Formation seeks to advance Sunshine project in Idaho

A $1-million private placement will enable cobalt explorer Formation Capital (FCO-T) to develop its Sunshine project in east-central Idaho.

The financing will consist of 4 million units priced at 25 cents each. A unit consists of one share and one warrant entitling the owner to buy an additional share at 25 cents for the first six months and at 50 cents for the following six months.

The Sunshine project centres on two cobalt deposits, Sunshine and Ram, which contain diluted proven and probable reserves of 974,700 tons grading 0.69% cobalt, 0.69% copper and 0.02 oz. gold per ton. An additional inferred resource is estimated at 1.4 million tons grading 0.63% cobalt, 0.52% copper and 0.017 oz.

The mineralization is stratiform and hosted in a folded sedimentary-tuff sequence in the Proterozoic Yellowjacket Formation. The primary ore minerals are cobalite and chalcopyrite.

A prefeasibility scoping study by Mine Development Associates (MDA) of Reno, Nev., envisions an initial 400-ton-per-day underground and flotation milling operation that would, by year three, ramp-up to 800 tonnes per day. MDA sees the mill producing a 10% cobalt concentrate and a 28% copper concentrate. Metallurgical tests suggest recoveries will exceed 90% for cobalt and 77% for copper. The copper concentrate would be shipped to a copper smelter, whereas the cobalt concentrate would be processed at an off-site, 50-ton-per-day, company-owned hydrometallurgical plant, which would produce cathode cobalt. Current proven and probable reserves allow for a mine life of just over four years, and by converting the inferred resource into minable reserves, the mine life could be extended to nine years.

The capital cost of the project is estimated at US$81.2 million, including a 20% contingency on most items. The cost include an estimate of US$6 million for bulk sampling, metallurgical testing, geotechnical work, a final feasibility study and permitting.

MDA’s base-case scenario projects an operating cost of US$7.31 per lb. cobalt, though smelting charges, hydrometallurgical plant costs and metal credits would add an estimated US$2.71 to that amount. The extended-case scenario projects a slightly higher operating cost of US$7.73 per lb., owing to the lower grade of the inferred material.

Based on a cobalt price of US$20 per lb., the base case has a net present value (NPV) estimated at US$8.3 million and an internal rate of return (IRR) of 13.2% at an 8% discount rate. The extended case, which treats the inferred resource as a minable reserve, has a NPV of US$80 million and an IRR of 31.7%.