Fortune closes second tranche of financing as NWT road permitting gets under way

TORONTO (miningweekly.com) – While TSX-listed project developer Fortune Minerals has closed the second tranche of a C$1-million financing for general working capital purposes, the transportation department of the Northwest Territories government (GNWT) has submitted permit applications for the construction of a public highway to the community of Whati, about 50 km from the company’s Nico gold/cobalt/bismuth/copper project, Fortune reported on Monday.

The GNWT had developed and submitted the required application package, with the support of the Tlicho government, to the Wek'èezhìi Land and Water Board, for a 94 km all-season road that would follow a former all-land winter road route to significantly reduce construction costs.

The road development would count in favour of Fortune’s shovel-ready Nico project, which had already received its environmental assessment approval for a mine and concentrator, as well as a spur road from the public highway to the mine.

As part of the financing, Fortune had placed a total of 14.28-million newly issued common shares to arm's length private investors at a price of C$0.035 a share.

MARKET UPDATE
Meanwhile, Fortune provided a cobalt market update, citing recent developments in the electric vehicle (EV) space as a positive long-term outlook for some of Nico’s key commodities.

According to Fortune, the cobalt market had had compound annual growth of about 5% to 6% for the past two decades. In 2015 it grew by 5.4%, more than double recent global gross domestic product growth of 2.4% for the same period.

Market growth had been driven mainly by the demand for cobalt in chemicals used to make lithium-ion rechargeable batteries needed to power portable electronic devices, EVs and stationary storage cells. Battery chemical demand increased nearly 12% in 2015 and now accounted for about half of the world's yearly cobalt output. Double-digit growth of cobalt used in rechargeable batteries was expected to continue for the foreseeable future, the company advised.

Supporting the positive outlook for cobalt, EV maker Tesla Motors made automotive history on March 31 with the launch of its Model 3 EV, receiving $325-million in deposits for 325 000 pre-orders of these cars in the first week. If these orders were converted into yearly sales, production of the Tesla Model 3 would be comparable to the top-selling vehicles in the US.

“Mainstream interest in EVs has been validated by thousands of people lining up to make a $1 000 downpayment for a car that will only be available in late 2017,” Fortune stated.

Meanwhile, Fortune advised that cobalt market analysts were projecting a supply deficit this year, owing to the increased demand. As demand continued to grow, cobalt supply was under pressure as it is a byproduct of base metals mining products, such as nickel and copper, and some base metals mines had recently closed owing to low primary metal prices.

The risks to cobalt supply were further exacerbated by the geographic concentration of supply. Sixty-five per cent of mine production was currently sourced from the Democratic Republic of the Congo, a politically unstable country, while 52% of refinery production took place in China. This risk was recently addressed in the Assessment of Critical Minerals report to the US Congress, which identified cobalt as a critical mineral in a supply chain that was vulnerable to disruption, and that served as an essential function in the manufacture of a product, "the absence of which would cause significant economic or security consequences".

According to Fortune, Nico was well positioned to become a reliable, vertically integrated North American source of battery-grade cobalt chemicals with supply-chain custody transparency and tax advantages under the North American Free Trade Agreement. Earlier this year, the company delivered an ultra-pure cobalt sulphate sample for testing by a potential customer. Discussions for offtake agreements and project financing were ongoing.

The Nico deposit also contained a significant gold co-product from more than 1.1-million ounces of gold in its mineral reserve statement, as well as 12% of global bismuth reserves. Bismuth is a metal used in a broad range of industrial applications, particularly in the automotive and pharmaceutical sectors.