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Trilogy Metals defines 77 million-pound cobalt resource at Bornite

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Trilogy Metals defines 77 million-pound cobalt resource at Bornite

Trilogy Metals Inc. billed a new cobalt resource at the Bornite copper project in Alaska as "one of the largest cobalt resources in North America." But its projected economic value is still up in the air and will depend in part on how much of the metal is recoverable, which is uncertain at this point.

"It's still very early days," Cormark Securities analyst Stefan Ioannou told S&P Global Market Intelligence, pointing to the unknown revenue potential of the cobalt.

The new resource builds on existing copper resources at Bornite, which is part of the company's Upper Kobuk Mineral Projects, and could prove a significant sweetener to economics if the cobalt is relatively simple to extract.

Trilogy defined inferred cobalt resources within its projected copper resource pit shell of 124.6 million tonnes grading 0.017% cobalt, representing 45 million pounds of contained cobalt metal. Below the pit shell, inferred resources are estimated at 57.8 million tonnes grading 0.025% cobalt for a further 32 million pounds, for a total of 77 million pounds of contained cobalt.

Previously defined in-pit copper resources at Bornite comprise indicated resources of 40.5 million tonnes grading 1.02% copper for 913 million pounds of contained copper and inferred resources of 84.1 million tonnes grading 0.95% copper for 1.8 billion pounds of contained copper.

Trilogy Metals President and CEO Rick Van Nieuwenhuyse said in a statement that it looks like about 80% to 90% of the cobalt would flow to copper tailings as a form of pyrite.

"This is great because forming a pyrite concentrate from the copper tails should be relatively straightforward using flotation or dense media separation," said Van Nieuwenhuyse, who could not be reached June 5 by phone.

It will take more metallurgical testing to show whether that optimism is justified. Trilogy Metals said metallurgical studies are ongoing.

"We don't know how much of the cobalt we can actually get out of the cobaltiferous pyrite," said Cormark Securities' Ioannou, noting that if the cobalt is recoverable at a good rate, it could give Trilogy Metals a boost.

"From a high-level perspective, 77 million pounds of cobalt in the ground, potentially recoverable, is interesting, especially given the fact that this is a deposit in a safe jurisdiction," he said. "And cobalt obviously is a critical metal, not just in the States, but globally with the whole electric vehicle movement."

Cobalt is a critical component of many lithium-ion batteries that are used to power electric vehicles. But as demand for cobalt has grown, so too have fears about its supply chain as most cobalt comes from the Democratic Republic of the Congo, a risky jurisdiction. That could help set projects such as Bornite apart as battery-makers source supplies.

Still, production would be years off at Bornite, which is at an early stage of project design.

Beyond Bornite, Trilogy Metals is focused on moving the polymetallic Arctic project, which is about 30 kilometers northeast of Bornite, into the permitting process. Arctic, as Bornite, is in a remote corner of Alaska and will depend on construction and permitting of a 340-kilometer access road.

A recent pre-feasibility study on the Arctic deposit defined an after-tax net present value of US$1.41 billion, discounted at 8%, and a 33.4% internal rate of return.

In April 2017, Trilogy granted South32 Ltd. an option to form a 50/50 joint venture on the Upper Kobuk property in exchange for US$150 million in funding.