Cobalt revival: former mines hold out promise for Castle Silver Resources

Mining, News — By on April 13, 2017 at 9:44 PM

Frank Basa of Castle Silver Resources.

Cobalt revival: former mines hold out promise for Castle Silver Resources

By James Brewer

In the minerals sector, cobalt was once a “second class citizen.”

The blue metal was often considered a “waste” product from silver mining and worth next to nothing. One mining executive used the cobalt tailings from a silver pit to pave a road to his home.

In the last couple of years, the price of cobalt has shot up because of demand from the battery and automotive market, in addition to its use in jet engines, paints, glass and ceramics.

Frank Basa, president and chief executive of Castle Silver Resources Inc, a development company listed on Toronto’s TSX-V exchange, has been in London to brief investors on plans to redevelop former mines.

The company’s interest in reviving the former Castle, Beaver and Violet mines in eastern Ontario reflects a search by many companies for viable new cobalt deposits.

Castle and Beaver were mined only for silver, leaving cobalt stockpiled. So recent is the upsurge in technological use of cobalt that the company bought the property with the intention of developing it for silver extraction. Now, despite the word silver being in the company’s name, it is likely that it is the cobalt aspect that will drive the share price.

A recent note from equity researcher and consultant Christopher Ecclestone in the Model Mining Portfolio published by his company Hallgarten & Co was headed Cobaltmania.

Commenting on the wider outlook, Mr Ecclestone wrote: “The price for cobalt has been on a tear, dragging along prices of cobalt ‘stories’ in its wake. While much of the move has been attributed to the lithium ion battery dynamic we would note that long term underinvestment in the metal (particularly in development of primary mines) and the closure of cu-co [copper-cobalt] mine capacity by Glencore during its late-2015 near-death experience also played a part.”

Cobalt amid the silver.

Mr Ecclestone stressed that the cobalt supply side “is totally inelastic because of the lack of ‘turn-on-able’ mines either in the primary or secondary category.” On the back of strong demand from the fast-growing battery tech sector, the price of cobalt has risen 140% to $24 per lb in 12 months.

Castle Silver’s project is at a formative stage, although with some of the key permits granted including agreements with the First Nations in its area. Some 3,000 tonnes of cobalt could be recovered.

The 33 sq km Castle property including three former shafts and adit (horizontal access) is northeast of the community of Gowganda, in the middle of a previously producing silver-cobalt camp. Between 1917 and 1989 a total of 22.25m ounces of silver was produced from the No. 3 shaft. Castle’s Beaver and Violet mines are near Cobalt.

In the area, more than 50m ounces of high-grade silver were produced in the early 1900s. This was when the district as the cradle of Canadian hard-rock mining drew international attention. This established an investment environment for large-scale mining of gold and copper in the first half of the 20th century.

Cobalt was discovered in 1884 at the site of the future Agnico Eagle mine, and silver in the area in the summer of 1903, during the construction of a rail line. By 1908, the camp was considered the largest producer in the world of silver and cobalt. Cobalt was valued to the extent that a town on the Ontario side of the border with Quebec was named after the mineral.

As a rare cultural landscape of remains and buildings associated with the evolution of hard rock mining, Cobalt was designated a Parks Canada National Historic site in 2002.

Mr Basa said that the content of deposits “is chosen by Mother Nature: it is either high grade silver, low grade cobalt in the same vein, or low grade silver, high grade cobalt.”

While the Democratic Republic of Congo is the major supplier globally, there are concerns about the employment in some operations of child labour. In 2016, Amnesty International produced a video contending: “Given that more than half the world’s cobalt comes from the DRC, that one fifth of it is extracted by artisanal (or informal) miners, and that around 40,000 children work in southern DRC where the cobalt is mined, there’s a chance that our phones contain child labour.”

In mining terms, cobalt is a metal “for the big boys.” Glencore is the biggest single producer, followed by Freeport McMoRan. In 2018 Glencore is due to bring its Katanga mine in the Democratic Republic of Congo back on line after a $430m overhaul.

Mr Basa, who has had 30 years in the gold mining and development sector, and is familiar with the Castle and Beaver deposits as a metallurgist and mill manager for Agnico Eagle from the 1980s, said his company has so far spent $4m on drilling. Mr Basa says that at the properties, preliminary metallurgical tests showed excellent silver and cobalt recoveries, 98.5% and 70.5% respectively, and very high grades of concentrate.

Castle has just completed a private placing of $950,000.

In June 2016, Castle signed an agreement with another Canadian junior company Granada Gold Mine Inc, as a 50% partner to advance what is called the Castle Golden Corridor Zone discovered during surface sampling.

The agreement allows Castle Silver Resources to focus on its cobalt strategy for its Beaver and Violet properties, and silver and cobalt on its Castle Silver property. The former Beaver mine produced 7.1m ounces of silver and 139,472 lb of cobalt from 1907 to 1940.

Metallurgical testing of tailings and waste rock samples is underway to determine the most effective method of extracting silver, cobalt and other metals left from previous mining.

www.castlesilverresources.com

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