, 2021
First Cobalt Corp. (TSXV:FCC, BUY, C$0.45 target, David A. Talbot) announced the closing of its previously announced transaction with Kuya Silver (CSE:KUYA, Not Rated) regarding the sale of its Cobalt Camp assets in Ontario (read our note here). The divestiture of these assets should allow the company to increase its focus elsewhere, namely to its cobalt refinery in Ontario as well as the Iron Creek project in Idaho. As per the terms of the agreement, Kuya paid an initial C$4M in cash and shares to acquire a 100% interest in the Kerr assets. Kuya may elect to earn a 70% interest on the remainder of the Cobalt Camp assets upon the payment of C$1M over the next six months, which shall trigger a series of earn-in payments, spending obligations, and milestone payments. While the monetization of these assets provides First Cobalt with cash ahead of major expenditures for the refinery, the agreement allows the company to retain leverage to the Cobalt Camp as a Kuya shareholder and JV partner. As well, the agreement grants First Cobalt a right of first offer for off-take of base metal concentrates and back-in rights on any primary cobalt discoveries on the remaining Cobalt Camp assets. The company’s flagship cobalt refinery continues to be financially and technically de-risked. We await commercial sales off-take agreements in the near-term ahead of production, scheduled for late 2022. The project is North America’s only permitted cobalt refinery and is expected to produce clean and ethically sourced cobalt, highly sought after by the growing EV sector. The refinery represents nearly 90% of our estimated NAV for First Cobalt, and thus we expect advancements in its permitting, recommissioning, and financing to be the key catalysts in re-rating the company towards our target. Read more
