Cobalt 27 Capital has acquired a net smelter return (NSR) royalty on future production from the Dumont nickel-cobalt project in Québec province, Canada, in a deal worth $70m.
The project is in the Abitibi region and contains undeveloped reserves of nickel and cobalt, with production expected in 2020.
The 1.75% NSR royalty is valid for a period of 60 years, with a provision for an automatic renewal for the same time period.
With cobalt is used in electric car batteries, the material is in increasing demand with the rise as car manufacturers such as BMW and Volkswagen (VW) are increasingly focusing on driving the production of electric vehicles in the wake of environmental issues caused by conventional fuels.
Under the deal, the royalty will be applicable over all metals, including nickel, cobalt, platinum, and palladium.
The project is owned as a joint venture between RNC Minerals and Waterton Resources on a 50:50 basis.
Cobalt 27 chairman Anthony Milewski said: “We are very pleased to add the Dumont NSR to our portfolio and the timing couldn’t be better. At a time when the DRC, which produces over 65% of the world’s cobalt, grows ever-more unstable, OEMs, battery manufacturers, and automobile companies are increasingly focused on sourcing nickel and cobalt in stable, conflict-free jurisdictions.
“As the second-largest nickel reserve and the largest undeveloped cobalt reserve globally, it ranks among the top battery metals projects in the world and one of only a few nickel-cobalt projects that will be built this cycle.”
Under a repurchase option, the Dumont JV has the right to buyback 0.375% of the total NSR in exchange for a payment of $15m.
Production from the mine will initially last for a term of 33 years, with potential for extending the life up to an additional 30 years.
The Dumont project is estimated to have proven and probable reserves of 1.18 billion tonnes of ore.
Cobalt 27 owns more than 2,982Mt of physical cobalt and manages a portfolio of cobalt royalties. The company is currently in discussions with relevant parties to secure additional cobalt streaming and royalty agreements.