TSX-V-listed First Cobalt has announced positive feasibility study results for its cobalt refinery expansion project, in Canada, marking a key milestone in its efforts to disrupt the existing cobalt supply chain.

The study shows strong asset-level economics that position the refinery to be “competitive globally and provide attractive investment returns”, president and CEO Trent Mell said on Monday.

The study, based on a cobalt price of $25/lb, calculated that the refinery expansion will yield an aftertax net present value of $139-million and an aftertax internal rate of return of 53%, with a payback period of 1.8 years.

The study, completed by Ausenco Engineering Canada, contemplates expanding the existing facility to 55 t/d and adapting it to be North America’s first producer of cobalt sulphate – an essential component in the manufacturing of batteries for electric vehicles (EV).

The objective is to produce about 25 000 t/y of cobalt sulphate for the EV market.

“The outlook for electric vehicles and the push by automakers to develop shorter supply chains creates an excellent opportunity. With most of the world’s cobalt refining capacity located in China, there is strong demand for a North American alternative," said Mell.

Citing a Benchmark Mineral Intelligence report, First Cobalt notes that China accounts for about 79% of the world’s refined cobalt sulphate production. Cobalt demand from nickel/cobalt/manganese batteries used in EVs is forecast to increase from about 20 000 t in 2019 to more than 730 000 t in 2040. The company says that there are currently no plans to commission new cobalt refineries outside of China, other than First Cobalt.

"Our focus will now turn to working with Glencore, our strategic partner, on implementing a new, ethical and transparent supply chain,” said Mell.

First Cobalt and Glencore last year formed a partnership for the phased recommissioning of the refinery. The Ontario-based refinery will treat cobalt feed material supplied from Glencore’s Democratic Republic of Congo operations for 4.5 years on a tolling basis, with Glencore providing capital required to recommission and expand the facility.

The feasibility study estimates that capital expenditure (capex) of $56-million will be needed for the expanded refinery, but First Cobalt stresses that it is continuing to evaluate opportunities to improve economics.

Some of these include using a different technology or approach to managing sodium, which could have positive impacts on capital and operating costs. Also, the crystalliser selected for the feasibility study (capex of $4.3-million) is intended to achieve the highest quality of cobalt sulfate ‘heptahydrate’. The company says their potential offtake partners have indicated a higher tolerance for other hydrates of cobalt sulphate, such as monohydrate or pentahydrate, provided that cobalt content is known and moisture is controlled. As a result, the project could realise savings by using a different crystalliser.

Discussions are ongoing with potential automotive offtake partners, as well as several lenders in providing a portion of the capital costs along with Glencore.

Further, First Cobalt is completing three scoping studies to help identify the best path forward to recommission the refinery using existing permits, which will allow a feed rate of up to 12 t/d. The demonstration plant could be producing cobalt sulphate for EV battery product qualification by as early as the fourth quarter of this year.

For the expansion scenario, amended permits will be required and work has begun on fulfilling requirements for those.