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Formation Metals to hold off on plans for flagship Cobalt mine in light of weaker prices

Published: 15:31 02 May 2013 BST

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Weak cobalt prices have forced Formation Metals (TSE:FCO) to stay its plans for underground development at the flagship Idaho Cobalt project (ICP), the company announced Thursday.

The 100 per cent owned property, site of a green-field underground cobalt mine, is home to a high-grade primary cobalt deposit, which the company describes as “metallurgically favourable for the production of high purity cobalt metal”, suitable for use in the manufacture of rechargeable batteries used in hybrid and electric vehicles and for use in such applications as jet engine turbines in the super-alloy sector. 

The mine was forecast to produce roughly 3.3 million pounds of super-alloy grade cobalt, which would represent almost 4 per cent of world cobalt production, a development all the more significant for the U.S., which despite being the world’s largest consumer of cobalt is dependent on imports, having no domestic primary cobalt production.

As recently as this year, the Vancouver–based mineral exploration, mine development and refining company announced the minesite at the project as being “fundamentally prepared to commence underground
development (contingent on successful conclusion of mine financing).”

The change in plans is being attributed to a fall in the price of the metal as the company’s plans for the mine were predicated on a cobalt price of $22.52 per pound.

"Although cobalt prices have recently exhibited signs of recovery, the weak prices seen over the last year, coupled with enhanced adversity to risk by potential financiers in these turbulent markets has made financing costs unattractive for the further development of the ICP at this time," stated CEO Mari-Ann Green. 

"We have been working hard to reduce capital costs and increase recoveries at the ICP and we will be ready when the markets recover. This way we can preserve Formation's cobalt, copper and gold resources until economic circumstances merit their extraction.

"In the meantime we will pursue those projects that have the best likelihoods of realizing cash flow in the shortest time possible under current market conditions. The ICP is a valuable asset and we intend to preserve it for future development once conditions improve."

Formation’s plans call for an increase in cash flow via a focus on advancement of the business from the Sunshine Precious Metals Refinery, an established precious metals refinery located at the company’s Big Creek
Hydrometallurgical Complex in Idaho’s Silver Valley, which currently processes copper/silver and gold concentrates in addition to refining silver doré. 

The company is also keeping a weather eye on finances, with the continuing elimination of all non-essential capital and operating spending, having a target of significant savings over the next year. Cost savings measures have reduced general and administrative costs via cuts to salary and staff positions.

Cobalt was trading at US$275 per tonne on the London Metals Exchange today, part of a recent continuing upward trend.

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