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Formation Metals Inc. – North America’s Only Near-Term, High-Purity, Cobalt Miner

Formation Metals Inc.

Overview

Formation Metals Inc. (TSX:FCO,OTCQX:FMETF) is an exploration and development 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.  As at Oct, 2013, the Company is debt free and coupled with the recent sale of a non-core asset for US $12 million leaves the company with a strong cash position. The Company’s Primary asset, located in the mining friendly state of Idaho, is the 100% owned, fully NEPA permitted Idaho Cobalt Project (“ICP”) which is comprised of the mine and mill near Salmon, Idaho and the current proposed Cobalt Production Facility (“CPF”) for refining ICP mine concentrate into high purity cobalt metal, with secondary copper and gold credits. The ICP is a unique, high Grade, primary cobalt deposit which is now prepared to commence underground development (contingent on successful conclusion of mine financing).

The Company owns a 16 acre industrial zoned package of land, located near Kellogg, Idaho suitable for the placement of the Cobalt Production Facility. The Company is also investigating other locations for the refining facility optimally located closer to the mine site and a railhead to reduce the operating expenditures of the ICP.

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
  • Committed to sustainable mining

Key Properties

ICPLocationNov2013

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

 

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

J. Paul Farquharson, B.B.A. – Interim Presiden & CEO
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.

Marc Tran, CPA, CGA, B.Comm,, B.A. – CFO
Prior to being appointed to CFO, Mr. Tran was the Controller for Formation Metals since October 2011. He has over 12 years of experience in corporate finance, financial management, and regulatory compliance with public companies. He has previously served as Director and CFO for other public companies with projects in mineral exploration, development, and production in Canada, US, Mexico, Central and South America.

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 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 18 years with Formation.

Directors

Robert Quinn, B.S., B.A., J.D. – Chairman
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.

David Stone, Ph.D., M.B.A., P.E., P.Eng.
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.
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
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.

Gregory Hahn, P.Geo., B.Sc.
Appointed to the Board in May of 2013, Mr. Hahn has over 30 years of mining industry ex-perience and is currently the President and COO of Canamex Resources Corp. He has served on the board of numerous companies including Marathon PGM Corp. and Metalline Mining where he was Director and Interim President & CEO. Mr. Hahn was also former District and Senior Geologist and Chief Mine Geologist with Noranda (now Xstrata) on the Blackbird Project, located adjacent to the Company’s 100% owned ICP. Mr. Hahn is considered an expert on the Idaho Cobalt Metallogenic Belt.

Scott Hean, B.A., MBA, ICD.D
Mr. Hean has over 35 years of experience in banking and finance. He is currently the Chief Financial Officer of Quaterra Resources Inc., a TSX-V and OTCQX listed junior mining and exploration company, and is a member of the Audit and Chair of the Compensation Committee of Sabina Gold & Silver Corp, a TSX-V listed company. Mr. Hean served as Senior Vice President and Managing Director with the Bank of Montreal, responsible for natural resources sector financing in North America. He also served with J.P. Morgan of New York, primarily financing junior oil and gas companies. He has served on numerous not-for-profit Boards including Outward Bound Canada and BC Children’s Hospital, and is currently Chair of the Bill Reid Trust. Mr. Hean graduated from Simon Fraser University in 1973 and from the Ivey School of Business in London, Ont. in 1975. He also graduated in 2006 from the Institute of Corporate Directors, Directors Education Program.

David Christie, P.Geo.
Mr. Christie has 27 years of experience in the resource sector. He is currently Vice President with Goodman & Company, Investment Counsel Inc., a wholly owned subsidiary of Dundee Corporation. He is a Director of Eagle Hill Exploration Corp (EAG-TSXV) and Condor Precious Metals Inc. (a private company). Prior to joining Goodman and Company, Mr. Christie was a highly ranked gold and precious minerals equity analyst at TD Securities and Scotia Capital. He also has extensive experience in the North American mining industry working as a professional geologist exploring for gold, base metals, uranium and platinum group metals including underground experience. Since joining the Dundee organization in 2011, Mr. Christie has taken on a merchant banking and investment analysis role. Mr. Christie is a member of the PDAC convention planning committee. He received a Bachelor of Science in Geology from McMaster University in 1986, is a Professional Geoscientist with APGO and NAPEG, and a fellow of the Geological Association of Canada.

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.