Canadian investment company Cobalt 27 acquires Highlands Pacific, and flags divestments

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Canadian-listed company Cobalt 27 has acquired Highlands Pacific, principally for its interest in the Ramu nickel-cobalt mine in Papua New Guinea. The corporate play will mean divestment of non-core PNG assets, including Highlands’ stake in the Frieda River project.

Kurumbukari mine, at the Ramu Nickel project. Source: Highlands Pacific

The deal is for A$115 million (K269 million).

Cobalt 27, which is listed on the TSX Venture Exchange in Toronto, describes itself as an ‘electric metals investment vehicle that offers exposure to metals integral to key technologies of the electric vehicle’ through streaming and royalties.

The principal purpose of the vehicle is to allow investors to acquire an interest in cobalt and nickel.

Cobalt’s acquisition is driven by its desire to acquire Highlands’ stake in the Ramu nickel and cobalt mine in Madang Province.

The Highlands acquisition ‘increases exposure to a large, long-life, low-cost, high-growth nickel-cobalt mine: Ramu’ according to a Cobalt 27 statement.

‘Cobalt 27 has flagged some divestments.’

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‘Following repayment of Highlands’ attributable Ramu construction and development loans, Highlands’ ownership would increase to 11.3 per cent,’ the statement says.

‘MCC Ramu NiCo Ltd is evaluating a potential expansion of the Ramu mine, which could cost in the order of approximately US$1.5 billion (K4.9 billion).

‘Cobalt 27 would have the opportunity to participate in any potential expansion and increase its attributable production through its acquisition of Highlands.’

Frieda River

Proposed Sepik Development Project Credit: PanAust

Cobalt 27 has also indicated it will get out of the proposed gold-copper Frieda River project—now re-named the Sepik Development project—a joint venture between Highlands and PanAust.

The company flagged in its investor presentation that it intends to sell its interest in Frieda River to PanAust, using its ‘best endeavours’ to enter into a buy-back agreement.

Highlands will transfer to PanAust ‘all of the shares in Highlands Frieda Limited, the entity holding Highlands’ participating interest in the joint venture,’ plus an ‘estimated’ US$300,000 (K975,000) in cash.

‘If the PanAust Buy-Back Agreement closes, such shares in Highlands will be bought back by Highlands and cancelled, and will not be acquired by Cobalt 27.’

Cobalt 27 is a niche play and the increasingly ambitious plans for the Sepik Development Project—which includes establishing a hydroelectric power facility, an expansion of the Port of Vanimo, road upgrades and other infrastructure development—do not align well with that strategy.

Other divestments

Highlands also holds interests in the Star Mountains Copper Gold exploration project in PNG, which is likely to be sold.

‘Cobalt 27 has also indicated it will get out of the proposed gold-copper Frieda River project.’

It is ‘evaluating’ the Sewa Bay laterite nickel project in PNG in conjunction with Japanese trading house Sojitz Group.

‘Cobalt 27 intends to evaluate strategic alternatives with respect to these non-core assets.’

Ethical sourcing

Chairman and Chief Executive Anthony Milewski said in a shareholder letter that the world stands ‘at the cusp’ of widespread adoption of electrification.

‘Battery metals, including nickel, cobalt, and lithium, will act as proxies for the adoption of these new technologies.’

Milewski pointed to the ‘precarious nature of the cobalt supply chain,’ with 70 per cent coming from the Democratic Republic of Congo (DRC).

‘Numerous reports [are] calling into question both the environmental impact of the non-mechanized mining and whether the material has been ethically sourced.

‘Indications from both the Cobalt Institute and London Metals Exchange (LME) [are] that ethical and responsible sourcing is no longer something that will be left to unofficial “self-certification”.’

Comments

  1. Alphonse Wapa says:

    It is sad that another PNG icon will be solid off to a foreign entity.Where is the government & the superfunds wbo should be protecting our own national interests.See how Oil Search is investing in the oil and gas sector & if run properly Highlands Pacific can do the same in minerals sector.

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