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Marquee Resources

Non-Binding MoU for Offtake With Chinese group

1 Video - Nov 18

Marquee Resources has signed a non-binding memorandum of understanding relating to offtake from its Werner Lake cobalt-sulphide project in the province of Ontario, Canada. Highlights of the announcement include the following.

  • Non-binding cobalt-copper offtake agreement signed with Zhejiang Meidu Haichuang Lithium Battery Technology Co. Ltd (‘China Hitrans’),  a significant Chinese enterprise ranked highly in China as a producer of battery cathode materials.
  • Negotiations to secure a formal offtake agreement with China Hitrans are underway.
  • In the next three months, Marquee will provide a metallurgical sample for independent testing, and China Hitrans will work with the former to determine the best potential feed for its needs.

Analysis:  this news came as a pleasant surprise, as it is unusual for potential offtake partners to evince interest in a project at such an early stage of development. That said, few primary sulphide-cobalt projects in first-world jurisdictions have the potential to commence production within a relatively short space of time, and it appears China Hitrans aims to get ahead of the curve.

Significant work – most notably, metallurgical testwork – remains to be done ahead of what could become a binding agreement. However, this announcement indicates that, despite difficult market conditions (as highlighted by Marquee’s current enterprise value of less than AU$2 million), the company is advancing its Werner Lake project with an eye to the future, and establishing relationships that may fast-track project development. Clearly, end-users are still active in the sector, despite a retreat from the record highs in the cobalt price over the past few months. We anticipate more information on offtake during the first quarter of 2019.

Catalysts: aside from details of the metallurgical testwork undertaken by China Hitrans, we expect a number of other key announcements in the coming months, outlining:

  • assay results from the phase 2 drill programme – 4Q18;
  • the inaugural resource – 4Q18/1Q19, and
  • recommencement of the phase 3 drill programme – 1Q19.

Location, history and work program

1 Video - Oct 18

The Werner Lake cobalt project is located in Canada’s Ontario province, about 170 kilometres north-east of Winnipeg, which is the nearest major city to the project.    This video reviews the following.

  • Projects location
  • Historical mining operation and exploration work completed
  • Summaries the current work program

What is cobalt?

1 Video - Oct 18

Review of the fundamentals for cobalt and the unique situation that is likely to continue to strain supply.

Corporate strategy

1 Video - Oct 18

We discussed what were the aspects that attracted Marquee to the Werner Lake project and the development strategy.

Regional exploration

1 Video - Oct 18

Outside of the Werner Lake deposit, Marquee has secured the majority of the surrounding ground at Werner Lake which includes two additional historical operations.  We discuss with the company the potential and long term strategy in further detail.

High grade cobalt sulphide in Canada 

1 Video - Oct 18

Marquee Resources is exploring its Werner Lake cobalt-sulphide project in the province of Ontario, Canada. Discovered during the 1920s, the project became a small but high-grade mining operation in the 1940s. Since then, however (with the exception of a period during the 1990s in which a development study commenced but was not completed due to funding issues for the then owner), only limited work has been completed.

In early 2018, Marquee took control of the project and has since commenced a 6,000-metre diamond-drilling programme, the first in more than 15 years. Encouragingly, results to date confirm mineralisation that starts from surface, continues at depth to at least 220 metres (vertical) and remains open. Assuming continued success with the current drill programme, an initial JORC resource (TSI estimate – 4Q18) is likely to follow, with a development study likely to quickly follow (scoping or pre-feasibility).

Why cobalt?: Cobalt has been the standout commodity in the past year, its price more than doubling during that time – largely in response to increased demand for lithium-ion batteries, a major consumer of cobalt. Typically, when demand for a commodity increases, as is the case with other electric-vehicle related metals, supply also increases to meet it. This typically leads to the price stabilsing or, in some cases, falling due to over-supply. In the case of cobalt, however, a unique set of circumstances (among them political risk and the fact that, typically, cobalt is a by-product metal), we believe supply is unlikely to match the increase in demand without fundamental changes within the sector … meaning higher prices are probably here to stay.

Sulphide or laterite: Cobalt is found in either sulphide or laterite mineralisation, the latter being the most of the ASX-listed cobalt developers. Compared to cobalt sulphide projects, cobalt laterite projects generally have a larger resource however at a lower grade.  Combined with more challenging metallurgy, operating and capital costs are usually significantly higher for laterite project.

On saying this, with the exception of projects in the Democratic Republic of Congo, where ethically unsound mining practices and political unrest are cause for concern – very few primary cobalt sulphide deposits with the potential to commence production have been discovered to date.

Werner Lake – results to date: as noted, early results from the ongoing diamond-drilling programme at Werner Lake have been encouraging, with most intercepts at a grade similar to or higher than the NI 43-101 mineral resource (0.43% cobalt). Importantly, drilling has confirmed that the mineralisation is continuous from surface to a depth of at least 220 vertical meters and remains open.

Development potential: while more drilling is obviously required, we believe the company is on track to deliver a maiden JORC resource before the end of the year. Subsequently, a development study that takes into account historical work at the project (including the development study begun but not completed during the 1990s) is likely to commence thereafter, with completion potentially as early as the first half of 2019.

We do not anticipate an initial resource in the ‘millions of tonnes’.  However, given the grade of the 43-101 resource, promising drilling results to date, as well as the strength of the cobalt price, we believe even a modestly-sized operation (with low initial capital costs) has the potential to deliver significant operating margins that could be used to further explore the vast, yet largely under explored, total project package.

Initiation Report

5 Videos - Oct 18

ASX-listed Marquee Resources offers investors exposure to the in demand cobalt sector,  as they recently took control of Canada’s Werner Lake cobalt project (70% interest), regarded as one of the more advanced primary sulphide cobalt plays in North America. This analysis reviews the following.

  • Marquee’s business strategy
  • The project’s location and history
  • The company’s exploration strategy and the project’s long-term potential
  • The unique characteristics of the cobalt sector