Two cobalt exploration companies have entered into an agreement to establish a joint venture involving a controversial refinery in northeastern Ontario.
First Cobalt announced June 1 that it has entered into an option agreement to form a 50/50 joint venture partnership with Cobalt One, (formerly Equator Resources) the pending new owner of the Yukon refinery in North Cobalt.
In a news release, First Cobalt said their “strategic partnership” with Cobalt One will give them access to the refinery and 40 acres of permitted land to process silver-cobalt arsenide concentrates from its historic Keeley-Frontier mine project.
“The Yukon refinery and the 40 acres of permitted property can help us reduce the permitting timeline in a meaningful fashion for a future development project,” said First Cobalt president-CEO Trent Mell.
“We are very pleased to be partnering with Cobalt One, which was one of the first companies to identify the opportunity to revive this historic camp and is now one of the largest cobalt companies in the district.”
The refinery is located 25 kilometres from First Cobalt’s property at Silver Centre, south of the historic mining town of Cobalt.
Cobalt One/Equator announced in late April that it had signed a binding agreement to acquire the refinery from a numbered company, 36569 Yukon, and its parent company, Yukon Refinery AG.
The purchase is expected to be finalized by the end of June.
Cobalt One executive director Jason Bontempo said his company shares the same vision with First Cobalt on bulk mining in the camp.
His company has claims on 13,470 acres of ground within the boundaries of the town of Cobalt and to the south in Silver Centre and Lorrain Valley.
“Their complimentary land package and strong Canadian-based management team made them logical partners for this strategic asset. I look forward to working with Trent and his team.”
Under the option agreement, First Cobalt will provide immediate payment of $750,000 to Cobalt One. First Cobalt has until December 31, 2017 to exercise the option. At that time, First Cobalt is obligated to pay Cobalt One $2.25 million and pay the equivalent of 50,000,000 shares of Cobalt One in cash or shares of First Cobalt with an approximate value of $5.5 million.
The agreement is subject to certain conditions, including the approval of the TSX Venture Exchange.
The facility is permitted to treat and process ore containing arsenic, one of four such permitted facilities in Canada, and is the only refinery in North America with no set limits on processing or storing arsenic from feeds.
But ownership questions about the refinery still linger.
Another junior miner in the area, CobalTech, has considered legal action against the refinery’s outgoing owners and Cobalt One in a lawsuit seeking damages and a proprietary interest in the facility.
CobalTech wanted the plant to process material from its cobalt properties, south of the town of Cobalt, and had signed a letter of intent to acquire the Yukon refinery last February.
By April, CobalTech dropped those plans, claiming the deal with the numbered company was being terminated for what CobalTech categorized as a breach by the vendor.
CobalTech threatened to sue when Equator/Cobalt One announced April 26 that it has entered into the asset purchase agreement with 36569 Yukon and its parent company, Yukon Refinery AG.
Cobalt One responded in early May that it regards any legal claim by CobalTech as “likely to be a transparent attempt to interfere in the valid contractual arrangements between 36569 Yukon and Equator.”
A spokesperson for First Cobalt said the closing of the refinery sale is still underway but is progressing as scheduled. "CobalTech announced an intention to bring legal action, however, no such action has been taken."
The refinery was built in the mid 1990's. It’s been idle since 2014 when United Commodity of Switzerland ran out of money.