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Cobalt 27 buys NSR on RNC Minerals' Quebec nickel-cobalt project

Cobalt 27 Capital Corp. said Feb. 22 that it acquired a 1.75% net smelter return royalty on all future metals production from the construction-ready Dumont nickel-cobalt project in Quebec. Production is expected to start in 2020.

The NSR, valued at US$70 million, contains a US$15 million one-time buyback option for the Dumont joint venture partners to repurchase 0.375% of the 1.75% royalty. The buyback option is only exercisable on the third, fourth or fifth anniversary of the original royalty agreement signed in July 2015.

The royalty will be paid quarterly in U.S. dollars once the project enters production, providing Cobalt 27 with cash flow over the 33-year initial life of the mine, which has proven and probable reserves of 1.18 billion tonnes of ore containing 3.2 million tonnes of nickel and 126,000 tonnes of cobalt.

The project is jointly owned by RNC Minerals with a 50% operating stake. Private equity firm Waterton Global Resource Management holds the remainder.

According to a January report, RNC Minerals was in talks with commodity traders, mine operators and financiers to raise the US$1 billion needed to build the project.

The potential financiers included large Japanese trading houses, companies that offer streaming deals and miners seeking off-take arrangements.

In addition, Cobalt 27 is negotiating for other cobalt streaming and royalty deals where cobalt is mined as a byproduct and plans to finalize the first of several streaming agreements over the next year.

For this purpose, the company created subsidiary Electric Metals Streaming Corp. to hold Cobalt 27's future streaming and royalty investments, including the Dumont NSR.