Cobaltech (CSK.V) crushes the market, jumps 44% as Cobalt, Ontario heats up

04/29/2017

“Your share price is down a little,” I said a few days ago to Bruce Bragagnolo, Chairman of Cobaltech Mining (CSK.V). “What gives?”

“Well, we did have an issue,” he replied. “We announced an LOI to purchase a refinery and when that didn’t proceed and we had to announce, unfortunately, though we were all the way down to formal documentation, that it wasn’t going to happen as planned, that affected our share price.”

“There was speculation about takeovers out there,” he added. “A lot of activity.”

The LOI hiccup came at the wrong time. Cobalt prices are cranking right now, and the area Cobaltech has landed in, around the town of (no, seriously) Cobalt, Ontario, is host to a growing number of very serious players.

Cobalt Power Group (CPO.V) is the earliest stage play with the biggest percentage upside. First Cobalt (FCC.V) has a big old past producing complex with shafts and ramps and old silver mines that produced heavily and could be easy to explore. LiCo Energy Metals (LIC.V) has been working its property hard and fast, not even waiting for the snow to melt. It’s a genuine area play, and while all that is going on, the world’s cobalt is coming out of The Congo, where conditions aren’t always so progressive and the workers not always above school age.

So Cobaltech’s LOI was a gut punch at a time when every advantage was needed.

But Bragangolo couldn’t worry about that, for two reasons. First, he said, the story isn’t over. He still hopes to get that refinery going. The second reason he’s not bothered is because, frankly, he has work to do.

It’s a common thing that, in the junior markets, good news will only get you so far, but bad news, or a delay of expected good news as it may also be, can see a much larger downward move.

Friday trading opened with Cobaltech in heavy ‘oversold’ territory, and I spoke off the record to a handful of big shareholders about why they weren’t working to change the course of the stock price.

“If people want to sell that stock to me cheaper tomorrow, I’ll wait for tomorrow,” said one. “Not my job to help weak hands. I can see what’s there.”

Early Friday, the market started figuring that out..

Cobaltech traded hard all day, blowing through some early churn before the rubber hit the road and the share price started gathering steam around noon. Up it went, again and again, until it came to rest 44% higher than it had started, at one point having moved from $0.125 all the way to $0.195 before easing to $0.18.

The stock is still cheap. But the truck has started backing up.

For those who don’t know what Cobaltech is, it’s a different play to the other Cobalt, Ontario campers. Cobaltech owns eleven past producing mines in the area, mines that were doing big business a long time ago, when cobalt was about as much use as a rice paper swimsuit.

Back then, they sold what they could, but mostly they just hauled it to the side so they could get at the silver, of which there was plenty. The town was named Cobalt because, when the railroad came through, it had to cut through acres of blue rock. The silver lay underneath. But not far underneath.

“I think the biggest asset is we have eleven past producing mines,” says Bragagnolo. “And all of that blue rock has been pulled out of the ground, so that’ll keep the recovery costs way down. We only have to assess the surface, so we can do a lot of exploration just by looking at the rock that’s out of the ground from previous operations. These were old surface mines, they were outcropping silver veins, basically open cut in the ground, they’re just wide open channels really that you can see walking around.”

“We just need to get the exploration package going and see what we’ve got. We have rock piles, dumps, tailings, an existing stockpile, and old mine that did have a historic resource on it of silver and cobalt. We just have to wait for the snow to get off the ground and see.”

In a situation where there’s a genuine rush to get producing while commodity prices are on a tear, Cobaltech’s in a really good place to push forward quickly. There’s no digging to be done, they can just backhoe through the rubble, test at will, and when they find high grade, track back to where it came from. That’s going to save millions, and perhaps years, off the usual track to production.

And it doesn’t hurt that they’re near a population centre.

“The town of cobalt is right there; there’s lots of infrastructure, power, road access, a very willing workforce that really wants to see the area develop again.. It’s been a long time since that town was on the map in a mining sense, so they’re really looking forward to getting it on the map again.”

Getting that refinery would be the sugar on top, but it’s not the guts of the game plan.

“It’s become a hot area,” says Bragagnolo. “There might be some companies who, if we get the mill going, would be looking to use that, but that’s not our focus. We do have an existing mill but it would produce a concentrate, not a cobalt salt. It would be a good addition if we can get it.”

A good addition to the eleven mines they have. Did we mention that?

eleven

Wrong ‘eleven’.

What it all comes down to is, Cobalt, Ontario is North America’s cobalt camp, and whether it’s Cobaltech or one of the other companies in the area that hits the first clump of blue, it’s going to rise all boats.

Says Bragagnolo, “Good results from anybody in that district will bolster the stock price of all companies there. The companies that will advance assets in the most positive way will do best because there are very few places that have cobalt.”

“I don’t know of anybody who is in production right now, I know there’s been some work done in Idaho but that’s a very limited area there, so what better place to go than Cobalt Ontario, the town named after blue rocks? […] We’re probably, just from the fact there were eleven old mines there, we’re probably talking millions of tons [of material on the ground]. We don’t know the grade right now, just talking about rock that was extracted. It’s early days.”

Adding to the general wave of optimism is recent moves by the Trump Administration to secure sources of strategic metals. Bragagnolo points out that cobalt is used in a wide number of electronics applications, and the Chinese control most of the production in it and rare earths, “So I think there will be a real move to get to a place where that supply chain is not going to be interrupted.”

To that end, Cobaltech isn’t settled on their current assets. The boss wants more.

“We’re always very interested in acquisitions,” he says. “”I think there’ll be some consolidation in the district.”

Which makes the current stock price less a value pick than a steal.

— Chris Parry

FULL DISCLOSURE: Cobaltech is an Equity.Guru marketing client

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