Essential Power…Infinite Possibilities

Technical Reports

2017 Feasibility Study

The Feasibility Study (“FS”) is based on an underground mine with a target production rate of 800 short tons per day (“tpd”) and a weighted average annual production of 2.4M lbs of cobalt, 3.3M lbs of copper and 3,000 oz of gold over a 12.5 year mine life with an estimated pre-production period of 24 months utilizing a 0.25% cobalt cut-off grade. The economic model uses a 34% corporate tax rate and a 7.5% discount rate, resulting in an after-tax NPV of $135.8M and an IRR of 21.3% using an average base case price of $26.65/lb for contained cobalt in cobalt sulphate.

The Idaho Cobalt Project (“ICP”) is 100% owned by the Company’s wholly owned subsidiary, Formation Capital Corporation, U.S. The FS was prepared by Micon International (“MI”) in conjunction with SNC Lavalin (“SNC”) both of Toronto, Canada. The ICP is expected to be an underground mine and mill, exploiting the Company’s Ram deposit, located within the Idaho Cobalt Belt outside the town of Salmon, Idaho. Additionally, the Cobalt Production Facility (“CPF”), a hydrometallurgical refining operation located on a railhead in Blackfoot, Idaho, is expected to be built. The ICP would be a vertically integrated project designed to produce cobalt chemicals for the rechargeable batteries market in addition to by-products of copper concentrate, copper sulphate, magnesium sulphate and gold.

Feasibility Study Results Summary

(Note: All monetary values used in this news release are in Q3 2017 US dollars)

Pre-Tax NPV7.5%

$176.9M

Pre-Tax IRR

25.1%

Post-Tax NPV7.5%

$135.8M

Post-Tax IRR

21.3%

Corporate Tax Rate

34%

Initial Capital Costs

$186.7M

Life of Mine (LOM)

12.5 years

LOM Average Co Sulphate Price (contained Co)

$26.65/lb

LOM Gross Revenue

$1.129B

LOM Total Net After Tax Cash Flow

$331.4M

LOM Average Net Cash Cobalt Production Cost

$5.05/lb

Pre-Tax Initial Capital Payback

2.9 years

LOM Cobalt Production (lbs)

31,767,000

LOM Copper Production (lbs)

42,819,000

LOM Gold Production (oz)

39,241

Feasibility Study Description

As previously described, the FS is based on an underground mine with a target production rate of 800 short tons per day (“tpd”) and a life of mine production of 31.8M lbs of cobalt, 42.8M lbs of copper and 39,241 oz of gold. The project has over 12.5 year mine life with weighted average annual production of 2.4M lbs of cobalt, 3.3M lbs of copper and 3,000 oz of gold and an estimated pre-production period of 24 months utilizing a 0.25% cobalt cut-off grade. The economic model uses a 34% corporate tax rate and a 7.5% discount rate, resulting in an after tax NPV of $135.8M and an IRR of 21.3% using an average base case price of $26.65/lb for contained cobalt in cobalt sulphate.

The Company completed a Preliminary Economic Assessment (“PEA”) on March 10, 2015 utilizing the Company’s September 14, 2007 (revised May 19, 2008) feasibility study as a basis. The PEA included the completed environmental permitting process and construction at the mine and mill that was completed from 2011 to 2013 and subsequently placed on care and maintenance in May 2013. The FS utilizes an updated resource, mine model and mine schedule with a feasibility study level of design for the CPF to produce cobalt sulphate. A combined cobalt/copper/gold concentrate is to be produced from the mine and mill and processed at the CPF through hydrometallurgical processing of cobalt and copper bearing sulphides to produce cobalt sulphate heptahydrate which is used in the production of cathodes for rechargeable batteries.

Marketable by-products include copper concentrate, copper sulphate, magnesium sulphate and gold. Gold will be recovered through a gold carbon in leach circuit producing gold-loaded carbon which will be refined at a contract facility to produce doré. The stripped carbon will be returned to the CPF for reuse.

The ICP is 100% owned by eCobalt and there is no underlying royalty on the property. The FS has been compiled in accordance with National Instrument 43-101 guidelines and a Technical Report will be made available on SEDAR and on the Company’s website within 45 days of the date of this news release. Readers are strongly encouraged to review the final National Instrument 43-101 Technical Report in its entirety.

Mineral Resource and Reserves

MI updated the estimate of cobalt, copper, and gold resources in a three-dimensional resource wire frame and block model to be used for mine planning, design, and scheduling as part of the FS. MI utilized the previously estimated resources for the Ram deposit (completed by Mine Development Associates for the PEA) supported by their own geostatistical model and reserve criteria. The resulting model moved some PEA level Measured resources into the Indicated category and adjusted grades within the resource categories. Cobalt, copper, and gold reported resources in the FS model are shown in the table below. The stated resource is reported at a cobalt cut-off grade of 0.20% cobalt. There is approximately 34% dilution forecasted in the stope designs with additional dilution applied, by mining method and stope conditions, for over-break. The copper and gold resources and reserves are those resources and reserves carried within the stope blocks which attain the cobalt cut-off grade. No metal value is given to the copper or gold in determining the cobalt resource cut-off. No metal recoveries are applied, as this is an in-situ resource.

Ram Deposit Mineral Resources at 0.2% Co Cut-off

Category

Zone

Co%

Cut-off

Resource

(Tons)

Co (%)

Co
(lbs)

Au (opt)

Au
(ounces)

Cu (%)

Cu
(lbs)

Measured

All Zones

0.2

1,725,000

0.54

18,589,700

0.014

24,300

0.76

26,324,900

Indicated

All Zones

0.2

1,711,000

0.64

21,988,000

0.017

29,900

0.71

24,110,600

M+I

All Zones

0.2

3,436,000

0.59

40,577,700

0.016

54,200

0.73

50,435,500

Inferred

All Zones

0.2

1,543,000

0.51

15,593,800

0.012

18,700

0.68

21,032,200

Ram Deposit Mineral Reserves at 0.25% Co Cut-off

Category

Zone

Co%

Cut-off

Resource

(Tons)

Co (%)

Co
(lbs)

Au (opt)

Au
(ounces)

Cu (%)

Cu
(lbs)

Proven

3021, 3022, 3023

0.25

1,987,209

0.43

17,107,067

0.013

25,276

0.69

27,383,521

Probable

3021, 3022, 3023

0.25

1,674,685

0.52

17,409,858

0.017

28,010

0.67

22,372,024

Total Reserve

3021, 3022, 3023

0.25

3,661,894

0.47

34,516,925

0.016

53,286

0.68

49,755,545

Economic Highlights

The FS economic model uses a 34% corporate tax rate and a 7.5% discount rate, resulting in an after tax NPV of $135.8M and an IRR of 21.3% using an average price of $26.65/lb of contained cobalt in cobalt sulphate. Gross revenue during the life of mine is estimated to consist of 75% cobalt sulphate, 15% copper sulphate, 5% magnesium sulphate, 4% gold and 1% copper concentrate. A pro forma cash flow was developed using conventional methodology utilizing the base case discount rate, before and after-tax determination of project economics, annual cash flows discounted on an end of year basis with costs estimated in Q3-2017 US dollars.

LOM Cobalt Sulphate and By-Product Revenue


The total LOM capital and reclamation cost is estimated at $288.1M, including $186.7M for initial capital, $5.8M for long term water treatment bond collateral, and $95.6M in sustaining capital and mine development capital during production over the LOM, reclamation and closure cost. Prior to the deferral of the ICP to care and maintenance status in May 2013 due to depressed market conditions; the Company spent $65.3M on the ICP for earthworks, engineering, and milling equipment including the crushing, ball mill, flotation and filtration circuits, pumps, grizzlies, hoppers, conveyors, etc. These are sunk costs and not included in the remaining initial capital costs.

Project sensitivities were evaluated against standard potential variances in the cobalt price, discount rate, capital expenditures, and operating costs. Results of the sensitivity analysis are presented in the following tables and charts.

Cobalt Sulphate Price Forecasted Sensitivity:

  • Co Sulphate Price:

$19.50

$22.50

$25.50

$26.65*

$28.50

$31.50

$34.50

  • After-Tax IRR

10.4%

15.1%

19.5%

21.3%

23.6%

27.4%

31.1%

  • After-Tax NPV @ 7.5%

$27.8M

$73.7M

$118.4M

$135.8M

$162.4M

$204.0M

$245.8M

*Base case

The table above shows that $1.00/lb change in the price of cobalt sulphate will lead to a $14.4M change in after tax NPV and 1.3% change in after tax IRR.

Discount Rate Forecasted Sensitivity:

Discount Rate:

5.5%

6.5%

7.5%*

8.5%

9.5%

After-Tax NPV using Base Case Prices

$174.0M

$154.0M

$135.8M

$119.3M

$104.3M

*Base case

Summary of Annual Forecasted Cash Flow


Sensitivity of Estimated After-Tax NPV to Prices (all products), CAPEX and OPEX


Cobalt Market- Growing Demand and Supply Deficit Forecasted (CRU)

The Company commissioned a marketing study with CRU Consulting of London, United Kingdom, to provide data and forecast on cobalt and by-product markets and specifically cobalt sulphate used in rechargeable batteries applications and the ICP’s position within the battery supply chain. The following cobalt marketing information is referenced from the Market Study for the Idaho Cobalt Project September 2017 Report authored by CRU Consulting.

Cobalt consumption has remained strong over the past six years because of stable demand in alloys, established chemical markets and rapid uptake in lithium ion batteries. CRU expects global refined cobalt demand to approach 166,210 tonnes by 2026 (2016 - 96,000 tonnes). Demand is forecast to grow at 6% CAGR in the mid-term spurred on by growing demand for lithium ion batteries. Demand will then increase at CAGR 4.1% in the long-term (2021-2026) as the EV sector matures and the metals sector continues to grow robustly.

Cobalt mine supply is consolidated in a small number of countries and dominated by the Democratic Republic of Congo. The country’s share of global supply is forecast to reach 67% in 2021 despite considerable risks to political stability, infrastructure development and energy supply. Cobalt chemicals supply is dominated by China, the largest importer of cobalt concentrates and hydrometallurgical intermediates. Being located in the United States, the ICP with access to its own mined feedstock, sustainable operating practices following ethical principles is an advantageous position in the current market environment. The ICP has the opportunity to become the reliable and transparent source of cobalt sulphate supply to the domestic market and export markets outside DRC and China.

Cobalt sulphate demand is rising strongly and is likely to outperform demand for other cobalt chemicals and demand in metallurgical applications in the future. Tightness in both the metallurgical and non-metallurgical sectors will lead to increasing competition for both mined and refined supply helping support prices at or above current levels over the next ten years. Most of this deficit will be felt in the non-metallurgical market, where supply and demand is expected to increase at CAGR 7.0 % and CAGR 7.9 % respectively. This means additional chemical refining capacity will need to be created in the mid-term. Delays in capacity increases could occur as a function of political instability, energy disruption or as a function of falling copper and nickel prices. The global supply of refined chemicals is becoming increasingly prone to mine supply bottlenecks, a major upside risk to cobalt chemical prices.

Based on CRU’s long term real price forecast, the FS uses a weighted average price of $26.65/lb for contained cobalt in cobalt sulphate, which has an average premium of $1.47/lb above 99.3% cobalt price forecast.

FS Risks

The most significant potential internal risks associated with the ICP are uncontrolled dilution, lower metal recoveries than those projected, operating and capital cost escalations, unforeseen schedule delays, and the ability to raise sufficient financing to execute the project. The central external project risks are product prices and markets. These risks are common to most mining projects, many of which can be mitigated with adequate engineering, planning and pro-active management.

Project Opportunities

There are significant opportunities that could improve the economics of the ICP. Including those opportunities typical to all mining projects, such as changes in metal prices, exchange rates, etc., there are additional opportunities that exist. The mineral resource has not been fully delineated and there is an excellent opportunity to expand this resource. As a result, the Company has initiated a targeted drilling program, in consultation with MI, that has the potential to immediately increase the indicated mineral resource. In addition, over a dozen potential targets have been identified in the immediate area within the claim block of the ICP. Four of these have been drill tested with several intercepts exceeding the current cut-off grade. There is also potential to add additional resources from the nearby Black Pine property owned by the Company which potentially could provide additional feed for the ICP mill.

There is an opportunity for the mine to process higher grade material for short durations through the optimization of the mine plan and sequence production to capitalize on market conditions. Opportunities for CPF capital and operating cost improvements exist through optimization studies during detailed design. There is potential to increase overall recoveries and obtain better shipping and handling terms through formal negotiations in the future and to incorporate offtake and/or streaming agreements on some or all of the products to be produced.

Conclusions

MI and SNC have concluded that the FS contains adequate detail and information to support the positive FS outcome shown for the ICP. Standard industry practices, equipment and design methods were used in the FS. MI and SNC further concluded that the ICP contains a viable cobalt and base metal resource that can be successfully mined by underground methods and recovered to concentrate with conventional milling processes. Using the assumptions contained in the FS; in the professional opinions of MI and SNC, the project economics merit consideration by eCobalt to proceed to the project financing and execution stage. To date the Qualified Persons, in accordance with National Instrument 43-101, are not aware of any fatal flaws for the ICP. The advancement of the ICP towards production is contingent upon financing.

Moving Forward

The positive results of the FS have given Management and the Board of Directors a clear mandate to move the ICP towards project financing and development. Management’s immediate goal is to evaluate a variety of opportunities for the ICP. The Company is also considering securing offtake arrangements for cobalt sulphate heptahydrate. Independent of the FS, the Company has produced cobalt sulphate crystals from recent metallurgical test work which were shipped to potential offtakers for evaluation. Initial feedback regarding product quality has been positive and current requests for additional material for evaluation are being fulfilled.

Preparation of the ICP mine and mill site for construction activities, expected to commence in earnest next year with successful mine financing in place, continues with access road upgrades, existing facilities maintenance, preparation of temporary power for construction, and approved water discharge line maintenance. At the CPF located in Blackfoot, ID, the existing pre-purchased building has been transported to the site.

Senior and Support staff capacity ramp up continues with the recent additions of Mr. Floyd Varley, COO, Mr. Llee Chapman, Operations Administrator, and Mr. Mandeek Manhas, Controller. Hiring of key employees in various functional areas is being implemented to support preconstruction and project development goals.

Concurrent with the above activities, Management also plans on pursuing the numerous opportunities for project enhancement.

The Qualified Persons as defined by National Instrument 43-101 responsible for the FS and this news release are listed below:

 

Qualified Person

Organization

Overall Responsibilities

Chris Jacobs CEng MIMMM

Micon International Limited

Project Economics and Cost Estimates.

Charley Murahwi P.Geo. FAusIMM

Micon International Limited

Geology and Mineral Resource Estimates

Barnard Foo P.Eng.

Micon International Limited

Mining and Reserve Estimates

Richard Gowans P.Eng.

Micon International Limited

Metallurgy and Process Design

E.R. (Rick) Honsinger, P.Geo.

eCobalt Solutions Inc.

Review and approval of the contents of this news release

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2015 Preliminary Economic Assessment (PEA) Summary​

The PEA was commissioned in January 2015 with Samuel Engineering Inc. (“SE”) to re-evaluate the Idaho Cobalt Project (ICP) to produce cobalt chemicals in response to improving financial markets and the projected bullish long-term demand for cobalt. The April 29, 2015 PEA’s economic model uses a 35% corporate tax rate and an 8.5% discount rate, resulting in an after tax NPV of $113 million and an IRR of 24.07%. A pro forma cash flow was developed using conventional methodology utilizing the base case 8.5% discount rate, before and after tax determination of project economics, annual cash flows discounted on an end of year basis with costs estimated in first quarter 2015 U.S. Dollars. A summary of the Life of Mine (LOM) economic results are shown in the following table. Note all monetary values used in the economic results of the PEA are in US$.

Pre-Tax NPV8.5%:$148 million, IRR 27.7%
Post-Tax NPV8.5%:$113 million, IRR 24.07%
Initial Capital Costs:$147 million
Life of Mine (LOM):12.5 years post preproduction
EBITDA:$515 million
LOM Gross Revenue:$983 million
LOM Total Net After Tax Cash Flow$258 million
LOM Average Net Cash Cobalt Production Cost:
(net of gold, copper and magnesium credits)
$4.94 per pound
Pre-Tax Initial Capital Payback:
3.7 years
LOM Cobalt Production:35,356,415 pounds
LOM Copper Production:57,384,700 pounds
LOM Gold Production:
(including ounces in copper con and doré)
46,858 ounces

The total LOM capital cost is estimated at $201.41 million, including $146.76 million for initial capital, and $54.65 million in sustaining capital and mine development capital during production over the LOM. These estimates do not include past investment totaling $65.31 million.

The total LOM cash production cost is estimated at $468.73 million or $13.26/lb of processed cobalt contained in cobalt sulfate heptahydrate and $175.58 million or $4.94/lb of processed cobalt sulfate heptahydrate net of by-product credits.

The PEA is based on an underground mine with a target production rate of 800 tons per day with a weighted average annual production of 2,771,000 lbs cobalt, 4,533,000 lbs copper and 3,600 oz gold over a 12.5 year mine life with an estimated pre-production period of 21 months utilizing a 0.25% cobalt cut-off. The PEA utilizes an updated resource, mine model and mine schedule with intentions to produce cobalt, copper sulfate chemicals, and gold at the CPF.

The PEA reported mill feed and internal recoveries at the CPF will be 90.99% for cobalt, 92.76% for copper, and 78.46% for gold. Overall recoveries for copper and gold include metals contained in the copper concentrate as well as leached products. All magnesium that is input as MgO (Magnesium Oxide) is recovered as MgSO4 (Magnesium Sulfate) in the current model for this study.

Earlier in 2015, Mine Developments and Associates (MDA) updated the ICP’s Ram deposit estimate of cobalt, copper, and gold resources into a three-dimensional block model to be used for mine planning, design, and scheduling. This information forms part of the PEA with an effective date of March 10, 2015. MDA had previously estimated the resources for the Ram deposit. Cobalt, copper, and gold reported resources are shown in the table below. The stated resource is diluted throughout the entire 6 feet by 2 feet by 5 feet blocks that are equal to or above the cut-off grade of 0.2% cobalt. There is approximately 15% dilution in the stope designs. The copper and gold resources are those resources carried within the blocks which attain the cobalt cut-off grade. No metal value is given to the copper or gold in determining the Co resource cut-off. No metal recoveries are applied, as this is an in-situ resource.

Conclusions from SE and MDA are that the ICP contains a viable cobalt and base metal resource that can be successfully mined by underground methods and recovered with conventional processing. Using the assumptions contained in the PEA, SE and MDA report the project is economic and should proceed to the feasibility stage.

The Company cautions this PEA is preliminary in nature, and is based on technical and economic assumptions which are currently being evaluated in further feasibility level studies. The PEA is based on the current (as at March 10, 2015) ICP estimated resource model, which consists of material in both the measured/indicated and inferred classifications. Inferred mineral resources are considered too speculative geologically to have technical and economic considerations applied to them outside the scope of a PEA. The current basis of project information is not sufficient to convert the mineral resources to mineral reserves, and mineral resources that are not mineral reserves do not have demonstrated economic viability. Accordingly, there can be no certainty that the results estimated in the PEA will be realized.

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​Metallurgical Test Work Summary​

On March 3, 2016 the Company announced metallurgical results on bench test production of cobalt sulfate heptahydrate crystals produced from ore samples from the ICP. SE was the Company’s lead engineer coordinating the metallurgical test work. eCobalt expects our final end product will meet the quality standards for high purity cobalt sulfate chemicals based on extensive metallurgical work and successful modifications to the Mill and CPF flowsheets by SE, positive results from Cytec Industries Inc., and successful testing by General Electric’s Water and Process Technologies Group.The development of the modified flow sheets outlines a critical path forward for eCobalt. SE has previously recommended that the project development activities be advanced to support and produce a Feasibility Study. The finalization of the modified flow sheets allows for such advancement.