Who is GeoVic ?
Geovic Mining Corp.(Geovic) aims to be the world’s largest primary producer of cobalt by 2010 through its 60% ownership of Geovic Cameroon PLC (GeoCam). GeoCam has the exclusive development and production rights to seven large cobalt-nickel laterite deposits in southeast Cameroon.
Cobalt and its compounds have many diverse applications: 1) batteries for cell phones, computers, portable tools and hybrid electric vehicles, 2) super-alloys, mainly for jet engines , 3) chemicals, 4) wear resistant alloys, 5) catalysts 6) magnets Global cobalt use in 2005 was 55,000 tonnes and has grown 129% during the previous ten years.
A 2007 Canadian National Instrument 43-101 Technical Report estimated that the first deposit delivers an after-tax cash flow of US $1.6 billion, a 10% NPV of $529 million, an IRR of 77.5% and a payback of less than 1.3 years. Capital costs estimated at $129 million are deemed to be the lowest in the cobalt-nickel industry in total and on a cost per pound of annual metal production. Pre-tax cash operating costs are negative after by-product credits for nickel prices above $6.35 per pound. Such strong financial performance is attributed to the unique characteristics of these Cameroonian laterite deposits:
1. Mine is less than 16 meters deep – no need for blasting
2. Ore is relatively high grade and amenable to simple pre- concentration – cobalt is further upgraded by a factor of three
3. Concentrate is inexpensively leached under atmospheric pressure with low acid consumption
4. Process plant produces high-purity, versatile and readily marketable products – no need for costly third-party refining
Proven and probable ore reserves of 53 million tonnes allow average annual production rates of 3,300 tonnes cobalt (6.6 million pounds) and 2,800 tonnes nickel (6.2 million pounds) during the first 21 years of operation. An additional 145 million tonnes of inferred resources is adjacent to the first process plant. The project development schedule includes completion of final feasibility and environmental permits by July 2007; start of major construction in April 2008 and initiation of production by mid-2009, all in an environmentally sensible manner. The management, technical team and Board of Geovic have a successful and extensive track record of corporate and project generation, acquisitions, financing, development, operations and environmental management throughout the global mining industry. The attributes of the GeoCam deposits and the political and economic stability of Cameroon will enhance Geovic’s ability to provide greater stability to global cobalt prices and supplies while building value for stakeholders and creating long-term sustainable development in southeast Cameroon.The Company is based in Grand Junction, Colorado and, in addition to its common shares, two series of warrants (GMC.WT and GMC.WTA) are traded on the TSX Venture Exchange.
Devil in a Blue Dress
One would have know that commodities and natural resources have entered the bullish phase for the last few years. In fact, CRB index ( a measure of commodity prices ) has hit its highest level since 1980.Well, in most cases, it's a simple matter of supply and demand, which one will not appreciate it, as it does not affect us directly.
The world is consuming up more natural resources at an amazing rate that the supply of natural resources is depleting. Everything is running low from crude oil to gas to iron to aluminium to copper to uranium.Of course, everyone wants to enter commodities before others do so. They will have made a fortune if they predict the prices of the commodities accurately. However, a relatively unknown natural resource is slowly made known to us.
This resource is cobalt, a transition metal closely related to nickel.
The word cobalt is derived from the German kobalt, meaning "goblin" or "devil," a term that gold miners used because they thought that the bluish metal was worthless.
But cobalt is far from worthless... For centuries, cobalt has been used to create beautiful blue glass, ceramics, pottery, and tile. In fact, traces of cobalt were found in Egyptian artifacts dating back to 2,600 B.C.
Of course, today, cobalt is used for much more than color and oriental.
Essential to Modern Society!
Chemical & Engineering News reports that cobalt has recently undergone a significant transformation from an "ugly duckling" of no interest to miners... into a "swan" of strategic industrial importance.
It might surprise you to learn the countless ways cobalt is essential to our daily lives. From cobalt's applications in health, communications, and national defense... modern society could not function without cobalt.
The U.S. Geological Survey (USGS) reports that for many commercial, industrial and military applications, there is NO SUBSTITUTE for cobalt.
Cobalt is used in cell phones, rechargeable batteries, hard-disk drives, memory chips, radial tires, drill bits, paints and inks, satellites, turbine blades, and even solar panels.
And get this: Because cobalt has an unusually high melting point (2,723 Fahrenheit), it's able to withstand extreme temperatures that would destroy conventional metals like steel and aluminum. This makes cobalt absolutely essential in the production of jet engines and guided missiles.
New applications for cobalt are being discovered constantly, and some of them are starting to radically transform whole industries. Eg, hydrogen cells.
Hybrid cars for example...
According to Booz Allen Hamilton, hybrids are spreading like wildfire, and could account for more than 20% of new cars by 2010. That's 4 million new hybrids coming out every year. Cobalt is a key ingredient in hybrid vehicles. In fact, hybrids use five pounds of cobalt in nearly every car.
Not only is cobalt important to the U.S. military... it's a matter of national security.
Cobalt is critical to the production of military aircraft, defense satellites, guided missiles, tanks, and even submarines. Without cobalt, it would be virtually impossible to produce many defense products such as jet engines, missile components, or electronic components. In fact, cobalt is so vital to US national defense that the United States government has classified it as a "strategic material." Cobalt received its "strategic" classification under the Strategic and Critical Stockpiling Act (50 U.S.C. 98-h-2).
According to this law, a "strategic material" is a commodity whose lack of availability would seriously affect the economic, industrial, and defense capability of the United States. Further, this law requires that cobalt be stockpiled at 20 locations throughout the country so that the United States is not dependent on foreign sources of cobalt.
Problem is, despite the Stockpiling Act, the United States is almost completely dependent on foreign sources of cobalt. According to the U.S. Geological Survey, the United States DID NOT mine or refine cobalt in 2006. The domestic production was ZERO. That means the United States must rely on foreign sources for nearly all its cobalt needs. And here's the worst part: As the demand for cobalt is soaring, the world is facing a severe supply shortage that could be devastating to the United States. That's because Russia is moving to dominate the cobalt market for its own political gain.
As it turns out, the most lucrative source of cobalt is not in Russia. It's in the tiny country of Cameroon... on Africa's rugged West Coast.
Good news for U.S. industry and military operations. And even better news for early investors who could ride this CAD$2 stock listed in Canada since 6th dec 2006 till CAD$3.90.
Back in 1981, the United Nations launched a development program in Cameroon. The idea was to use local mineral resources to help fight poverty in the African country. And the project initially proved promising. In fact, the U.N. found a large nickel mine. But because nickel prices were so low at the time, the discovery didn't draw much attention. But in 1994, a veteran geologist became aware of the Cameroon nickel discovery. After reviewing samples, he realized that the mine had an unusually high level of cobalt. Further investigation revealed that the Cameroon site held the single-largest cobalt supply on the planet!
GeoVic was formed and began feasibility studies on the Cameroon cobalt mine.
It quickly became clear that the mine was an absolute fortune just waiting to happen. Not only was there a massive supply of cobalt at the location, but the cobalt was very close to the earth's surface. This meant that mining costs would be minimal... and profits would be mind-shattering.
Of course, news of Cameroon's lucrative cobalt mine spread, and every mining outfit on the planet was watering at the mouth for a piece of the action. Finally, the U.S. government decided that the Cameroon cobalt reserved needed to be in U.S. hands.
Cameroon's President Biya was invited to a private meeting at the White House with President Bush in March 2003. It was the first time the presidents of the two countries had ever met. What did Bush promise President Biya? No one knows for sure...
But days after the meeting, GeoVic was granted an exclusive contract to develop the Cameroon cobalt mine.
A $10 Billion Fortune!
With cobalt prices soaring... and Russia holding back supply... These are great news for GeoVic. In fact, it is estimated that the mine has $10 billion worth of cobalt!
It has exclusive rights to the entire region.
In effect, GeoVic has joined forces with the Cameroon government to form a cartel over the most lucrative cobalt source on the planet.
The Cameroon mine is so rich with cobalt that you can practically scoop it out of the ground with a toy shovel.
That means mining costs are very low. In fact, they are lower than anywhere else in the world... only 96 cents per pound.
Cobalt is currently selling for $30 per pound. With Russia restricting supply, cobalt prices could easily soar to over $50 per pound over the next few months.
And GeoVic can pull it out of the ground and process it for a mere 96 cents per pound.
Its profit margins are enormous. And with exclusive rights to $10 billion in cobalt, GeoVic is now in an extremely position to ride the wave.
The only question: How high will it go?
In addition to the initial site, GeoVic also has the rights to SIX ADDITIONAL MINES that could be even BIGGER.
Realistically, it could be sitting on over $60 billion in cobalt. If that's the case, GeoVic could be worth up to $120 per share.
But let's be conservative, and put those additional mines aside. Let's just focus on the initial mine... worth $10 billion.
Analysis of GeoVic: How much is it worth?
Calculations:
Cameroon government gets 40% of the reserve ( according to the agreement signed). Therefore US$6 billion goes to Geovic.
And although the production costs are very low, estimated at US$0.96 per pound, If I were to assume mining cost is US$15 per pound ( which is very high), it will worth US$3 billion.
At CAD$3.90 per share, CobalCam has a market cap of just USD$290 million.
(By the way, the "market cap" is just a measure of a company's market value. It's the value of all outstanding shares of stock, and basically determines how much the company would sell for on the open market. In this case, the company could be purchased for $290 million.)
That means the company is trading at 10% of its reserve value!
That means, GeoVic could realistically trade up to CAD$39, and still be fairly valued.
If we assume its reserve is US$1.5 billion, it is worth CAD$19.50, which is still way higher than CAD$3.90 as of 16th April.
Risk Factors:
1) You must be comfortable with micro caps. The "prospector" stocks are small and without operations at the moment. The share price is very volatile by nature. The share hast the potential to rise tenfold BUT they can also experience rapid declines should the mining did not materialise.
2) You must be prepared to lose the amount you have invested as mining exploration is a high risk investment by nature.
3) The above analysis is based on reserve reports by the company and a 3rd party report on the assumption that they are true.
Below are some examples of successful mining companies who have managed to “extract” the reserve from the ground. Do note that there are also a lot of companies going bust with failure to extract the reserve or the reserve are not up to their expected yield.
Frontier Development Group (FRG.TO:TORONTO) This uranium miner went from 75 cents in September 2004 to $8.23 in April 2006. That's nearly 1,000% in 18 months.International Tower Hill Mines (ITH.V:CDNX) This junior gold miner went from 34 cents in May 2006 to $3.40 in September 2006. That's 900% in four months. Strata Oil & Gas (SOIGF.OB:OTC BB) This Canadian oil exploration company went from 79 cents in September 2005 to $7.95 in July 2006. That's over 900% in 10 months.Katanga Mining (KAT.TO:Toronto) This copper company went from 80 cents in June 2005 to $8.45 in April 2006. That's 956% in 10 months.Peru Copper (CUP:AMEX) This copper miner went from $1 in July 2005 to $6.90 in June 2006. That's 590% in 11 months.U.S. Gold Corp.(USGL.OB:OTC BB) This gold company went from $1 in August 2005 to $10.30 in April 2006. A 930% gain in eight months.
Geovic Mining Corp.(Geovic) aims to be the world’s largest primary producer of cobalt by 2010 through its 60% ownership of Geovic Cameroon PLC (GeoCam). GeoCam has the exclusive development and production rights to seven large cobalt-nickel laterite deposits in southeast Cameroon.
Cobalt and its compounds have many diverse applications: 1) batteries for cell phones, computers, portable tools and hybrid electric vehicles, 2) super-alloys, mainly for jet engines , 3) chemicals, 4) wear resistant alloys, 5) catalysts 6) magnets Global cobalt use in 2005 was 55,000 tonnes and has grown 129% during the previous ten years.
A 2007 Canadian National Instrument 43-101 Technical Report estimated that the first deposit delivers an after-tax cash flow of US $1.6 billion, a 10% NPV of $529 million, an IRR of 77.5% and a payback of less than 1.3 years. Capital costs estimated at $129 million are deemed to be the lowest in the cobalt-nickel industry in total and on a cost per pound of annual metal production. Pre-tax cash operating costs are negative after by-product credits for nickel prices above $6.35 per pound. Such strong financial performance is attributed to the unique characteristics of these Cameroonian laterite deposits:
1. Mine is less than 16 meters deep – no need for blasting
2. Ore is relatively high grade and amenable to simple pre- concentration – cobalt is further upgraded by a factor of three
3. Concentrate is inexpensively leached under atmospheric pressure with low acid consumption
4. Process plant produces high-purity, versatile and readily marketable products – no need for costly third-party refining
Proven and probable ore reserves of 53 million tonnes allow average annual production rates of 3,300 tonnes cobalt (6.6 million pounds) and 2,800 tonnes nickel (6.2 million pounds) during the first 21 years of operation. An additional 145 million tonnes of inferred resources is adjacent to the first process plant. The project development schedule includes completion of final feasibility and environmental permits by July 2007; start of major construction in April 2008 and initiation of production by mid-2009, all in an environmentally sensible manner. The management, technical team and Board of Geovic have a successful and extensive track record of corporate and project generation, acquisitions, financing, development, operations and environmental management throughout the global mining industry. The attributes of the GeoCam deposits and the political and economic stability of Cameroon will enhance Geovic’s ability to provide greater stability to global cobalt prices and supplies while building value for stakeholders and creating long-term sustainable development in southeast Cameroon.The Company is based in Grand Junction, Colorado and, in addition to its common shares, two series of warrants (GMC.WT and GMC.WTA) are traded on the TSX Venture Exchange.
Devil in a Blue Dress
One would have know that commodities and natural resources have entered the bullish phase for the last few years. In fact, CRB index ( a measure of commodity prices ) has hit its highest level since 1980.Well, in most cases, it's a simple matter of supply and demand, which one will not appreciate it, as it does not affect us directly.
The world is consuming up more natural resources at an amazing rate that the supply of natural resources is depleting. Everything is running low from crude oil to gas to iron to aluminium to copper to uranium.Of course, everyone wants to enter commodities before others do so. They will have made a fortune if they predict the prices of the commodities accurately. However, a relatively unknown natural resource is slowly made known to us.
This resource is cobalt, a transition metal closely related to nickel.
The word cobalt is derived from the German kobalt, meaning "goblin" or "devil," a term that gold miners used because they thought that the bluish metal was worthless.
But cobalt is far from worthless... For centuries, cobalt has been used to create beautiful blue glass, ceramics, pottery, and tile. In fact, traces of cobalt were found in Egyptian artifacts dating back to 2,600 B.C.
Of course, today, cobalt is used for much more than color and oriental.
Essential to Modern Society!
Chemical & Engineering News reports that cobalt has recently undergone a significant transformation from an "ugly duckling" of no interest to miners... into a "swan" of strategic industrial importance.
It might surprise you to learn the countless ways cobalt is essential to our daily lives. From cobalt's applications in health, communications, and national defense... modern society could not function without cobalt.
The U.S. Geological Survey (USGS) reports that for many commercial, industrial and military applications, there is NO SUBSTITUTE for cobalt.
Cobalt is used in cell phones, rechargeable batteries, hard-disk drives, memory chips, radial tires, drill bits, paints and inks, satellites, turbine blades, and even solar panels.
And get this: Because cobalt has an unusually high melting point (2,723 Fahrenheit), it's able to withstand extreme temperatures that would destroy conventional metals like steel and aluminum. This makes cobalt absolutely essential in the production of jet engines and guided missiles.
New applications for cobalt are being discovered constantly, and some of them are starting to radically transform whole industries. Eg, hydrogen cells.
Hybrid cars for example...
According to Booz Allen Hamilton, hybrids are spreading like wildfire, and could account for more than 20% of new cars by 2010. That's 4 million new hybrids coming out every year. Cobalt is a key ingredient in hybrid vehicles. In fact, hybrids use five pounds of cobalt in nearly every car.
Not only is cobalt important to the U.S. military... it's a matter of national security.
Cobalt is critical to the production of military aircraft, defense satellites, guided missiles, tanks, and even submarines. Without cobalt, it would be virtually impossible to produce many defense products such as jet engines, missile components, or electronic components. In fact, cobalt is so vital to US national defense that the United States government has classified it as a "strategic material." Cobalt received its "strategic" classification under the Strategic and Critical Stockpiling Act (50 U.S.C. 98-h-2).
According to this law, a "strategic material" is a commodity whose lack of availability would seriously affect the economic, industrial, and defense capability of the United States. Further, this law requires that cobalt be stockpiled at 20 locations throughout the country so that the United States is not dependent on foreign sources of cobalt.
Problem is, despite the Stockpiling Act, the United States is almost completely dependent on foreign sources of cobalt. According to the U.S. Geological Survey, the United States DID NOT mine or refine cobalt in 2006. The domestic production was ZERO. That means the United States must rely on foreign sources for nearly all its cobalt needs. And here's the worst part: As the demand for cobalt is soaring, the world is facing a severe supply shortage that could be devastating to the United States. That's because Russia is moving to dominate the cobalt market for its own political gain.
As it turns out, the most lucrative source of cobalt is not in Russia. It's in the tiny country of Cameroon... on Africa's rugged West Coast.
Good news for U.S. industry and military operations. And even better news for early investors who could ride this CAD$2 stock listed in Canada since 6th dec 2006 till CAD$3.90.
Back in 1981, the United Nations launched a development program in Cameroon. The idea was to use local mineral resources to help fight poverty in the African country. And the project initially proved promising. In fact, the U.N. found a large nickel mine. But because nickel prices were so low at the time, the discovery didn't draw much attention. But in 1994, a veteran geologist became aware of the Cameroon nickel discovery. After reviewing samples, he realized that the mine had an unusually high level of cobalt. Further investigation revealed that the Cameroon site held the single-largest cobalt supply on the planet!
GeoVic was formed and began feasibility studies on the Cameroon cobalt mine.
It quickly became clear that the mine was an absolute fortune just waiting to happen. Not only was there a massive supply of cobalt at the location, but the cobalt was very close to the earth's surface. This meant that mining costs would be minimal... and profits would be mind-shattering.
Of course, news of Cameroon's lucrative cobalt mine spread, and every mining outfit on the planet was watering at the mouth for a piece of the action. Finally, the U.S. government decided that the Cameroon cobalt reserved needed to be in U.S. hands.
Cameroon's President Biya was invited to a private meeting at the White House with President Bush in March 2003. It was the first time the presidents of the two countries had ever met. What did Bush promise President Biya? No one knows for sure...
But days after the meeting, GeoVic was granted an exclusive contract to develop the Cameroon cobalt mine.
A $10 Billion Fortune!
With cobalt prices soaring... and Russia holding back supply... These are great news for GeoVic. In fact, it is estimated that the mine has $10 billion worth of cobalt!
It has exclusive rights to the entire region.
In effect, GeoVic has joined forces with the Cameroon government to form a cartel over the most lucrative cobalt source on the planet.
The Cameroon mine is so rich with cobalt that you can practically scoop it out of the ground with a toy shovel.
That means mining costs are very low. In fact, they are lower than anywhere else in the world... only 96 cents per pound.
Cobalt is currently selling for $30 per pound. With Russia restricting supply, cobalt prices could easily soar to over $50 per pound over the next few months.
And GeoVic can pull it out of the ground and process it for a mere 96 cents per pound.
Its profit margins are enormous. And with exclusive rights to $10 billion in cobalt, GeoVic is now in an extremely position to ride the wave.
The only question: How high will it go?
In addition to the initial site, GeoVic also has the rights to SIX ADDITIONAL MINES that could be even BIGGER.
Realistically, it could be sitting on over $60 billion in cobalt. If that's the case, GeoVic could be worth up to $120 per share.
But let's be conservative, and put those additional mines aside. Let's just focus on the initial mine... worth $10 billion.
Analysis of GeoVic: How much is it worth?
Calculations:
Cameroon government gets 40% of the reserve ( according to the agreement signed). Therefore US$6 billion goes to Geovic.
And although the production costs are very low, estimated at US$0.96 per pound, If I were to assume mining cost is US$15 per pound ( which is very high), it will worth US$3 billion.
At CAD$3.90 per share, CobalCam has a market cap of just USD$290 million.
(By the way, the "market cap" is just a measure of a company's market value. It's the value of all outstanding shares of stock, and basically determines how much the company would sell for on the open market. In this case, the company could be purchased for $290 million.)
That means the company is trading at 10% of its reserve value!
That means, GeoVic could realistically trade up to CAD$39, and still be fairly valued.
If we assume its reserve is US$1.5 billion, it is worth CAD$19.50, which is still way higher than CAD$3.90 as of 16th April.
Risk Factors:
1) You must be comfortable with micro caps. The "prospector" stocks are small and without operations at the moment. The share price is very volatile by nature. The share hast the potential to rise tenfold BUT they can also experience rapid declines should the mining did not materialise.
2) You must be prepared to lose the amount you have invested as mining exploration is a high risk investment by nature.
3) The above analysis is based on reserve reports by the company and a 3rd party report on the assumption that they are true.
Below are some examples of successful mining companies who have managed to “extract” the reserve from the ground. Do note that there are also a lot of companies going bust with failure to extract the reserve or the reserve are not up to their expected yield.
Frontier Development Group (FRG.TO:TORONTO) This uranium miner went from 75 cents in September 2004 to $8.23 in April 2006. That's nearly 1,000% in 18 months.International Tower Hill Mines (ITH.V:CDNX) This junior gold miner went from 34 cents in May 2006 to $3.40 in September 2006. That's 900% in four months. Strata Oil & Gas (SOIGF.OB:OTC BB) This Canadian oil exploration company went from 79 cents in September 2005 to $7.95 in July 2006. That's over 900% in 10 months.Katanga Mining (KAT.TO:Toronto) This copper company went from 80 cents in June 2005 to $8.45 in April 2006. That's 956% in 10 months.Peru Copper (CUP:AMEX) This copper miner went from $1 in July 2005 to $6.90 in June 2006. That's 590% in 11 months.U.S. Gold Corp.(USGL.OB:OTC BB) This gold company went from $1 in August 2005 to $10.30 in April 2006. A 930% gain in eight months.
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