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Cobalt 27’s growth strategy is focused on building the Company’s portfolio of battery metals streams, royalties and direct interests which may include the acquisition of interests in producing mines, development projects or exploration properties. Direct interests may be pursued in both primary cobalt deposits, as well as properties in which cobalt is a by-product or co-product with other metals.  The Company believes investments in such properties could leverage the Company’s industry expertise and broaden the scope of potential growth opportunities. 

Highlands Pacific - On May 17, 2019, Cobalt 27 completed the acquisition of Highlands Pacific to create a leading high-growth, diversified battery-metals streaming company.  As a result of the acquisition, Cobalt 27 now holds an 8.56% joint venture interest in the producing Ramu Mine, a long-life, low-cost nickel-cobalt operation located near Madang on the north coast of Papua New Guinea.  Ramu was financed, constructed and commissioned in 2012, by majority-owner and operator Metallurgical Corporation of China Limited, for US$2.1 billion which, at the time, was China’s largest overseas mining investment.  In 2018, the Ramu mine achieved record annual production of 35,355 tonnes of nickel and 3,275 tonnes of cobalt.

Cobalt 27’s acquisition of Highlands Pacific implies attributable production to Cobalt 27 to over 600,000 pounds of cobalt and over 2,900 tonnes of nickel per annum (based on 2018 Ramu production for Highlands’ 8.56% interest).  Following repayment of Highlands’ attributable construction and development loans, Cobalt 27’s ownership interest in the Ramu mine would increase to 11.3% and implied attributable production to Cobalt 27 is expected to reach over 800,000 pounds of cobalt and over 3,800 tonnes of nickel per annum.

Management believes that their collective experience in the areas of mining, mergers and acquisitions, accounting and corporate and financial management, together with the advice of expert consultants in the evaluation and exploitation of cobalt opportunities, will enable the Company to achieve its objective.

Transaction Highlights

Creation of a leading high-growth, diversified battery metals streaming and royalty company

Increases exposure to a large, long-life, low cost, high-growth nickel-cobalt mine (Ramu)

Expands and diversifies existing portfolio with increased nickel exposure

Accretive to Cobalt 27 shareholders

Attractive re-rating potential

Repayment of Ramu loans after closing will accelerate cash flow to Cobalt 27

Transaction Details

  • On May 17, 2019, Cobalt 27 completed the acquisition of all of the issued and outstanding ordinary shares of Highlands Pacific that it did not already own, for an all-cash offer price of A$0.105 per share (the “Base Purchase Price”). 
  • In addition, if before December 31, 2019, the London Metal Exchange official closing cash settlement price for nickel is US$13,220 per tonne or higher for a period of 5 consecutive trading days, Cobalt 27 will also pay additional contingent consideration of A$0.010 per Scheme Share in cash (the “Contingent Purchase Price”).
  • The Base Purchase Price consideration offered for all of the Scheme Shares is valued at approximately US$64 million which was funded with available cash and credit under Cobalt 27’s Amended Credit Facility.  The Contingent Purchase Price consideration of US$6 million is held in escrow and funded with available credit.  Subsequent to the close of the acquisition, Cobalt 27 closed the PanAust buyback agreement, resulting in the transfer of Highlands’ Frieda River joint venture interest to PanAust, which will result in the return of approximately US$9.4 million of the Base Purchase Price. 
  • Highlands’ common shares were removed from the official list of the Australian Securities Exchange and the Port Moresby Stock Exchange (“POMSoX”) on May 20, 2019.

Overview of Key Transaction Benefits to Cobalt 27 Shareholders

Consistent with strategy of gaining exposure to battery metals

  Greater nickel and cobalt exposure

  Lower transaction cost

  Significantly lower pro forma debt

Increased exposure to low-cost, long-life Ramu mine

Expands and diversifies existing portfolio with increased nickel exposure

Accretive to shareholders on a NAV basis(1)

Superior platform in Australasia to review and invest in regional opportunities

Simplifies the ownership and future funding mechanism for Ramu

Footnotes

  1. Based on street NAV estimates

Highlands Pacific Overview

Corporate Overview

  • Highlands Pacific (“Highlands”) is an ASX-listed battery metals producer and developer
  • Primary assets are an 8.56% interest in the Ramu Mine and a 20% interest in the Frieda River Copper-Gold Project, both located in Papua New Guinea
    • Ramu interest will increase to 11.3% upon repayment of partner loans to MCC
    • Also holds interests in the Star Mountains copper-gold exploration project and the Sewa Bay laterite nickel project in PNG
  • Ramu partner loans are non-recourse and have a balance of US$115 million(1)

Ramu Expansion

  • Ramu’s operator, the Metallurgical Corporation of China (“MCC”), is investigating a ~US$1.5 billion expansion of the mine
    • Cobalt 27 will have the opportunity to participate in the expansion and increase its attributable production

Non-core Assets

  • The proposed transaction entails the sale of Highlands’ interest in Frieda River to PanAust
  • Cobalt 27 to acquire interests in Star Mountains and Sewa Bay and will evaluate strategic alternatives

Asset Locations

Footnotes

  1. As at June 30, 2018

Ramu Overview

  • Ramu is a producing, open-pit nickel-cobalt mine located on the coast of the Bismark Sea in the Madang Province of Papua New Guinea (“PNG”)
    • In 2017, PNG’s total population was ~8.3 million and its total GDP was ~US$21 billion
  • Constructed in 2008 and commissioned in 2012 with ~US$2.1 billion in capital expenditures invested
  • Joint venture between the following:
    • Metallurgical Corporation of China Ltd. (85% ownership) – Operator
    • Highlands (8.56% ownership, Highlands has the option to repay the partner loans and increase its ownership to 11.3%)
    • PNG Government and local landowners (6.44% ownership, have the option to repay partner loans and increase its ownership to 8.7%)
  • 2018 forecast production of 3,300 tonnes of cobalt and 34,000 tonnes nickel (in concentrate)
    • Now achieving record production rates
  • Potential to deliver 30+ years of mine life
  • Mineral Resource: 76 Mt(1) Measured and Indicated and 60 Mt Inferred @ 0.9% Nickel and 0.1% Cobalt
  • Mineral Reserve: 56 Mt @ 0.9% Nickel and 0.1% Cobalt

Images (click to view larger)

Photo of the Ramu site

Ramu Site

Core Infrastructure Location

Core Infrastructure Location

Ramu mine location

Mine Location

Footnotes

Source: World Bank, Highlands

  1. Resources are inclusive of reserves

Ramu Production Overview

Cobalt Production in Concentrate (100% Basis)

Tonnes

Cobalt Production in Concentrate (100% Basis)

Nickel Production in Concentrate (100% Basis)

Tonnes

Nickel Production in Concentrate (100% Basis)

Global Nickel Cost Curve (2017)

US$/lb Nickel

Footnotes

Source: Highlands Pacific Corporate Presentation dated September 21, 2018, S&P Market Intelligence

Scientific and Technical Information
The majority owner and operator of Ramu is MCC Ramu Nico Ltd., a 67.02% owned subsidiary of MCC, and is operated by Ramu NiCo Management (MCC) Limited, a wholly-owned subsidiary of MCC. MCC is listed on the Hong Kong Stock Exchange (Stock Code “1618”) and on the Shanghai Stock Exchange, and has a market capitalization of approximately US$12 billion. The scientific and technical information, as well as additional material scientific and technical information with respect to the Ramu project, has been prepared by MCC in its capacity as operator of Ramu and disclosed by MCC and Highlands and is available on MCC’s HKEX profile at http://www.hkexnews.hk/index.htm as well as on Highlands Pacific’s website at http://www.highlandspacific.com/asx-announcements.

All estimates of mineral reserves and mineral resources in respect of Ramu are presented in compliance with the 2012 Australasian Code for Reporting of Exploration Results, Mineral Reserves and Ore Reserves established by the Australasian Joint Ore Reserves Committee (the “JORC Code”).

Disclosures of a scientific or technical nature have been reviewed on behalf of Cobalt 27 by Mr. Robert Osborne P.Eng., geologist and President of Osborne Laterite Geology Service Inc., an independent consultant to Cobalt 27 and a “Qualified Person” as defined by Canadian National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”).