Cobalt 27 finalises Vale offtake agreement

Canadian mining and metals investment company Cobalt 27 has agreed with Brazil's Vale to acquire future cobalt production from the Voisey's Bay mine in Canada.

Under the terms of the agreement, Cobalt 27 will agree to purchase 32.6pc of finished cobalt from the mine and mine expansion plan, which commences in January 2021.

The company has paid Vale $300mn upfront and will continue to make payments at 18pc of market prices for each pound of delivered metal, which will increase to 22pc once Vale completes its deliveries of metal under the terms of the agreement.

Cobalt 27 will purchase up to 1.6mn lb/yr of cobalt over the 2021-24 ramp-up period, which will then increase to 1.9mn lb/yr from 2025 once full production commences.

Vale expects the mine to remain active until 2034 and if production after 2021 reaches a total of 33,100t, then the proportion of finished metal that Cobalt 27 receives would decline to 16.3pc.

Cobalt 27 referred to the agreement as a streaming deal. But it remains unclear whether Cobalt 27 will offer the material on the open market or store it in warehouses in Baltimore and Rotterdam.

Cobalt 27 has built up a large inventory of 2,982t — primarily of alloy-grade cobalt metal — over the past several years amid growing demand for the metal from the electric vehicle battery sector.

Vale operates several nickel and cobalt mines in Canada and New Caledonia, in addition to being the world's largest iron ore producer.