Formation Metals Inc. – The Idaho Cobalt Project – A Unique, High-Grade, Primary Cobalt Deposit
Overview
Formation Metals Inc. (TSX:FCO,OTCQX:FMETF) is an exploration, development, and refining company focused on cobalt production in Idaho, USA. Through its wholly-owned subsidiaries it has interests in cobalt, uranium, and other base and precious metals in Canada, the United States and Mexico. Formation Capital Corporation, U.S., a subsidiary of Formation Metals Inc., owns the Idaho Cobalt Project. The Company completed an $80 million equity financing in March 2011 and commenced Stage II construction in Q2, 2011. The Company is currently securing the balance of the financing of approximately $100 million in a debt facility.
The Company announced in May 2012 that it expanded its precious metals refining division located in the world famous silver valley of northern Idaho, to accept precious metals concentrates for processing into high purity bullion. The SUNSHINE ® silver brand is accepted as Good Delivery on COMEX, (Commodity Exchange, Inc, a designated contract market of the CME Group Inc.).
Investment Highlights
- Idaho Cobalt Project is estimated to produce 1,525 tons of high purity cobalt metal annually over a minimum ten-year span
- Potential to meet almost 15% of North America’s cobalt demand
- Revenue generating refining business
- Committed to sustainable mining
Key Properties
Idaho Cobalt Project, Idaho, USA
Formation owns 100 percent of the Idaho Cobalt Project in east central Idaho. This site holds high-grade, primary cobalt deposit metallurgically favourable for the production of high purity cobalt metal. This cobalt is suitable for next generation Lithium-Cobalt-Ion rechargeable batteries used in hybrid and electric vehicles and for critical applications in the super-alloy sector such as jet turbine blade production.
Formation estimates that 1,525 tons of cobalt will be produced annually over a minimum ten-year span, feeding 14.9 percent of North America’s cobalt demands. This project received a stimulus fund bond allocation from the state of Idaho. Stage I & II Construction has been completed. The ICP minesite is fundamentally prepared to commence underground development (contingent upon successful conclusion of mine financing.
Idaho Cobalt Project
Based on Samuel Engineering’s NI-43-101 compliant technical report of their Bankable Feasibility Study utilizing a base case cobalt price of $22.52 per pound, and a 7.5 percent discount rate, the Net Present Value (NPV) is US$87.29 million with an Internal Rate of Return (IRR) of 22.30 percent. The average operating cost per pound of cobalt is US$7.73, with an average annual Net Cash Flow of US$34,162,100 over a ten year mine life. Total estimated capitalization expenditures for the mine, mill, and retrofitting of the hydrometallurgical refining facility are estimated at US$138.7 million.
Diluted, Proven and Probable Reserves of the project currently stand at 2.636 million tons @ 0.559% cobalt, 0.596% copper and 0.014 ounces per ton gold utilizing a 0.2% cobalt cut-off for a ten year mine life (14 years including the inferred resources) of 1.122 million tons grading 0.585% cobalt, 0.794% copper and 0.017 ounces per ton gold. This represents contained metals of 42.6 million pounds of cobalt, 49.1 million pounds of copper and 56 thousand ounces of gold.
Cobalt Ore
Idaho Cobalt Project Minesite Construction Update October 2012
Sunshine Precious Metals Refinery, Idaho, USA
Owned by subsidiary Essential Metals Corporation, the Sunshine Precious Metals Refinery processes material containing silver, gold and copper from sources such as mining doré, industrial precious metal waste, recycled metals and other types of high content precious metal bearing materials. Operational as of 2004, it is a zero-discharge, expansion-capable facility that continues to escalate production. It specializes in high-purity refinement, with consistent fineness of 999.5 silver or better. The SUNSHINE® silver brand is accepted as good delivery on COMEX (Commodity Exchange, Inc.).
The 36,000 square foot refinery also contains two additional circuits, the hydrometallurgical (hydromet) and solvent extraction electrowinning circuits (SX-EW). These circuits will be retro-fitted to accept Idaho Cobalt Project concentrate. The hydromet circuits will produce 1,525 tons of high purity cobalt metal, while the SX-EW circuits will produce a similar amount of copper plate metal. Gold from the cobalt project concentrate will be processed at the exisiting precious metals refining circuits.
The Sunshine Silver Refinery is currently processing copper/silver and gold concentrates in addition to refining silver and gold doré, high grade silver residues and other high content silver materials into high quality silver and gold bullion for customers. Earlier in 2012, the Company entered into an agreement to process silver concentrates from the Crescent Mine located three miles from the Refinery. The first delivery of concentrate from the Crescent Mine for pilot runs was delivered in May 2012.
Gold concentrate is being delivered regularly for processing, and other contracts are currently being negotiated. Research and testing of various concentrate materials is ongoing and the Company expects to process an increasing variety of concentrates with a wider range of acceptable impurities in the future.
Pouring Bullion Bars
Black Pine Project, Idaho, USA
The Black Pine Property is proximal to Formation’s Idaho Cobalt Project. Stratiform sulphide mineralization is found in massive sections which typically contain pyrite and chalcopyrite. Aside from the copper rich strata, there are a number of narrower cobalt-gold rich arsenopyrite-bearing beds present in the copper mineralized section. In 1992, the company optioned the Black Pine property and shortly thereafter staked additional claims. Since the acquisition of Black Pine, Formation has spent $3.2 million on property payments and exploration including geological mapping, soil geochemistry, geophysical surveys, trenching and drilling programs. Formation has completed 100 diamond drill holes totaling 44,954 feet, and 100 reverse circulation holes totaling 15,625 feet.
Core drilling has defined a preliminary (historic, in house, non National Instrument 43-101 compliant) sulphide resource of 224,673 tons grading 4.17% copper, 0.013% cobalt and 1.269 grams per tonne (gm/T) (0.037 oz/t) gold has been calculated for the Swift East and Trench zones. Comparatively under-explored zones include the Regina zone where the best drill hole intersected a cobalt-rich horizon which assayed 1.133% cobalt. 0.02% copper and 1.920 gm/T (0.056 oz/t) gold over 17.5 feet and the Troll Zone where drilling intersected a copper-rich horizon grading 0.164% cobalt, 4.90% copper and 0.446 gm/T (0.013 oz/t) gold over 9.2 feet. All of these zones remain open in at least one direction.
Summary
Formation Metals has the potential to meet almost 15 percent of North America’s cobalt demand thru its 100 percent owned Idaho Cobalt Project in east central Idaho. The company is committed to sustainable mining, and received a stimulus fund bond allocation from the state of Idaho. The project is estimated to produce 1,525 tons of high purity cobalt metal annually over a minimum ten-year span. The completion of construction will take approximately 12 months subsequent to the successful completion of mine financing.
Management
Mari-Ann Green, B.A., B.Ed. - Director, Chairman, and CEO
Ms. Green, co-founder of Formation Metals Inc., has over 27 years’ experience in the resource sector in the areas of finance, management and corporate development. She has been directly responsible for the raising of over $170 million in equity funding for the Company and has assembled and directed a team of exceptional industry professionals. Since inception, she has kept the team focused on the corporate objective – to become an environmentally and socially responsible, profitable, primary metals miner and refiner.
J. Scott Bending, P.Geo., B.Sc. - Director and President
Mr. Bending, also a co-founder, has over 28 years’ experience in mineral exploration and development within Canada, Mexico, United States and abroad and has 15 years experience in metal price forecasting and commodity analysis. Mr. Bending provides Formation with solid management expertise and has a proven track record of acquiring and evaluating high quality metal projects. Mr. Bending is also on the Board of Directors of the Northwest Mining Association.
W.G. (Bill) Scales, B.Sc. - Director and Executive Vice President
Mr. Scales, also a co-founder, has over 30 years’ experience in project management including 20 years in mineral exploration and development. His extensive knowledge of the Idaho Cobalt deposit gives him a solid background from which to oversee and review property development as Project Manager.
David Stone, Ph.D., M.B.A., P.E., P.Eng. – Director
Dr Stone has over 30 years of engineering and financial consulting experience to underground and surface metal mines worldwide. He has managed and led multidisciplinary project teams through pre-feasibility and feasibility level evaluations of development-stage projects, and has contributed to the engineering, design and construction of several mines.
His expertise includes scoping and feasibility studies for open pit and underground projects, and an extensive international knowledge of current mining best practices, environmental permitting, mine planning and production scheduling, capital and operating costs, equipment selection, and financial analyses. He holds BA Sc. in Geological Engineering from the University of British Columbia and an MBA and PhD in Civil Engineering from Queen’s University. He is a licensed professional engineer in numerous Canadian and United States jurisdictions. Dr Stone sits on a number of Boards of TSX and Venture Exchange listed companies.
Robert Metka, B.Sc., Eng., M.B.A. – Director
Mr. Metka has over 23 years of mineral production and engineering experience as V.P. of Projects for Noranda Minerals and V.P. and General Manager of CEZinc. He is presently a Principal of Hatch, the world’s largest international hydrometallurgical company.
James B. Engdahl – Director
Mr. Engdahl has over 30 years experience in corporate finance, management, accounting and administration with major financial institutions such as Barclays Bank of Canada and the Bank of Montreal.
Robert J. Quinn, B.S., B.A., J.D. – Director
A founding partner of the Houston mining transactional law firm Quinn & Brooks LLP, Mr. Quinn has over 25 years of legal and management experience, including as Vice President and General Counsel for Battle Mountain Gold Company. Appointed to the Board of Directors of the Company in June 2006, he has extensive experience in M&A transactions, corporate governance, public disclosure, governmental affairs, environmental law and land management. Mr. Quinn has a Bachelor of Science degree in Economics from the University of Denver, a juris doctorate degree from the University of Denver College of Law and has completed two years of graduate work in mineral economics at the Colorado School of Mines.
Cecil D. Andrus – Director Emeritus
Previous four-term Idaho governor and former U.S. Secretary of the Interior, Mr. Andrus has served on the boards of Albertson’s, Key Bank and Coeur d’Alene Mines Corporation since leaving office in 1995. He currently is “of counsel” to Gallatin Public Affairs, a northwest based public affairs firm and chairman of the Andrus Center for Public Policy at Boise State University. Governor Andrus is known for his strong environmental stance on mining and believes the Idaho Cobalt Project to be an environmentally conscious mining operation.
J. Paul Farquharson, B.B.A. – CFO
Mr. Farquharson has 25+ years experience in financial management and regulatory compliance with private and public resource companies across Canada. Over the last 14 years he has been responsible for financial and compliance matters for Formation Metals and has assisted with the raising of venture capital and the corporate development of Formation.
Alan D. Vichert, B.A., B.Sc. (Geol), M.B.A., CRM – Senior Vice President, Chief Risk Officer, and Corporate Administrator
Mr. Vichert has many years of geological and business experience in the Middle East, the Caribbean, the USA and Canada. Before joining Formation Metals, Mr. Vichert spent a decade with the International Financial Centre Vancouver promoting world wide business in Vancouver. He assists Formation in matters of business development and is responsible for ensuring that business ventures engaged in by the company are managed in the manner most likely to reduce risk for shareholders.
Jeffrey T.K. Fraser, B.Comm., LLB. – Corporate Secretary
Mr. Fraser has practiced corporate, securities and mineral natural resources law for over 25 years. He has, through Jeffrey T.K. Fraser Law Corporation, been legal counsel to Formation Metals Inc. since 1997, providing legal services relative to financings, corporate law and governance, and securities regulatory compliance.
E.R. (Rick) Honsinger, B.Sc., P.Geo. – VP Corporate Communications
Mr. Honsinger’s geological and technical background brings over 25 years of project management, exploration, IT, and I.R. related experience to the Company. He is directly responsible for Corporate Communications and related compliance and has managed and contributed to the success of numerous field and special projects during his past employment with Formation.
