Pala to acquire Cobalt 27 for $375m, create new company Nickel 28

The Ramu nickel-cobalt operation in Papua New Guinea. Image courtesy of Cobalt 27 Capital Corp.

Today Swiss firm Pala Investments announced that it intends to buy Cobalt 27 Capital Corp. (TSXV: KBLT) for C$501 million ($375 million). Pala’s offer – equivalent to C$5.75 per share – represents a 66% premium to Cobalt 27’s closing share price of C$3.47 on June 17 and a 46% premium to its 20-day volume-weighted average trading price of $3.95.

Subsequently, a new company named Nickel 28 Capital Corp. will be created to hold some of Cobalt 27’s assets and projects.

Cobalt 27 currently owns a joint venture interest (8.56%) in Ramu, a producing nickel-cobalt mine located near Madang on the north coast of Papua New Guinea. The mine was financed, constructed and commissioned by majority-owner and operator Metallurgical Corporation of China in 2012 for $2.1 billion, which at the time was China’s largest overseas mining investment. Last year Ramu achieved production of 35,355 tonnes of nickel and 3,275 tonnes of cobalt.

Cobalt 27 also holds streams and royalties on various projects across Canada. The company previously acquired a cobalt stream on Vale’s Voisey’s Bay mine in Newfoundland and Labrador, which allows Cobalt 27 to receive 32.6% of the mine’s production beginning in 2021. The company’s royalty portfolio includes a 2% net smelter return on the Turnagain project in British Columbia, one of the largest undeveloped nickel-cobalt sulphide deposits in the world.

The Voisey’s Bay stream along with the company’s physical cobalt inventory will be kept by Pala, and they will not fall under Nickel 28’s ownership.

“Pala will be acquiring the physical cobalt inventory and stream on Voisey’s Bay at a significant discount to carrying value, leaving the Ramu royalty as the main asset in the newco,” Colin Healey of Haywood Securities comments in a research note.

Pala will also inject $5 million into Nickel 28 upon its inception and retain a 4.9% interest in the new company. The current Cobalt 27 leadership team will continue as the board and management of Nickel 28.

Shares of Cobalt 27 rose by close to 20% during Tuesday’s trading session. The company has a market capitalization of approximately C$346 million.