Skip to content

First Cobalt hedges its bets with offtake agreement

Temiskaming refinery cashes up for plant expansion, inks five-year deal with UK commodities trader
First Cobalt cobalt sulfate
Cobalt sulfate (First Cobalt photo)

A British commodities hedge fund has signed a five-year off-take agreement with the owners and refurbishers of a Temiskaming cobalt refinery.

The five-year offtake contract between Stratton Metals and First Cobalt matches the length of a supply agreement First Cobalt recently signed with African miner Glencore AG to ship unprocessed cobalt - cobalt hydroxide - from the Democratic Republic of Congo (DRC) to the refinery located outside of the town of Cobalt.

Shipments start in the fourth quarter of 2022. Glencore helped finance First Cobalt's refinery reopening plans.

First Cobalt has also signed a second offtake agreement with IXM S.A., a subsidiary of China Molybdenum Co., to source cobalt from the Tenke Fungurume Mine in the DRC.

Stratton Metals is a UK-based private hedging company for mineral commodities with a focus on cobalt and nickel.

Want to read more stories about business in the North? Subscribe to our newsletter.

With North America's only cobalt refinery in its possession, First Cobalt wants to provide a "premium" and "ethically sourced" battery-grade material to the electric vehicle market.

The refinery is being upgraded and physically expanded with new buildings. Construction begins sometime during the middle of this year. The plant commissioning is slated for October 2022.

Sign up for the Sudbury Mining Solutions weekly newsletter here

The plan is to increase the refinery's production capacity from 12 tonnes to 55 tonnes a day of battery-grade cobalt sulfate material. Once operational, it will produce 25,000 tonnes of cobalt sulfate annually, roughly five per cent of the world's cobalt supply.

In a news release, First Cobalt said this arrangement with Stratton is very flexible.

The quantities of processed cobalt to be sold to Stratton will be determined by First Cobalt in advance of each calendar year. That gives First Cobalt the ability to enter into other offtake agreements with other buyers and reduce the amount of material sold to Stratton.

"Stratton Metals are among the most knowledgeable cobalt traders in the world, with a network of relationships in every major market", said company president-CEO Trent Mell in a news release.

"This sales arrangement is a key milestone for the company as firming up commercial arrangements supports the financing process for the refinery expansion. Refinery commissioning remains on schedule for October 2022. We look forward to working with Stratton to supply the world's most sustainable cobalt to the electric vehicle market."

First Cobalt also announced that it has arranged a debt financing arrangement with CIBC Capital Markets for US$45 million. The loan is earmarked for the construction and expansion of the refinery.

"Progression into an exclusivity phase for a debt facility without a royalty or stream represents a key milestone in securing the remaining capital needed to restart the First Cobalt Refinery and brings us one step closer to our vision of producing the world’s most sustainable cobalt," said Mell.

Last December, the federal and provincial governments collectively invested $10 million toward the refinery project.

Besides owning the refinery, First Cobalt holds cobalt and silver properties in the Temiskaming area of northeastern Ontario, where it has a joint venture deal with Kuya Silver, along with its Iron Creek cobalt-copper project in Idaho.