Company Overview: Northern Cobalt Ltd is an Australian cobalt exploration and development company. The Company is engaged in the acquisition, exploration and development of cobalt mineral projects. The Company’s Wollogorang cobalt project covers an area of 1131 kilometer square in the north-east of the Northern territory. The project is approximately 1000 kilometer by road from Darwin and a similar distance from Cairns in Queensland. The McArthur river mine is approximately 150 km to the west and the mining service centre of Mount Isa lies 500 kilometer m to the southeast in Queensland. Other smaller service centres are Borroloola and Burketown, 150 kilometer to the west and east respectively. The Company’s Wollogorang cobalt project, which includes the Stanton cobalt deposit, located in the north-eastern corner of the Northern territory.
 

N27 Details
 
Scoping study on the Stanton Cobalt Deposit: Northern Cobalt Ltd (ASX: N27) reported that they acquired a highly detailed magnetic survey over the Stanton Cobalt Deposit and surrounding prospects. The survey identified Stanton Cobalt Deposit as having a characteristic magnetic signature while multiple analogous signatures occurred in the vicinity of Stanton. The group is planning to drill test potential repetitions of Stanton this year. They started scoping study on the Stanton Cobalt Deposit on 2 January 2018. The drill core from ten diamond holes across the deposit arrived in Adelaide on 22 December 2017. The scoping study team started core inspection on 4 January 2018. The final logging and cutting of drill core for submission to laboratory for assay is currently ongoing while the assays from the diamond core are due late February. The group appointed Independent geologist to undertake resource calculations. They also appointed Metallurgist and mining engineer as well as Environmental consultants for undertaking EIS baseline studies.  The scoping study was flagged to finish by the end of second quarter of 2018.
 

Stanton Cobalt Deposit (Source: Company Reports)
 
Stanton Cobalt Deposit Exploration updates: As of December 2017, the group drilled 70 RC and 10 diamond core holes on their current Stanton Cobalt resource, aiming to upgrade the existing inferred Mineral Resource of 500,000 tonnes of 0.17% Co, 0.09% Ni, 0.11% Cu, and obtain material for metallurgy studies and potential use in scoping studies. Major new intersections at the Stanton Cobalt Deposit included 11 metres of 0.29% Co from 1m for Drill hole NC17RC028 including 1m of 2.30% Co from 2m, and 14 metres of 0.23% Co from 20m for Drill hole NC17RC028. It also included 12 metres of 0.24% Co from 1m for Drill hole NC17RC030 and 9 metres of 0.34% Co from 41m for Drill hole NC17RC030 including 1m of 2.33% Co, 0.45% Cu and 1.01% Ni from 41m. The intersection also included 21 metres of 0.11% Co from 47m for Drill hole NC17RC031 and 14 metres of 0.18% Co from 4m for Drill hole NC17RC040. The Wollogorang Cobalt Project Operations showed better than expected results with extra RC holes drilled being finished outside the resource envelope to test mineralization discovered to the SE, S, E and North. The group’s Wollogorang Cobalt Project is said to be a sediment hosted cobalt mineralization system with potential for low CAPEX and OPEX options. The drilling finished on the back of approaching wet season while further assays are expected in batches through to early February.
 

Exploration Plan (Source: Company Reports)
 
New Cobalt Targets at Selby: The group has recently identified Stanton style new cobalt targets at Selby Pipe Cluster at Wollogorang in addition to 21 prospects at the Running Creek Pipe Cluster. Historical drilling was found to intersect cobalt and copper mineralisation of up to 0.14% Co and 0.19% Cu, and the rock was found to chip up to 21% Cu. The key thing to note is that historically cobalt potential was overlooked in this region. With the latest development, N27 will proceed ahead with an airborne magnetic and soil sampling survey.
 

Selby Pipe Cluster Indicating Cobalt Potential (Source: Company Reports)
 
Acquired Lithium projects for complementing Cobalt Resource: The group acquired 100% interest in nine prospective tenements in the Northern Arunta Pegmatite Province, Northern Territory while made applications for four adjoining tenements. The group indicated to issue 600,000 fully paid ordinary shares to Gempart to acquire a 100% interest in the nine tenements. This acquisition is on track with the group’s strategy is to pursue commodities essential to the renewable energy future of the planet. These commodities are mainly lithium and cobalt which are in high demand for modern batteries. Moreover, the group is well placed in 2018 with a resource upgrade planned at their advanced Wollogorang Cobalt Project. The Lithium project is thus a complimentary project to the advanced Wollogorang Cobalt Project and prospective for strategic metals including lithium-cesium-tantalum (Li-Cs-Ta), related rare earth elements and niobium – yttrium (REE (La-Ce)-Y-Nb) and Cobalt (Co). These new hard rock lithium targets in central Australia that the group acquired are also prospective for other strategic metals used in electric vehicles like permanent magnets in electric motors and other components; typically, lithium-cesium-tantalum and related rare earth elements and niobium – yttrium might be found in the project area. The abundance of host pegmatites in the region was stressed by several historic mica mines. Ultramafic copper-cobalt (Cu-Co) mineralization was identified in the region which would boost the attractiveness of this prospective package as cobalt is the group’s major target commodity. The group would be pursuing mapping, soils, and rock chipping to work up drill targets over the coming months.
 

Granted tenements acquired in the transaction (Source: Company Reports)
 
Arunta Project highlights: The group’s Arunta Project includes four pegmatite fields which are Alcoota, Plenty River, Harts Range and Undippa. Pegmatites in the Alcoota region are prospective for Li-Cs-Ta based on the sampling from the nearby Spotted Wonder Prospect held by Kingston Resources. A rock chip at KSN’s prospect returned a value of 10.2% Li₂O (reported by KSN on 7/6/2017) from a sample of pegmatite containing amblygonite. The Harts Range Pegmatite Field contains several Rare Earth Element (REE) prospects from which rock chips comprising 12% Ce and 7% La have been reported. Over 1,000 individual pegmatites were interpreted to occur within these tenements. Moreover, mafic and ultramafic intrusions have been identified, with major Cu-Co potential. Arunta Lithium Project is in the south-east of the Northern Territory, which is an area of 180 km to the north-east of the population centre of Alice Springs.
 
Market opportunity for Cobalt: Li-ion (cobalt) batteries are suited to electric vehicles, where weight and energy density are important factors. The demand for Electric vehicles is rising with major ramping up of production. China intends to phase out the production and sale of gas and diesel vehicles altogether with Norway that has agreed to end sales of petrol and diesel cars by 2025. Netherlands also aims to end all petrol and diesel car sales by 2025. India aims to end sales of petrol and diesel cars by 2030. Scotland said that they would phase out petrol and diesel cars by 2032 while France intends to end sales of petrol and diesel cars by 2040. Britain aims to end sales of petrol and diesel cars by 2040. Given these global initiatives, the long-term opportunity for Electric Vehicles is lucrative opening a major opportunity to the group. Accordingly, car makers like Volkswagen declared electric versions of all 300 of its models. Daimler (owner of Mercedes-Benz) said that they are ramping up their EV program and would have 10 new EVs to market by 2022. Volvo announced that all its models that would be launched in 2019 and after would be hybrid or electric. By 2025, BMW intends to have 12 new BEVs and 13 new hybrids on the road. Jaguar Land Rover reported that all of its new models from 2020 onwards, would be hybrid or electric.
 

Market for Li-ion batteries by end use, 2016-2026 (GWh) (Source: Company Reports)
 
Stock performance: The shares of N27 rose 100% in the last three months (as of January 15, 2018) and we believe there is more potential in the stock. While the group is yet to report profit, the net loss after tax for the period ending June 2017, was $296,046 at the back of IPO costs and exploration expenditure. On the other hand, rising cobalt prices, demand from electric vehicles, new exploration ready zones indicating cobalt potential, and addition of Lithium projects to the portfolio that has key Cobalt projects are collectively expected to drive the stock upwards. We recommend a “Speculative Buy” on the stock at the current price of $0.525.


N27 Daily Chart (Source: Thomson Reuters)

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