In a Jan. 2 research note analyst Eric Zaunscherb reported that eCobalt Solutions Inc. (ECS:TSX; ECSIF:OTCQX; ECO:FSE), while working on an optimized feasibility study for its Idaho Cobalt Project, "identified an opportunity to increase its targeted production rate by 50% from 800 tons per day to 1,200 tons per day."
He pointed out that "this increase in production should also offer greater cobalt production earlier in the mine life and an increase in cash flow at the beginning of the mine life."
The extra effort needed to boost the production rate will delay delivery of the feasibility study by "several months," which investors may be unhappy with, but it is "worth a more robust Idaho Cobalt Project," Zaunscherb noted. "The work being done by new president Michael Callahan and his growing technical team is essential to getting this project 'right' from a technical and financial perspective. So be it."
Those additional required tasks include modifying the mining sequence, timeline and cost, and conducting necessary engineering for a mill expansion, both to accommodate the higher production level. The company will also need to get quotes to determine feasibility study level costs and define concentrate specifics that will be commercially competitive for offtake agreements. Additional permits for any of this are not needed.
Management said the delay should not affect the timeline for reaching full production, which Canaccord Genuity estimates will be in 2022, Zaunscherb relayed. This milestone will come following underground mine development this year and a ramp-up next year.
Canaccord Genuity has a Speculative Buy rating and a CA$0.90 per share target price on eCobalt Solutions, whose stock is currently trading at around CA$0.53 per share. "We see the sentiment around battery materials correcting in 2019 and this optimized feasibility study as a potential rerating opportunity for the company," Zaunscherb indicated.
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Disclosures from Canaccord Genuity, eCobalt Solutions Inc., Flash Update, January 7, 2019
Analyst Certification: Each authoring analyst of Canaccord Genuity whose name appears on the front page of this research hereby certifies that (i) the recommendations and opinions expressed in this research accurately reflect the authoring analyst’s personal, independent and objective views about any and all of the designated investments or relevant issuers discussed herein that are within such authoring analyst’s coverage universe and (ii) no part of the authoring analyst’s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the authoring analyst in the research.
Analysts employed outside the US are not registered as research analysts with FINRA. These analysts may not be associated persons of Canaccord Genuity Inc. and therefore may not be subject to the FINRA Rule 2241 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Required Company-Specific Disclosures (as of date of this publication):
eCobalt Solutions Inc. currently is, or in the past 12 months was, a client of Canaccord Genuity or its affiliated companies. During this period, Canaccord Genuity or its affiliated companies provided investment banking services to eCobalt Solutions Inc.
In the past 12 months, Canaccord Genuity or its affiliated companies have received compensation for Investment Banking services from eCobalt Solutions Inc.
Canaccord Genuity or one or more of its affiliated companies intend to seek or expect to receive compensation for Investment Banking services from eCobalt Solutions Inc. in the next three months.
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