Cobalt Blue sees A$60M price tag for Kwinana, WA refinery – but $68M value for stage one


Cobalt Blue (ASX:COB) has released cost estimates for what it would take to get its proposed Kwinana refinery off the ground – seeing CapEx of $60M.

The COB stock price staged a modest jump in pre-lunch trades. While the company sees a $60M upfront spend (including a “15.5% contingency”), stage one of the project is valued at only $68M.

Its internal rate of return would be 23% post-tax. Stage two of the project would require an extra $23M and would bring the total project value to $90M. Combined value sits at $158M with $46M EBITDA per year.

How, exactly, the company would break up its EBITDA remains to be seen. The metric is widely perceived as unbankable.

It’s worth noting while COB’s market cap is $30M, it sees construction of the refinery kicking off in the first half of next year. The asset it wants to build is built into that great synthetic geopolitical narrative of our current moment: critical mineral supply ex-China.

Cobalt Blue’s proposed WA-based refinery would feed into the USA’s domestic production initiatives as ratified in Biden’s Inflation Reduction Act (IRA), as well as the European Union’s (EU) desire to do business with Western allied nations.

The refinery, all cards in order, would produce 8,000 tonnes per annum (tpa) cobalt sulphate and 500tpa nickel metal. That would provide ingredients to produce EV batteries without needing to rely on Chinese markets.

Cobalt Blue’s intended construction date for 2025 lines up with its own modelling for when cobalt demand will outpace supply – which we haven’t seen since 2022. African cobalt continues to be produced and shipped around the world, largely from the Congo.

“The cobalt market is in a state of transition … global supply growth has outweighed demand growth since 2022,” Cobalt Blue wrote on Wednesday.

“However, this trend will reverse in 2025 … when considered through the lens of available capacity for IRA-compliant, battery-grade cobalt, an immediate shortfall grows as IRA restrictions tighten.”

The company did not provide any meaningful analysis of the EV market in its current form, but more specifics around its total addressable market are clear when it comes to offtake.

“Cobalt Blue has progressed offtake/project partner discussions with approximately 30 international companies,” the company wrote.

“Discussions with potential partners are on-going. Samples were received by over 20 partners globally spanning Europe, South Korea, and United States … along with Japan, these represent the strategically aligned EV markets.”

COB last traded at 8.4cps.

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