First Cobalt has secured an exploration partner in northeastern Ontario that will provide capital to help bring its refinery project online.
The Toronto company announced Dec. 21 that it has signed a letter of intent with Kuya Silver to sell a portion of its silver and cobalt mineral exploration property, known as the Kerr Assets.
The two parties are forming a joint venture in the historic mining camp to move exploration forward.
First Cobalt holds more than 10,000 hectares, including over 50 former producing mines.
Toronto-based Kuya Silver owns the Bethania Project in central Peru, a former silver, lead and zinc mine that the company plans to restart.
In a news release, First Cobalt said the deal involves an upfront $4 million cash-and-share payment that will provide them with capital toward restarting its cobalt refinery outside of the town of Cobalt. Last week, the company received a sizeable investment in the refinery by the federal and provincial governments.
First Cobalt owns North America’s only permitted cobalt refinery. Its plans are to position the plant as a global toll processing facility, making battery-grade material for the electric vehicle market.
The terms of the transaction outlines more payments by Kuya as part of an earn-in arrangement toward acquiring a controlling 70/30 ownership stake in First Cobalt's remaining exploration properties in the area. There will payments as the size of resource estimate of these properties increases through further exploration.
The transaction is expected to close during the first quarter of 2021.
The Kerr Assets include eight historic silver mines over a 900-hectare area. These mines produced over 50 million ounces of silver and 900,000 pounds of cobalt, mainly between 1905 to 1950. The deal includes the nearby Silverfields property, which was mined by Teck until 1989 to a depth of 300 metres, producing over 17 million ounces of silver.
First Cobalt's remaining property covers more than 9,000 hectares and include former mines in the Silver Centre where exploration drilling intersected new cobalt-silver veins that the company said has yet to be fully tested.
"This transaction will provide capital to advance the First Cobalt refinery project while we advance a larger debt financing solution," said First Cobalt president Trent Mell in a statement.
"The electric vehicle landscape is moving quickly and proceeds from this transaction will allow us to remain on schedule, while reducing dilution.
"Equally important is the partnership that we are forming with Kuya to continue advancing a one-of-a-kind Canadian silver and cobalt district. First Cobalt has spent a considerable amount of time consolidating this historic high-grade mining district and has made great strides toward reviving what was once a world class silver and cobalt mining camp. Kuya’s leadership team has tremendous experience with high-grade silver deposits and we look forward to working with them on these coveted assets.”
First Cobalt has spent $10 million in exploration in the camp, including 3D geological modelling with more than 35,000 metres during 2017-18 that identified "numerous bonanza grade intercepts" with near-surface cobalt and silver mineralization.
Last summer, the company raised $1 million in flow through financing for exploration on the property.