Formation Capital closes in on Idaho Cobalt

VANCOUVER — After eight years of red tape and US$14 million spent on permitting, Formation Capital (FCO-T, FCACF-O) is finally getting a green light for a high-purity cobalt mine 42 km west of Salmon, in central Idaho.

The U. S. Forest Service approved a modified mine plan for the Idaho Cobalt project that requires Formation Capital to get a national pollution discharge elimination system permit from the Environmental Protection Agency (EPA) and easements for private lands it would cross to build the mine.

“So long as Formation Capital meets the requirements as we set them out, then they will get final approval,” says Bill Wood, the Salmon- Challis national forest supervisor who signed off on the record of decision pertaining to Formation’s environmental impact statement (EIS).

In addition, Wood says, once the Forest Service publishes the decision on June 27, along with the EIS, interested parties have 45 days to file appeals against the project. Only those individuals and groups with standing — that is, those who commented in the 2007 EIS draft — can appeal.

Even with caveats to final approval, Wood calls the decision a big deal.

“It’s fair to say that this is a green light for the project,” he says. He agrees that it’s been a long process for Formation to get to this point — the closest they have been to pouring concrete in eight years — saying that getting approval between multiple agencies has been complex.

As his decision suggests, Wood thinks the project has merit.

“We’ve been working closelywith Formation, and think there is a real need for cobalt,” he says, adding that not only is there strong consumer demand for cobalt but a need for domestic supply. And ultimately, he says, the mine can go ahead with little environmental impact.

“We’re ecstatic,” says Rick Honsinger, Formation’s vice-president of corporate communications. “This record of decision represents years and years and years of permitting efforts as well as millions of dollars.”

Although he notes Formation must still wade through the appeals period, the company is working with potential appealers to resolve issues prior to the end of the 45-day period. Although he won’t comment on any specific issues, as the appeal process has yet to begin, he says, “I think most of them are resolvable.”

Wood adds that while appeals can be made and will be listened to, they will not necessarily stop the mine from going ahead.

The underground mine, known as the Idaho Cobalt project, would extract cobalt, copper, and gold from the Ram deposit. A feasibility study by Samuel Engineering reports that the deposit contains a reserve of 2.6 million provable and probable tonnes of0.559% cobalt, 0.596% copper and 0.4 gram gold per tonne. With a US$22.52-per-lb. price for cobalt and a 7.5% discount rate, the net present value comes in at US$87.3 million and the internal rate of return is 22.3%.

Formation projects that it would produce 3.3% of the world’s cobalt and meet 14.9% of North American demand.

The cobalt would be trucked to Formation’s Big Creek hydrometallurgical complex 250 km away, near Kellog, Idaho, where the company expects to be able to produce 1,525 tonnes of cobalt per year.

Honsinger says the company is targeting the high-purity portion of the cobalt market.

“And we would be able to produce cobalt metal that would be suitable for critical applications in the superalloy sector,” he says. “It’s a very limited number of companies that can do that.”

Sectors that use high-purity cobalt include the aerospace industry and battery manufacturers. For example, some new generation lithium-ion batteries used in hybrid electric cars require high-purity cobalt.

On the approval news, Formation’s share price rose 6% to close at 70. It has traded between 40 and 93 over the last 52 weeks.