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From the trading desk

Northern Cobalt

Future results + metallurgy + adding Li tenements + Co prices going higher

With the drilling campaign ending with the NT wet season, N27 will be releasing results through whats left of Dec and/or Jan 18. Given the price has been trading some 50% off its highs, I am looking at N27, with some interesting newsflow ahead. N27, fully diluted, is still only ~$26m, and there is plenty to keep interest levels high: -

- Cobalt (Co) price has moved from US$60k to $72k per tonne - nowhere near 2008 high of $115k!
- BMW saying we will need 10x's as much Co by 2025. They are joining the ever-growing chorus realising the reality of the Co shortage
- Stanton drilling should see JORC upgrade early in new year
- Other targets - scout drilling at Stanton SW/NE - Running Creek - Felix - Felix East to be released in coming weeks
- Metallurgy - what if the Co can be separated out through simple gravity/spiral - similar to DRC and mineral sands operations? And Capex was sub $10m - game changer
- Acquisition of Lithium Project (Arunta) east of Alice Springs  - to cheap to pass up - with pegmatites - and gives exploration option through wet season

For background, see my previous notes since the listing at $0.20, on the 24/Nov HERE and 10/Nov HERE and 30/Oct HERE

“We'll need 10x as much”
— BMW throws fuel on the cobalt price fire

 Cobalt Price 

One thing to note when you think about the price of Co, back in 2008, when issues hit the DRC (Democratic Republic of Congo, which supplies the majority of the worlds Co),  traders started hoarding supply, and the price went to US$115,000/t. That is some 60% higher than now, and in 2008, there was little to no Electric Vehicle (EV) demand to speak of.
 The Chinese are serious on EV

Forget Tesla - a Chinese start-up has just launched a EV at roughly half the entry price of the Tesla Model X. on sale in 2018. Watch this on Bloomberg 
 Stanton - drilling supports resource upgrade.

The goal of Stanton drilling is to bring resource into JORC 2012 and increase it. My guess (guess- nothing more) is that it increases from 500t tonnes at 0.17% Co, to 1.0 to 1.5 Mt holding roughly the same grade. It will depend on the cut-offs they use and depths they use to calculate a JORC. Metallurgy, from diamond holes, is the other unknown factor influencing the potential recovery calculations. 

Regardless, the drilling points to a good increase, but perhaps in the price.
 Other Targets - Scout drilling 5 other pipes

A 10Mt JORC at the current grades could make it a serious project. They are testing 17 targets within a 10km radius. The market should understand that the results coming from the other prospects are scout drill programs (below), and are really to get an understanding of how to position a future drill program. Hitting high-grade Co will be a bonus if it occurs. At Running Creek CRA drilled the copper, and the Co highs are being targeted from the GeoChem. In talking with the MD, the Geochem is similar across the prospects. Also, the radiometrics showed potassium highs at Stanton, that is a good sign for the Co, and these are appearing across other prospects. 

Still, only the drill bit will tell us what is there.
 Metallurgy - getting the Cobalt out!

A large amount of the Co within the resource boundary at Stanton is occurring in a Sandstone/Siltstone. As with a lot of the Co mined in the DRC, this may be able to be recovered via a relatively simple gravity/spiral separation. Somewhat similar to mineral sands operations. The Co is much heavier than the surrounding rock. I stress this is not yet tested, and the metallurgists will need to work this out. 

The big upside for N27, if it is viable, is that it is a cheap operation to set up. In discussing it as an option, it might be less than $10m in Capex. That is a potential gamechanger when looking at mining multiple pipes/ore bodies. 

To put it in some perspective. At Co US$72k/t. If Stanton JORC was 1mt at the same Co 0.17% grade, and you could recover 50% of the Co from that simple process, you have around 850t Co, which in A$ is worth ~A$80m in contained metal value. 

Again, all hypothetical, but you can see why the metallurgy is very important in this case. 
 Acquisition of Lithium Project (Arunta)

Highlights from the Arunta acquisition. 
  • Very Cheap - Northern Cobalt will issue 600,000 fully paid ordinary shares to Gempart (NT) Pty Ltd to acquire a 100% interest in the 9 (nine) tenements (subject to ministerial approval)
  • 100% interest in nine (9) prospective tenements acquired in the Northern Arunta Pegmatite Province, Northern Territory and applications made for four (4) adjoining tenements
  • Prospective for lithium and strategic metals, Li-Cs-Ta, REE (La-Ce)-Y-Nb and Co, used in the production of electric vehicles
  • Acquisition is complimentary to the Wollogorang Cobalt Project and allows exploration during the wet season; geological mapping and rock chip sampling at the Arunta Project will commence early in 2018
In talking with the company, they will only have to commit circa $100k to get a program ready for mid 2018. So no drain on the finances and the work will not move focus from the Co. Also, one of the interesting things with the tenements they contain a large number of mica mines, which according to some suggest large pegmatites (source rock for Li). 

It is a greenfield prospect, but at that price, a great deal for shareholders.
 N27 - My junior Co Peers

(CLICK to Open)
 Important Note and Disclosure

I own shares in N27 and N27O. Wentworth has had no corporate involvement in N27. I and clients would benefit from a rise in the share price on N27. This is not research or a forecast for N27. This is a desk note discussing the company and thematic. Please read the full disclaimer below. N27 is to be considered a highly speculative stock. This note goes to a general list of readers, and should not be considered to be written for any individual recipient.
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Wentworth Corporate Finance
Scott Griffin
d: +61 2 9119 6037
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d: +61 2 9119 6034

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