Cape Lambert Resources (ASX:CFE) has executed a binding terms sheet to conditionally acquire 70% of an entity holding a copper-cobalt asset located in Zambia.
The entity holds an exploration licence that hosts an historical cobalt-copper rich tailings dump located near Kitwe in Zambia, known as the Kitwe Cobalt-Copper Tailings Project.
A Zambian government survey from earlier this month estimated the license to contain 17.72 million tonnes of tailings with Cape Lambert sampling grades of up to 0.43% cobalt.
Tony Sage, chairman, commented: “The acquisition of this significant high-grade cobalt-copper tailings dam emphasises the company’s commitment to becoming a significant player in the cobalt sector.
“There will be obvious synergies available to us with our recently acquired Kipushi Tailings Project located just over 170 kilometres away across border in the Democratic Republic of Congo.”
Kitwe Cobalt-Copper Tailings Project
The project is located 3 kilometres from the outskirts of Zambia’s second largest city, Kitwe.
This is within Zambia’s Copperbelt, one of the world’s largest producing regions of high grade cobalt and copper concentrates.
The tailings dam has a footprint of 750x 650 metres and is up to 15 metres in height.
The Zambian government’s resource department confirm its survey completed on 9 May 2017 estimated the license to contain 17.72 million tonnes of tailings.
Samples taken by Cape Lambert’s technical consultants also during May 2017 were assayed through SGS labs in Zambia and revealed cobalt grades of up to 0.43%.
Cape Lambert’s management have visited the site and met with senior government officials in order to accelerate its technical and legal due diligence review and joint venture discussions
Acquisition details
Cape Lambert has executed a binding terms sheet to conditionally acquire 70% of the shares in Zambian entity Australian Mining Company Zambia Limited (AMCZL), which is the holder of exploration licence 21853-HQ-SEL.
Cape Lambert is to pay US$25,000 on execution of the terms sheet.
On executing the terms sheet, Cape Lambert will have 6 months to decide whether it wishes to exercise an option to expend US$500,000 within 6 months from the date of exercising the option.
If Cape Lambert does not exercise the option, or fails to spend the US$500,000 within the 6 months option period, then the 70% shareholding will be returned to the seller.
The seller will also be entitled to up to three US$50,000 milestone payments should Cape Lambert exercise the option satisfactorily.
Analysis
This acquisition provides Cape Lambert with a number of operating synergies as it looks to establish an operating base in one of the largest cobalt and copper rich geological environment in the world.
It further strengthens Cape Lambert’s position as an emerging cobalt developer and producer at a time of record high cobalt demand and prices.
Cobalt spot prices are sitting at US$54,500 per tonne with demand set to grow due to the electric vehicle boom and the launch of Tesla Inc’s (NASDAQ:TSLA) cobalt-hungry battery gigafactory.
Cape Lambert shares have more than doubled in 2017, currently trading at $0.029.