Meteoric Resources all set for a re-rating, ahead of drilling on the Mulligan cobalt project
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13:29 29 May 2018
Meteoric Resources has high grade cobalt in a safe jurisdiction
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The cobalt price continues to benefit from supply disruptions and rising demand
It’s worth a moment of reflection to consider how the valuation of rock that contains cobalt compare to other types of ore, now that the cobalt price is hovering at around US$100,000 per tonne.
After all, at these levels, ore that grades 2% cobalt can now be considered equivalent to gold ore that grades as much as 40 grams per tonne. READ: Meteoric Resources 'back on the ground' and keen to get drilling in Canada
Seasoned mining investors will know that such gold grades are exceedingly rare, and cobalt grading at 2% isn’t exactly thick on the ground either.
But Meteoric Resources (ASX:MEI) can go even better than 2%. Historically mined grades at its Mulligan project in Ontario averaged 10% cobalt and at times ran as high as 19%, with associated gold, silver and nickel.
Because the veins in which this ore occurs are very thin there isn’t that much of it, but what there is is likely to be very rich rock indeed.
“These things per tonne are incredibly valuable,” says Meteoric’s managing director Andrew Tunks.
He’s relatively new at the helm of Meteoric, but has no doubts at all about the potential of the portfolio of assets inside the company.
“It’s cobalt, cobalt and cobalt,” he says.
Demand for cobalt continues to wax strong as battery production continues to rise and the main source of supply, from Congolese mines, remains constrained.
Not surprising then that Tunks has been picking up more Canadian cobalt projects to go with Mulligan while he’s been waiting for the snow to thaw so that his teams can get mapping. Recent acquisitions have included Lorrain, nine kilometres to the south of the Ontario town of Cobalt, and Beauchamp, 40 kilometres north.
But now that the snows have gone, work on Mulligan is getting underway, and is likely now to be continuous.
At the moment it’s geophysics, but it won’t be too long before a drilling campaign gets underway.
“Our goal is to start drilling in July,” says Tunks.
The plan is to spend around C$2mln to C$2.5mln on the exploration campaign this year, and it’s “not impossible,” says Tunks, that the company might end up with a maiden resource by then.
However, he cautions that at this stage it’s really too soon to say exactly where the company will be in six months’ time. So much depends on what sort of core comes out of the ground.
But what is clear is that once the company starts putting out results from Mulligan and other prospects, market interest will pick up.
Other cobalt companies that have initiated drilling programmes on prospects have seen significant re-ratings on the Australian market, and in Canada too. Meteoric is likely to be no different.
After all, there aren’t too many easy, high grade cobalt projects to be found in the world. Production from the main sources in the Democratic Republic of Congo is fraught with difficulty, while the cobalt in a lot of the Australian projects is contained in laterite ore, which is famously a challenge in terms of metallurgy.
“Finding a good deposit in the First World is really the ideal,” says Tunks.
Potential buyers are of a similar mind. There are reports that Apple is considering entering the cobalt market in a manner similar to the way tech companies have moved to secure lithium supply.
That kind of news only serves to heighten investor appetite, and means that all eyes will turn to the results from Milligan when they start coming out in a month or so.
After that, the future is open. There may be a resource by the end of the year. And in the event of success, there may be a dual listing in Canada too.
But as always, the drill bit will have the final say.
MEI Price at posting:
3.3¢ Sentiment: Buy Disclosure: Held
