Caledonia Mining Corporation (OTCBB: CALVF) announced the signing of a cobalt off-take agreement with a large Chinese refiner. The agreement calls for Caledonia to supply a minimum of 21,000 tons of cobalt metal equivalent in the form of cobalt hydroxide from its Nama Cobalt Project over the next six years. The terms also call for the price to be based on the published monthly average for 99.3% cobalt from the London Metal Exchange, which involves a guaranteed “Take or Pay” minimum cobalt price of US $12/lb of cobalt metal.
The company is currently outlining a detailed plan of the project which has a targeted starting date by early 2009. The expected annual production level is of 10,000 tons of cobalt metal with an estimated capital expenditure set at US$125 million, and production costs below US$10/lb.
Caledonia is a Canadian registered mining, development and exploration company with assets in Africa. The company is focused on their Blanket gold mine in Zimbabwe and the developmental aspects of the existing project. They also have the Nama cobalt project in Zambia, as well as the Rooipoort platinum-nickel exploration project in South Africa. Caledonia brings a well experienced management team and Board of Directors with a diverse knowledge in gold production, exploration, mine development, finance and marketing. The company saw an increase in morning trading as it rose 71.84%.
Commenting on the announcement, Stefan Hayden, President and CEO of Caledonia Mining said, “The signing of this cobalt off-take agreement marks an important milestone for Caledonia as we commence with the development of Nama, which I expect will prove to be one of the world’s largest primary cobalt deposits. In the context of current spot prices for cobalt of US$44/lb and the floor price of US$12/lb, this contract represents substantial value and confirms Caledonia’s potential to become one of the key primary players in the cobalt market. Negotiations on further agreements with refiners continue. With rising demand from China, India and America, we believe the fundamentals for cobalt remain robust in the near-term.”
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