Booming consumer demand for cellphones, laptops and iPads has helped a local junior mining company close a once-in-a-lifetime deal in Siberia.
In late July, Puget Ventures (TSX-V:PVS) shed its rookie reputation to become Global Cobalt Corp., a mine developer with a key cobalt project in Russia’s Republic of Altai .
By way of a reverse takeover, Puget has not only landed what it believes to be a very large cobalt deposit in an under-explored region of Siberia, but also a $400 million deal to develop infrastructure to support an eventual mine.
Erin Chutter, Puget’s 37-year-old president and founder, told Business in Vancouver her company has spent the last four years scouring the globe for large cobalt projects.
The company was coming up short when a shareholder mentioned a project called Karakul in a remote part of southern Siberia.
“It was almost disbelief,” Chutter said of the find. “We’ve been looking for primary cobalt assets all over the world … and then the elephant shows up in a place no one has heard of.”
The Altai Republic is a little-known region within the Russian Federation that shares borders with Kazakhstan, Mongolia and China.
Chutter said the region is looking to make the most of its mineral deposits, notably Karakul.
The company will need to drill the deposit to bring it in line with Canadian resource estimate standards, but Chutter believes it could become one of the largest primary cobalt deposits outside of the Democratic Republic of Congo, where the majority of the world’s cobalt is produced.
The metal is traditionally used in alloys that are manufactured into aircraft engines, but is increasingly being found in new high-tech gadgets such as cellphones and batteries.
Ongoing consumer demand for those technologies has prompted a few local mining companies to seek out cobalt-rich deposits to take advantage of this emerging market.
Even the London Metals Exchange (LME) caught on to the demand for the metal, launching a cobalt futures trading platform in February 2010.
The Republic of Altai is so keen on cobalt that it and the federal government of Russia have committed to spend $400 million over the next five years to help Chutter and her team build a mine at Karakul.
“The infrastructure funding is viewed as a way for Altai to leap over some of the growing pains of an emerging economy,” she said.
But her company isn’t the only local outfit to tap into the race for cobalt riches.
Vancouver-based Formation Metals (TSX:FCO) is about to begin building its cobalt project in Idaho.
Once in production, the mine is expected to supply 15% of North America’s demand for high-purity cobalt, which will be used in jet engines.
Jonathon Lee, an analyst with Byron Capital Markets, believes Formation is undervalued at $1 per share given the size of its project and its ability to serve a niche part of the cobalt market.
Despite the fervour for metal, he said that no two cobalt deposits are alike, with different types serving different markets.
That being the case, Lee said investors should continue to tread carefully. •
