Geovic in talks to finance Cameroon cobalt project, could reduce stake

3rd May 2011 By: Liezel Hill

TORONTO ( – Geovic Mining may be prepared to lower its ownership level in the Nkamouna cobalt/nickel/manganese project in Cameroon to help finance the mine's development, president Barbara Filas said.

Asian battery firms have expressed interest in a "strategic" investment in the project in combination with an offtake agreement for future production from the mine, she indicated, although any decision would also include the company's partners on the asset.

Geovic owns 60,5% of the Nkamouna project and the rest is held by the National Investment Corporation of Cameroon (NICC) and local investors.

The firm published an updated feasibility study for the project in April, and will aim to arrange financing later this year, Filas said.

If all goes to plan, construction will start late in 2011 or early 2012, with mining operations starting in 2013 and commercial production by 2014.

The new feasibility study pegged initial capital expenditure at $617,2-million, and Filas said the project owners are looking at a range of options to raise the funds.

“We are keeping every angle open on the financing,” she said in an interview on Monday. “We're basically not closing our minds to anything.”

Early talks have been held with potential lenders, and will be accelerated now that the feasibility study has been completed, and discussions have been under way for more than a year on possible offtake agreements.

If the partners look at arranging 60% of the project finance through debt, that will leave Geovic with a “couple of hundred million dollars” that it needs to raise as its share of equity funding, Filas said.

That money could be raised by issuing paper, but that would obviously be dilutive to existing shareholders, she said.

“So we are looking at all angles. We're talking to parties in Asia – primarily China and Korea, although we've had some more recent interest from the Japanese as well – about a potential strategic investment at the project level.”

Such an investment “would affect both Geovic and our partners, and would be dilutive at the project level rather than at the Geovic corporate level”, Filas said.

Most of the possible partners also be interested in agreements for a “significant percentage” of the offtake for the Nkamouna project, which will produce an average of 13,5-million pounds of cobalt, 7,25-million pounds of nickel and 138-million pounds of manganese carbonate a year in the first 11 years of full production.

“We need to make sure that any arrangement is in Geovic Mining Corp's shareholders' best interests,” Filas said.

“But we are committed to seeing this project to completion, and seeing this mine getting built in Cameroon.”

Cobalt is used in rechargeable batteries, including for electric and hybrid vehicles, as well as in gas turbine aircraft engines, catalysts and magnets.

The Nkamouna operation will have two products – a high-quality mixed cobalt/nickel sulphide and the manganese carbonate – and currently has an estimated mine life of 23 years.

Without ruling anything out, the company is mainly focused on battery companies as potential partners, Filas said.

Denver-based Geovic completed an initial feasibility study on the Nkamouna project in 2008, but put the project on hold that year amid turmoil in financial markets.

Shares in the company rose 7,3% on Monday, to C$0,59 apiece in Toronto.

Cobalt production rose by an estimated 27% in 2010, to 76 363 t, the Cobalt Development Institute said last month. Global apparent consumption increased 9%, to some 61 000 t, the group said, led by increased demand in China.