Fortune Minerals Limited (TSX-V: FT) (OTCQX: FTMDF) ("Fortune" or the "Company") announces that Hatch Ltd. ("Hatch") and Micon International Limited ("Micon") have been engaged to update the Feasibility Study for the NICO Cobalt-Gold-Bismuth-Copper Project. Hatch has also been retained to conduct additional engineering work. The vertically integrated NICO Project consists of a planned mine and concentrator in the Northwest Territories and refinery near Saskatoon where concentrates from the mine will be processed to battery grade cobalt sulphate, gold, bismuth metal and oxide, and copper. NICO has already been assessed in a positive Feasibility Study in 2014 but requires an update to reflect current costs, commodity prices and currency exchange rates to support efforts to arrange project financing in progress. The Feasibility Study update is expected to be completed in early summer. Fortune is working with PricewaterhouseCoopers Corporate Finance Inc. ("PwC") to arrange the project financing.
NICO is a primary cobalt deposit with more than 50% of projected revenues at current commodity prices coming from cobalt, now quoted at more than US$26 per pound for metal cathodes. The cobalt market has transitioned into a supply deficit and demand is accelerating primarily due to consumption in lithium-ion batteries used in portable electronic devices, electric vehicles ("EV's") and stationary storage cells used to store energy from the electrical grid. The NICO deposit co-products include more than 1.1 million ounces of gold as well as 12% of global bismuth reserves.
Robin Goad, President and CEO of Fortune, commented, "We are pleased to be working again with both Hatch and Micon as we advance towards arranging project financing for our NICO development and prepare for construction. NICO is positioned to become a unique North American vertically integrated producer of cobalt chemicals for the lithium-ion battery industry with a highly liquid gold co-product."
Glen Koropchuk, Director of Fortune and former COO of De Beers Canada Inc., said, Hatch was the primary Engineering Procurement Construction partner for De Beers' recently commissioned Gahcho Kué diamond mine in the Northwest Territories. With considerable Arctic construction and logistics experience, Hatch is eminently suitable to assist the Fortune team in updating the NICO Feasibility Study and completing detailed engineering to support project financing."
The 2014 Feasibility Study for the NICO Project was prepared by Micon based on a previous financing proposal from China CAMC Engineering Co., Ltd. and Procon Group, and comprehensive Front-End Engineering and Design ("FEED") studies by Jacobs Engineering and other consultants. Following completion of the 2014 Feasibility Study, Hatch reviewed FEED and optimized the layout for the NICO concentrator and related facilities. Hatch also completed a Procurement Study for the Saskatchewan refinery that identified potential material savings for some equipment purchases. Hatch will apply similar strategies to identify opportunities for capital cost savings for the NICO concentrator and related facilities in the Feasibility Study update. Hatch has also been contracted to complete the engineering for the cobalt sulphate circuit based on the flowsheet identified by SGS Lakefield Research Ltd. in a pilot plant completed in 2012. Micon will be responsible for reviewing the Mineral Resources and Reserves for the NICO deposit, mining methods and schedules, and will lead the drafting of the Feasibility Study technical report.
The cobalt market has had a 20-year compounded annual growth rate ("CAGR") of approximately 6% and is now greater than 100,000 metric tonnes per annum. Growth has been primarily due to the demand for cobalt in high performance rechargeable batteries which now accounts for more than 50% of consumption, up from 1% of a smaller market in the mid 1990's. Cobalt delivers superior energy density for power, performance and charge life in lithium-ion batteries and is therefore a key ingredient in most cathode chemistries, including Lithium-Cobalt Oxide ("LCO"), Nickel-Cobalt-Aluminum ("NCA") and Nickel-Manganese-Cobalt ("NMC"). Cobalt is also used in superalloys for aerospace applications, high strength alloys for cutting tools, cemented carbides, permanent magnets and surgical implants, pigments, catalysts, and additives in agricultural products.
The cobalt market has transitioned into a supply deficit that is expected to continue as demand growth continues to outpace supply. Darton Commodities Limited is forecasting an approximately 11% CAGR of battery demand for cobalt to 2022 – noting the impact of transformative automotive electrification. And whereas a typical smart phone battery contains between 5 and 20 grams of cobalt, EV batteries usually contain between 4,000 and 14,000 grams. Additionally, Tesla's Gigafactory in Nevada started commercial production earlier this year and will require more than 7000 tonnes of cobalt per annum when it reaches full production in 2018. Notably, more than 15 battery mega-factories have either been announced or are under construction globally to meet the future demand for EV's and stationary storage cells.
The future supply of cobalt is at risk due to geographic concentration of supply and the predominance of production as a by-product of either copper or nickel mining (98% of non-artisanal cobalt mine supply). In order to meet the forecast future cobalt demand, current copper-cobalt and nickel-cobalt mines would need to more than triple their production and effectively cannibalize the markets for their primary metals. The Democratic Republic of the Congo ("Congo") is responsible for more than 60% of current cobalt mine supply and is a politically unstable country. There has never been a regime change in the Congo without violence or civil war and political tensions were recently exacerbated when President Joseph Kabila defied the Constitution by refusing to cede power in 2016. China controls 52% of cobalt refinery production and 84% of refined cobalt chemical supply following China Molybdenum's purchase of the controlling interest in the Tenke-Fungurume Copper-Cobalt Mine. Near surface oxide deposits in the Congo are also transitioning into deeper sulphide ores that require more expensive downstream processing to recover the cobalt. Ethical sourcing of raw materials has become an issue for the electronics industry because of the use of child labour in some Congolese artisanal mines and concerns about metals being used to finance conflicts under U.S. Dodd-Frank and European Union Ethical Sourcing legislation. Some analysts project these issues leading to a premium being paid for non-Congolese cobalt production.