Cobalt Blue Holdings Ltd (ASX:COB) has released a significant resource upgrade at the Thackaringa Project near Broken Hill, New South Wales.
The resource estimate now comprises 72 million tonnes at 852 parts per million (ppm) cobalt, 9.3% sulphur and 10% iron for 61,000 tonnes contained cobalt at a 500 ppm cobalt cut-off.
Compared with the June 2017 resource estimate the upgrade reflects a 31% increase in total tonnes and a 23% increase in contained cobalt.
Improvement in geological confidence
The resource upgrade has also provided increased confidence with about 72% of the resource now classified as indicated.
Cobalt Blue has submitted the draft geological report to its joint-venture (JV) partner, Broken Hill Prospecting (ASX:BPL), serving notice that the company believes it has fulfilled its Stage I JV requirements.
The news has been well received with Cobalt Blue's share price hitting a 12-month high of $1.24 on Monday morning, building on recent strong gains.
READ: Cobalt Blue reaches new 12-month high on back of compelling cobalt story
Looking forward, Cobalt Blue remains on schedule to deliver a pre-feasibility study (PFS) by 30 June 2018 and satisfy obligations under stage II of the agreement to secure a 70% beneficial interest.
Base case 10-year mine life
Crunching the numbers, Cobalt Blue expects that the company should be able to mine 5 million tonnes of resource annually for about 10 years.
Joe Kaderavek, chief executive officer, said: "Investors should look at the project as having a 10-year mine life in the indicated status.”
Development strategy may substantially extend mine life
Management is of the view that it could backfill with a looser resource to create a 20-year mine before going into production.
Kaderavek said: “The front of the cupboard should be full of high-quality, high-confidence ore and at the back there is another 10-plus years.
“The confidence of an indicated resource is a big tick, the scale is a big tick and that is only the first double punch because as we come into the PFS investors will see how we will process the ore, and how effectively we can do that.”
Completion of stage I commitment
Management highlighted that the resource work allows it to effectively step through stage I of the agreement with Broken Hill Prospecting.
The PFS is expected to be delivered by the middle of the year, implying a fairly quick step between stage I and stage II.
The company is collecting the above and below-ground test work to create the engineering backdrop.
88% of cobalt can be turned into a viable product
All the back-end, PFS work relies on the front-end geological work that has been done.
Kaderavek said: “Our results to date have been encouraging and we have demonstrated that we can take 88% of the cobalt that is in the ground and turn it into a viable product.
“By chasing one metal we are able to optimise the whole process to extract that one metal – we are not a by-product player.”