Canadian mining firm First Cobalt has signed a $5m (£4.07m) loan facility with British-Swiss commodity trading and mining company Glencore to complete engineering, metallurgical testing, fieldwork and permitting for the recommissioning and expansion of the First Cobalt Refinery in Canada.

Glencore will provide an additional $40m (£32.5m) to recommission and expand the refinery after completion of a feasibility study for a 55tpd (tonnes per day) refinery expansion in the first quarter of 2020 and subject to certain terms and conditions and satisfaction of conditions precedent.

The $5m (£4.07m) loan will be used to assess the suitability of the refinery to treat Glencore material to produce cobalt sulfate for the electric vehicle (EV) market in North America.

Phase II involves the recommissioning of the refinery at 12tpd in 2020, while Phase III will involve an expansion to 55tpd in 2021 using the existing infrastructure.

A scoping study by Australian construction engineering company Ausenco had estimated that if the refinery operated at 55tpd, it could produce 5,000tpa of contained cobalt in sulfate.

The company is finalising an RFP for the feasibility study, metallurgy and environmental work so that fieldwork can commence in September.

First Cobalt president and CEO Trent Mell said: “We are delighted to be working with Glencore to bring a domestic supply of battery grade cobalt to the North American market. Subject to the results achieved over the next six months, both parties would like to target first production in late 2020 and then commission an expanded 55 tpd facility in 2021.

“Cobalt prices have increased considerably over the past few weeks and the outlook for the electric vehicle market remains exceptionally strong.”

First Cobalt and Glencore signed a term sheet in July

On 15 July, First Cobalt and Glencore signed a term sheet specifying the framework for a fully funded, non-dilutive, phased approach to recommission the refinery in Canada.

The latest loan facility carries interest at LIBOR plus 5%, payable semi-annually in arrears until maturity.

First Cobalt will have the option to defer interest and get it added to the principal amount outstanding on interest payment dates.

The company will also have the option to extend the two-year loan by one year. Subject to regulatory approval, Glencore may convert all or a part of the balance owing to equity at discount to market of up to 15%.