A Canaccord Genuity report detailed the agreement.
A June 29 Canaccord Genuity research note indicated that earlier in the month, on June 15, Cobalt 27 Capital Corp. (KBLT:TSX.V; CBLLF:OTC; 27O:FSE) agreed to acquire 32.6% of cobalt produced at Vale’s Voisey’s Bay mine when it starts up in 2021.
“This is the second stream in the company’s portfolio, showing the market that it is continuing to execute its business plan,” wrote analyst Eric Zaunscherb. “This stream could offer investors more confidence in the direction the company is going.”
Based on this acquisition, Canaccord raised its target price on Cobalt 27 to CA$22.50 per share from CA$18. In comparison, the stock is currently trading at around CA$9.10 per share. “Our rating remains Speculative until cash flow commences,” noted Zaunscherb.
Zaunscherb relayed that the agreement calls for cobalt delivery to Cobalt 27 of up to approximately 850 tons per year for a total of 10.8 thousand tons, followed by 16.3% of the production. Cobalt 27 will pay $300 million ($300M) up front. After, “it will receive ongoing payments equal to 18% of the cobalt reference price for each pound of cobalt delivered, until Cobalt 27 has recovered the full value of the advance amount through Vale’s deliveries of finished cobalt,” explained the analyst.
Also, he noted in the report that Cobalt 27 announced on June 27 the closing of its bought deal financing in which it raised more than CA$300M. “Although the financing was slightly more dilutive than previously anticipated, the accretive nature of the stream offset dilution,” said Zaunscherb. The company will use a portion of those proceeds to fund the stream acquisition from Vale.
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Disclosures from Canaccord Genuity, Cobalt 27 Capital Corp., June 29, 2018
Analyst Certification: Each authoring analyst of Canaccord Genuity whose name appears on the front page of this research hereby certifies that (i) the recommendations and opinions expressed in this research accurately reflect the authoring analyst’s personal, independent and objective views about any and all of the designated investments or relevant issuers discussed herein that are within such authoring analyst’s coverage universe and (ii) no part of the authoring analyst’s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the authoring analyst in the research.
Analysts employed outside the US are not registered as research analysts with FINRA. These analysts may not be associated persons of Canaccord Genuity Inc. and therefore may not be subject to the FINRA Rule 2241 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Required Company-Specific Disclosures (as of date of this publication):
Cobalt 27 Capital Corp. currently is, or in the past 12 months was, a client of Canaccord Genuity or its affiliated companies. During this period, Canaccord Genuity or its affiliated companies provided investment banking services to Cobalt 27 Capital Corp.
In the past 12 months, Canaccord Genuity or its affiliated companies have received compensation for Investment Banking services from Cobalt 27 Capital Corp.
In the past 12 months, Canaccord Genuity or any of its affiliated companies have been lead manager, co-lead manager or co-manager of a public offering of securities of Cobalt 27 Capital Corp. or any publicly disclosed offer of securities of Cobalt 27 Capital Corp. or in any related derivatives
Canaccord Genuity or one or more of its affiliated companies intend to seek or expect to receive compensation for Investment Banking services from Cobalt 27 Capital Corp. in the next three months.
Disclosures are available here.