Last August, Glencore Canada Corp., a unit of Swiss mining giant Glencore plc (LSE: GLEN)(OTC: GLNCY), agreed to sell the mineral rights for patent #585, a 16.2-hectare cobalt property in Bucke Township, Ontario to LiCo Energy Metals (TSX-V: LIC)(OTCQB: WCTXF). Per the deal, LiCo made an upfront cash payment and owed another $350,000 within six months of the closing date, a payment that the company said Monday morning has now been made, giving LiCo full ownership to the mineral rights at the project better known as Glencore Bucke.
For LiCo, the purchase was a strategic, as Glencore Bucke adjoins its Teledyne cobalt project, giving the company one of the largest cobalt land packages in the region. In the early 20th century, the adjacent Agaunico Mine produced 4.35 million ounces of cobalt and 980,000 ounces of silver. A cobalt-first mine is a bit of an anomaly as the metal is generally produced as a byproduct of other mining activity, frequently copper and nickel.
Drilling at Teledyne indicates the cobalt mineralization from Agaunico extends into LiCo’s property. Exploration at Glencore Bucke, including 36 diamond drill holes, have outlined two vein systems hosting “significant cobalt and silver,” one of which is theorized to be an extension of a vein from the Cobalt Contact Mine to the north of Glencore Bucke.
Cobalt, a critical metal in the production of rechargeable batteries, has seen a spike in prices in in the last year-and-a-half mainly due to the growing investment in electric vehicles, driving up demand for the finite resource. A potential supply shortfall has major manufacturers and cobalt consumers like Apple (NASDAQ: AAPL) and Volkswagen (OTC:VLKAY) scrambling to lock-down long-term supply agreements, including with companies like Glencore, one of the world’s biggest cobalt producers.
LiCo believes one day it may be selling the cobalt from its properties to Glencore, as the terms of the acquisition state that ahead of commercial production, LiCo will enter an off-take agreement with Glencore “for all ores and/or concentrates produced from the [Glencore Bucke] Property and/or the Teledyne Property.” Glencore also made sure it had the option to buy back into the project provided LiCo exploration proves that there is at least $100 million in economically recoverable minerals, at which point Glencore agreed to pay LiCo three times the amount it spent to prove the reserves dating back to the original contract date last year for 51% of a joint venture between the two companies.
Shares of LIC, which have gained more than 50 percent since hitting a low of 8 cents in November, opened trading Monday even at 12.5 cents.