In a May 21 research note, Canaccord Genuity analyst Eric Zaunscherb reported that First Cobalt Corp. (FCC:TSX.V; FTSSF:OTCQX; FCC:ASX) signed a memorandum of understanding (MOU) with Glencore to process, at First Cobalt's refinery in Ontario, feedstock supplied by Glencore. "We see this MOU as a positive step for the company," Zaunscherb added.
The refinery, the only permitted primary cobalt refinery in North America, is not currently operating, and First Cobalt has not made a final decision yet to restart it. However, Glencore, per the MOU, will consider making a loan to fund the capital requirements to recommission the refinery and enter into a tolling agreement with First Cobalt.
The two companies will collaborate on the final flowsheet design, and the refinery could be back in operation in 18–24 months. Glencore's contributed feedstock would generate about 2,000–2,500 tons per annum of cobalt sulfate from the refinery.
First Cobalt is working with the provincial government as well to possibly streamline and accelerate the permit amendment process.
The energy firm views the refinery opportunity as a way to generate cash flow in the near term as it continues advancing its Iron Creek project in Idaho and its project in Cobalt, Ontario.
Potential catalysts for First Cobalt are further clarity around derisking of the refinery and additional exploration results from Iron Creek.
Canaccord Genuity has a Speculative Buy rating and a CA$0.70 per share price target on First Cobalt; the stock is currently trading at around CA$0.16 per share.
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Disclosures from Canaccord Genuity, First Cobalt, Flash Update, May 21, 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.
The authoring analysts who are responsible for the preparation of this research have received (or will receive) compensation based upon (among other factors) the Investment Banking revenues and general profits of Canaccord Genuity. However, such authoring analysts have not received, and will not receive, compensation that is directly based upon or linked to one or more specific Investment Banking activities, or to recommendations contained in the research.
Canaccord Genuity or one or more of its affiliated companies intend to seek or expect to receive compensation for Investment Banking services from First Cobalt Corp. in the next three months.
The primary analyst, a member of primary analyst's household, or any individual directly involved in the preparation of this research, has a long position in the shares or derivatives, or has any other financial interest in First Cobalt Corp., the value of which increases as the value of the underlying equity increases.
An analyst has visited the material operations of First Cobalt Corp. Partial payment was received for the related travel costs.
Disclosures are available here.
