Cobalt 27 intends to enhance its exposure to electric metals through the acquisition of new or existing streams and royalties in producing mines, development projects and exploration properties. Cobalt 27 acquired a cobalt stream on Vale's world-class Voisey's Bay mine in Canada, beginning in 2021, including the recently announced US$1.7 billion underground expansion. Cobalt 27’s acquisition of US$300 Million Voisey’s Bay cobalt stream will result in Cobalt 27 receiving 32.6% of cobalt production from the mine, to deliver approximately 1.9 million pounds of cobalt per year to Cobalt 27, to be settled in physical delivery for the life of the mine beginning in 2021.
The Company also manages a portfolio of eight royalties including a net smelter return (“NSR”) royalty on the construction-ready Dumont Nickel-Cobalt project in Québec and 6 royalties on exploration-stage properties prospective for cobalt. Cobalt 27 intends to continue to invest in an electric metals-focused portfolio of streams, royalties and direct interests in mineral properties containing cobalt, while potentially adding to its cobalt physical holdings when opportunities arise. The Voisey’s Bay cobalt stream and portfolio of royalties on current and future mineral production are summarized in the following table:
|Stream/Royalty Name||Operator||Location||Stage||Primary Metal(s)||Stream / Royalty Type||Stream ROFR|
|Voisey’s Bay Co||Vale||NL Canada||Production1||Co||32.6%||-|
|Dumont Ni-Co||RNC Minerals||Québec||Construction-ready||Ni-Co||1.75% NSR||-|
|Flemington Co-Sc-Ni||Australian Mines||Australia||Exploration||Ni-Co-Sc||1.5% GRR2||-|
|Nyngan Co-Sc-Ni||Scandium Int’l Mining||Australia||Construction-ready||Ni-Co-Sc||1.7% GRR2||-|
|Turnagain Ni-Co||Turnagain Ni-Co||British Columbia||Exploration||Ni-Co||2% NSR||Yes|
|Triangle||Palisade Resources Corp.||Ontario||Exploration||Co-Ag||2% Co NSR||Yes|
|Rusty Lake||Palisade Resources Corp.||Ontario||Exploration||Co-Ag||2% Co NSR||Yes|
|Professor & Waldman Properties||Palisade Resources Corp.||Ontario||Exploration||Co-Ag||2% Co NSR||Yes|
|North Canol Properties3||Golden Ridge
|Yukon||Exploration||Ag-Pb-Zn-Co||2% Co NSR||Yes|
|Sunset||Private Individuals||British Columbia||Exploration||Cu-Zn-Co||2% Co NSR||Yes|
(1) Stream to commence Jan 1 2021
(2) Gross Revenue Royalty
(3) Two separate mineral properties to which a Co NSR applies
A royalty is a payment to a royalty holder by a property owner or an operator of a property and is typically based on a percentage of the minerals or other products produced or the profits or revenue generated from the property. Royalties are not working interests in a property. Therefore, the royalty holder is generally neither responsible for, nor has an obligation to, contribute additional funds for any purpose, including, but not limited to, operating or capital costs, or environmental or reclamation liabilities. Typically, royalty interests are established through a contract between the royalty holder and the property owner; and many jurisdictions permit the holder to also register or otherwise record evidence of a royalty interest in applicable mineral title or land registries. These unique characteristics of royalties provide royalty holders with special commercial benefits not available to the property owner because the royalty holder enjoys upside potential of the property with reduced risk.
A common form of royalty is a NSR - Net Smelter Return royalty, which is based on the proceeds paid by a smelter or refinery to the miner for the mining production from the property less certain transportation, smelting and refining costs as defined in the royalty agreement. This type of royalty provides cash flow that is free of any operating or capital costs and environmental liabilities.
Streaming interests are agreements that provide, in exchange for an upfront payment, the right to purchase all or a portion of the metals produced, at a defined price for the term of the agreement, which is typically the life of mine for the respective property.
Streams and royalties have several structural advantages relative to other commodity acquisition alternatives as they provide many of the benefits of mine ownership without the exposure to increasing capital, operating and environmental costs. Investing in a streaming or royalty company is similar to investing in a physical commodity although it also provides the additional benefit of gaining exposure to earnings and dividends, resource growth and production growth while minimizing exposure to capital, operating, environmental and closure costs.
Cobalt 27’s management has significant streaming and royalty experience and is actively pursuing streams and additional royalties. The focus will be on streaming opportunities that could provide the Company with near-term cash flow and royalties on exploration-stage cobalt properties that will provide longer-term optionality on the price of cobalt.