Cobalt Blue forfeits ownership of cobalt project after missed deadline; shares pounded
Mining & Resources
Mining & Resources
Cobalt Blue will not rush a final feasibility study on its Thackaringa cobalt project to meet a mid-2019 deadline – forfeiting its chance to grab full ownership of the project from its joint venture partner.
Cobalt Blue (ASX:COB) plummeted more than 20 per cent to 23c by mid-morning on the news. Its JV partner Broken Hill Holdings (ASX:BPL) suffered an 8 per cent dip to 4.6c.
A review of the project concluded that test-work, demonstration plants and feasibility studies would take up to two years, Cobalt Blue told investors.
The risk of attempting to fast-track such studies into a period of only a year to meet the final feasiblity timetable would “significantly impair the project and pose undesirable risk”.
“Subsequently, after a period of negotiations leading to no acceptable commercial outcomes, [Cobalt Blue] has now elected out of the earning period process of the farm-in agreement,” the company told investors.
“As a result, COB is unable to progress further within the earning period provisions in the farm-in agreement and has elected to stay within the joint venture as a 70 per cent partner.”
Broken Hill was considering the “validity, legality and practical implications of Cobalt Blue’s Notice”, the explorer said in a short statement to investors.
“Further information may be provided in due course.”
Cobalt Blue could have earnt up to 100 per cent of Thackaringa by hitting four milestones, shelling out $10.9 million in project expenditure before 30 June 2020, and paying Broken Hill $7.5 million in cash.
Broken Hill would also get 2 per cent profits of all cobalt produced.
Broken Hill has cash and cash equivalent of just $2.1 million at the end of June; Cobalt Blue had $9.7m.