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February 12, 2017

Capitalizing On Cobalt (Part 3) – Overlooked Opportunities!

Three excellent examples of how the market for Cobalt stocks is heating up and where it’s going, and a couple of quality plays (CSR and CPO) we find particularly attractive given their competitive advantages and very modest market caps ($5.3 million and $4.3 million, respectively).

1. First Cobalt (FCC, TSX-V) last week announced a doubling to $6 million of a recently announced financing of 7.5 million shares at 40 cents a share.  FCC has acquired privately-held Cobalt Industries which holds the South Lorraine Cobalt claim group (19.5 sq. km) adjacent to the past producing Keely Frontier mine in the former mining camp of Silver Centre, Ontario, 25 km south of Cobalt.  FCC closed at 69 cents Friday for a market cap of $20 million.

2. A total of 13 million shares from an October financing at 6 and 7 cents in Cobalt Power (CPO, TSX-V) became free-trading last week and were eagerly soaked up by the market with CPO gaining 4 pennies on the week to 13 cents (market cap $4.3 million).

3. CobalTech Mining (CSK, TSX-V) completed a hard dollar financing of $3 million at 20 cents per share at the end of December to advance its Duncan Kerr Project (past producer) in Cobalt.

Cobalt is called the “birthplace of Canadian hardrock mining”.   Silver was discovered in Cobalt in 1903 and the community quickly became world famous for its riches, far exceeding Klondike Gold towns!  Over 100 separate mines and prospects were active in the area in the early 1900’s.  Explorers followed the Cobalt, which they had little interest in back then, to get to what they really wanted – the exceptionally high-grade Silver (now, of course, technology is rapidly boosting the demand for Cobalt at a time when more than 50% of the supply of this strategic metal comes from an unstable source, the Congo).  Silver production continued at a high level until the mid-to-late 1920’s (with Cobalt as a by-product) when the price of the metal collapsed. 

Exploration expanded outward from Cobalt in the few years after the initial Silver discoveries and rich veins were found in other nearby areas such as South Lorraine Township and Gowganda, resulting in very significant historical production of both Silver and Cobalt – the last of which came from Agnico Eagle in the late 1980’s on a property now held by Castle Silver Mines (CSR, TSX-V).  That’s a company we alerted subscribers to last summer when the stock was trading around a nickel, and we reiterated the opportunity just recently following CSR’s January 31 news regarding impressive metallurgical recoveries of Silver and Cobalt from Castle as well as the Beaver Property, another past producer, just outside the town of Cobalt. 

In many ways, the Cobalt rush is simply starting to catch up with Castle Silver Mines which we view as the most advanced player in the district.  Funny how Mr. Market can sometimes overlook a few important things, if only temporarily.

Consider the following facts:

  • A total of $4 million has been invested at Castle and Beaver since 2011 (90% toward Castle)
  • CSR has immediate access to the main adit at Castlecritical!
  • Besides sourcing mineralization left behind in the adit*, old mine tailings, waste and other rock piles on the surface at Castle offer potential for initial near-term Cobalt and Silver extraction
  • CSR has already negotiated important agreements regarding Castle with First Nations and the Ontario government (a Closure Plan with the Ministry of Northern Development and Mines includes an advanced exploration permit)
  • Silver and Cobalt recoveries at Beaver of 98.5% and 70.5%, respectively, produced an extremely high concentrate grade of 11,876 g/t Ag and 10.5% Cobalt using a simple flotation process – the mineralized material surface rock sample was a composite from the waste pile assaying 2,064 g/t Ag and 5.6% Cobalt!
  • In 2013, a hand-cobbed 20 kg geological test sample from the historic waste pile at the Beaver mine had an average calculated assay of 7.98% Cobalt!
  • Veins with high-grade Cobalt come to surface at Beaver and have never been touched – again, the oldtimers were after exceptionally high-grade Silver

*Cobalt mineralization at the entrance of the Castle adit is evidenced by the pinkish alteration as seen below (source: July 2015 Technical Report).

Entrance to Castle main adit.

The Castle-Beaver double play will be fascinating to watch (CSR also has a legitimate Gold opportunity on part of the Castle Property).  Everyone agrees – this Cobalt district is going to be red-hot but it will also quickly separate the men from the boys.  On that score, CSR has a northern Ontario Cobalt King at its side, Frank Basa.  More on that part of the story in the coming days.

Cobalt Power Group Inc. (CPO, TSX-V)

What impresses us about Cobalt Power Group (CPO, TSX-V) is how this company, with a sense of urgency, has taken a very systematic approach to exploration at its properties acquired near Cobalt last September/October.  No doubt that’s due to Dr. Andreas Rompel, an expert in structural geology who has a wealth of industry experience including more than a decade with Anglo American.

Dr. Andreas Rompel, Cobalt Power Group President & CEO.

It’ll be interesting to see what an expert in structural geology, aided by modern technology, can accomplish in terms of new Cobalt discoveries in this past producing and prolific Silver-Cobalt Camp where much must have been overlooked many decades ago.

CPO’s first acquisition was the Smith Property consisting of a modest 8 claims covering 72 hectares 4 km southeast of Cobalt.  However, what’s significant is that those are patented claims (greatly simplifies getting to the drilling stage) featuring some limited underground development and mining immediately west of the historic Deer Horn mine.  From the early 20th century to the mid-1960’s, Deer Horn produced a reported 11 million ounces of Silver and 100,000 pounds of Cobalt.  A review of historic data by CPO has confirmed that the adjoining Smith Property contains the southeast extension of the veins previously mined at Deer Horn.  All the necessary geological components of accepted mineralization models have been identified at Smith…

Cobalt Power has systematically carried out compilation of historical data, mapping, surface sampling and ground truthing at Smith, along with airborne and ground geophysical surveys including a recently completed IP program with results pending.  The company will also be looking to rehabilitate the Smith Cobalt shaft and underground workings to allow mapping and sampling of the veins.  With vast new knowledge of the property, CPO has put itself in an excellent position to enjoy success with the drill bit this spring.

Highlights of the sampling carried out to date included 6 samples averaging an impressive 0.50% Co from a muck pile (loose ore that has been fragmented as a result of drifting along the veins) originating from historic underground workings.  The muck pile covers an area approximately 50 x 20 m with a thickness of 3 to 4 m and is estimated to contain 5,000 to 10,000 tonnes of crushed rock.  The samples are considered to be representative of the bulk of the material within the pile.

“These grades compare favourably with those found at top Cobalt-producing mines worldwide,” stated Rempel.  “Copper and Nickel grades were promising as well and, along with Silver, may be converted into additional credits.”

In addition, 2 rock samples collected from a vein uncovered while clearing vegetation around the historic shaft assayed a whopping 7.9% and 3.8% Co.

Through staking and some deal-making, CPO expanded its land package 10-fold to 712 hectares with claims contiguous to and surrounding Smith.

Note:  John and Jon both hold share positions in CSR and CPO.  Jon also holds a share position in CSK

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