Cobalt Blue Holdings Limited

COB Details

Stock price plunge despite positive update from Thackaringa Cobalt Project: Cobalt Blue Holdings Limited (ASX: COB) witnessed a share price fall of 23.44% on July 04, 2018 while it revealed its Ore Reserve Estimate and Positive Pre-Feasibility Study (PFS) Results for the Thackaringa Cobalt Project. The project is under the farm-in joint venture agreement with Broken Hill Prospecting Limited wherein COB is responsible for exploration and development programs.

The PFS study in view of the expenditure of a minimum of $2.5 million to attain Stage 2 goals under the Thackaringa Joint Venture Agreement has delivered satisfactory results with gearing up on commercial development further indicated. Particularly, a maiden ore reserve has been declared by the group for the Thackaringa Project with probable ore reserve of 46.3M tonnes @ 819 ppm cobalt.


PFS outcome (Source: Company Reports)

The group has indicated that the project has been economic with positive net present value. However, the group stated that there is lack of certainty that further exploration work will lead to determination of Indicated Mineral Resources or that the production target itself will be realised.In addition, and with regards to the Thackaringa project, COB can earn an interest up to 100% of the Thackaringa Cobalt Project on completion of a four-stage farm-in. However, COB needs to pump in $10.9 million in terms of project expenditure before June 30, 2020. It needs to pay Broken Hill Prospecting Limited about $7.5 million in cash for the same while the latter is entitled to receive a 2% net smelter royalty on all cobalt produced from the Thackaringa tenements. Even, intellectual property rights also vest with Broken Hill.

COB has flagged that Bankable Feasibility Studies (BFS) will be beginning now. Given the entire interplay, COB does have the capability to commercialise the material in battery industry directly to have maximum cobalt margin.

It is worth noting that the demand for cobalt has been growing and the same is expected to be enhanced by 7% pa CAGR 2018-2021 despite the near term supply seen from Africa as global deficit will still need to be catered to.

Nonetheless, the association and limitations under the JV with Broken Hill and the prevailing volatility in the stock, indicates that it may be time to reap some benefits. Further, latest indications from the London Metal Exchange (LME) that is taking initiatives to investigate cobalt companies that trade the metal on the exchange and depend on child labour for mining, particularly in the Democratic Republic of Congo, are putting pressure on many cobalt companies. We give a “Sell” recommendation on COB at the current price of $ 0.735.
 

COB Daily Chart (Source: Thomson Reuters)

 
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