Idaho Cobalt Operations

In September 2020, Jervois announced completion of an updated Bankable Feasibility Study (the “BFS”) for ICO in the United States. Since acquiring ICO in mid-2019, Jervois has increased confidence in its ability to successfully bring the site into commercial production.

Jervois’ technical quality, rigour and conservatism applied in the BFS confirmed the uniqueness of ICO in its ability to become the only source of domestic cobalt supply in the United States.

The BFS confirmed the potential of ICO to establish a near-term, low-cost cobalt-copper-gold mine, with significant opportunity to increase the mineral resource and extend mine reserves once mining commences. Jervois’ January 2020 updated Mineral Resource Estimate was integrated into a revised mine plan and mining reserve, together with design of the metallurgical plant and final infrastructure requirements.

Key drivers for development of ICO was Jervois’ recognition that incorporating flexibility in design to enable a final investment decision to be undertaken on either bulk or separated cobalt and copper concentrates, together with potential concentrate roasting or calcination, had the greatest potential to enhance off-take negotiations and underpin an economically optimised operation.

The BFS is based upon design of a concentrator producing a cobalt-copper bulk concentrate with gold credits. Jervois also completed engineering design and costing, flowsheets to produce separated cobalt and copper concentrates, and calcined (roasted) cobalt concentrate as part of the preparation of the BFS. It has received off-take offers from potential customers for a variety of products to support economic trade-offs between flowsheet alternatives. With the recently announced acquisition of the SMP Refinery, Jervois is moving ahead with construction of a flowsheet based on separated concentrates, with the cobalt concentrate (containing gold) to be refined in Brazil, and the copper concentrate to be placed with customers in North America

The BFS was managed by a joint team of DRA Global (“DRA”) and M3 Engineering (“M3”), with the latter headquartered in Tucson, Arizona. Input was obtained from specialised North American contractors across mineral resource and reserve estimation and audit, mine design and scheduling including mine rock waste and underground paste fill pump and placement / scheduling, metallurgical testwork and laboratory management, process plant and engineering design including site infrastructure and dry stack tailings, together with capital and operating costing. The study was prepared in accordance with both the Australian JORC Code 2012 Edition (“JORC”) and Canadian National Instrument 43-101 (“NI 43-101”), the latter of which Jervois published on SEDAR in mid-November 2020.

Key technical outputs from the BFS are summarised in Table 1 below:

Production rate1,200 stpd oreNPV (@ 8% real post-tax)1US$95.7 million
1,090 mtpd ore
Mine life7 yearsIRR (nom. post-tax)140.60%
Capital cost1 US$78.4 millionEBITDA2,5US$54.8 million per annum
Operating cost2US$7.45/lb payable Co (post credits)EBITDA margin252%
Cobalt price3US$25.00/lbCobalt in conc. (contained)21,915 metric tonnes per annum
Copper price4US$3.00/lbCopper in conc. (contained)22,900 metric tonnes per annum
Gold priceUS$1,750/osold in conc. (contained)26,700 oz per annum

The BFS is based on extracting 2.5M metric tonnes of ore at an average grade of 0.55% Co, 0.80% Cu and 0.64 g/t Au. Initial mine life within the BFS is 7 years, as Jervois sought to maximise initial operating margins, economics and IRR’s. Once underground access has been established and drilling can occur more cost effectively than from surface, unconstrained by seasonality, Jervois has confidence that further resource will be converted to mine reserves (only 60% of the Measured and Indicated Resource has been included in the mining reserve at this time, and none of the Inferred Resource). In addition to known mineralisation, there exists significant potential for additional tonnes along strike and at depth.

The BFS mine plan does not incorporate any uplift in ultimate metallurgical recoveries associated with processing concentrate at SMP Refinery, and its consequential impacts on reserve cut off and potential extensions to life of mine. Historical cobalt recoveries percentage at SMP Refinery have averaged in the mid 90’s over its operating life.

The process route at ICO is well defined and tested using standard existing technologies. Projected metallurgical recoveries to bulk concentrate once operations are ramped up and stabilised are 91.1% for cobalt, 95.5% for copper and 84.9% for gold. Recoveries are dependent on the feed grades, feed grade ratios of Cu:Co, and targeted concentrate grade quality (with 10% cobalt being targeted).

Operating costs will be extremely competitive (US$7.45/lb of payable cobalt after by-product credits), with the mine being the first and only United States supplier of ethically sourced cobalt units into the North American market.

In November 2020, Jervois announced it had elected M3 as lead engineer for the detailed design and site early works for ICO.

M3 is headquartered in Tucson, Arizona and was selected as the preferred engineering contractor due to its work on the BFS. M3 also has extensive construction experience and project delivery in the United States, specifically relating to local conditions in Idaho and regional contractor capabilities.

The detailed design will cover all packages of work to allow orders to be placed on long lead items so construction can restart and site early works in May 2021 can commence, after snow melts allowing safe site access. ICO remains scheduled to be commissioned in July 2022.

In January 2021, Jervois appointed Metso Outotec to undertake engineering and fabrication of a SAG (semi-autogenous grinding) mill for ICO.  The contract is for the design, fabrication and delivery of a 4.7-metre diameter and 2.5m-long 750kW SAG mill. The mill design will comfortably accommodate the nameplate 1,200 short tons of ore per day (“stpd”) Jervois applied in the ICO BFS.

The mill will be delivered to site prior to end of 2021. As part of the order, Metso Outotec will provide mill layout drawings to Jervois’s appointed engineering firm at ICO, M3, so final site layout for upcoming site construction reactivation can be detailed and awarded in Q2 2021.

As a result of the successful outcome of the BFS and reflecting the commencement of the next stage at ICO, the classification of ICO within the Balance Sheet has been changed to Assets Under Construction from Exploration and Evaluation.

Project Financing

Jervois continues to work with potential lenders around structuring alternatives, including security packages surrounding either ICO, or ICO and SMP. An integrated financial model is being finalised for lenders. RPM Global was appointed as the Independent Engineer for the ICO mine and mill, and they will shortly be recommencing their work as Jervois looks to finalise lender(s) appointment. Discussion with lenders around due diligence requirements of SMP Refinery continue, to extent this facility forms part of lender security package. Jervois continues to engage with the United States government, and customer and off-take negotiations are also progressing both for supply of nickel and cobalt intermediates into SMP and refined production.

ICO Environmental Social Governance

At ICO, Jervois will apply best-in-class environmental and safety standards, systems, and techniques in the production of cobalt in Idaho as part of its overarching environmental, social and governance (“ESG”) policies. Key activities related to both the regulatory requirements at ICO as well as voluntary activities form the basis of our aim to be a positive contributor to the local and regional communities, businesses and environments.

During 2020, ICO performed environmental monitoring activities in accordance with all applicable regulatory requirements. These included monitoring of surface water quality, ground water quality, storm water and erosion controls, and reclamation and revegetation activities. As a component of ICO’s concurrent reclamation program, extensive revegetation efforts were conducted by seeding with a mix of native grasses and forbs, spreading of open serotinous cones, and transplanting of native trees. Work was also performed to maintain optimal growing conditions in the wetland mitigation cells and to eradicate noxious weeds and other invasive plants.

During 2020, ICO collaborated with the Idaho Conservation League to develop the Upper Salmon Conservation Action Program (“Program”) to protect and restore fish, water quality, wildlife habitat, and biodiversity within the Upper Salmon River basin. This innovative and voluntary partnership, which was formalised in February 2021, will fund projects to protect and enhance this ecologically important region of Idaho. Jervois Mining USA Limited will contribute US$150,000 per year into a dedicated fund for the Program through the operational life of the ICO mine. The Program is separate from and unrelated to the mitigation measures and other regulatory requirements applicable to ICO. The Program will also include an ongoing dialogue with communities in the area, including the Shoshone-Bannock and Nez Perce Tribes, as well and local, state, and federal agencies, about investment priorities for the Program.

During the COVID-19 pandemic, Jervois provided a cash donation to the Idaho Foodbank’s Backpack program. This program ensures that students who are chronically hungry have access to adequate food by providing food caches all over town, full of nutritious, kid-friendly food. Many low-income children have access to nutritious meals through their school’s free-and-reduced breakfast and lunch program. Unfortunately, on the weekends and during the evening, these same children have food insecurity. The Backpack program helps these children by providing food support throughout the year.

ICO power will be provided by Idaho Power, an Idaho corporation. In 2019 (last published data at date of this report), 64.1% of Idaho Power’s energy mix came from renewables (including hydro) and 11.4% from natural gas. The utility has plans to further increase the share of renewables and eliminate coal-fired energy, which represented 16.3% of generation capacity in 2019. They were the first investor-owned utility to establish a clean energy goal without a government requirement. Idaho Power has set a goal to be 100 percent clean energy by 2045 and offer additional green-energy solutions for more renewable, carbon-free electricity. ICO continues to discuss future opportunities with Idaho Power that may allow ICO to take advantage of Idaho Power’s innovative approach toward clean energy; continuing to reduce ICO’s already industry leading carbon footprint.

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