Fuse Cobalt Inc. (TSXV: FUSE) (OTCQB: FUSEF) shares rallied in August, surging over 62% in the period and reaching price levels not seen since November of last year. More impressive is that FUSEF scored those increases despite decidedly bearish market conditions, as stock prices across major sectors retreated from highs set earlier in the month. And indicators suggest that FUSEF's momentum could be strengthening, evidenced by trading volume spiking to more than 19X average on August 26th and staying elevated at 3X its average during the final week in August. That's excellent news to those subscribing to the adage "volume precedes price."
And for those paying attention to fundamentals over hypotheticals, FUSEF also checks that box, with a series of updates supporting its intention to capitalize on and maximize its opportunities in a red-hot EV and battery metals sector. The more excellent news, Fuse Cobalt looks better positioned than ever to make that happen, investing in properties within the world's most mining-friendly jurisdictions whose legacy of prior mining success could put significant revenue potential in FUSEF's crosshairs.
That target is the primary attraction. And that attention is warranted, considering that despite its August rally, there still seems to be a significant valuation disconnect between assets, project potential, and share price. While some investors are taking advantage of the opportunity, others may be wise to consider the value proposition sooner than later. Recent company updates support the contention that FUSEF is possibly one of the green-energy sector's most undervalued junior-miner investment opportunities.
Accelerating Its Mission To Monetize Assets
Last month, FUSEF announced plans to undertake a "state of the art" Alpha IPTM geophysical survey by Simcoe Geoscience Limited, with additional plans to initiate a multi-hole diamond drilling exploration program after completion. The project is funded by an initial budget of $500,000 to evaluate the potential of its 100% interest in the cobalt-focused Glencore Bucke Property in Ontario, Canada, by locating and testing targets within the vicinity of known prior-drilled mineralization results.
Knowing that FUSEF's properties are situated near historically proven reserves, the testing results are expected to be encouraging. If so, Fuse's 100% interest in the Glencore Bucke Property alone could be a substantial value driver in the coming weeks and quarters. That property consists of two patented mining claims totaling approximately 16.2 hectares (about 40 miles) located west of and contiguous to its Teledyne Cobalt Project. Investors should also know that the Teledyne leased mining claim 585, now the "Glencore Bucke Property," traces back to initial development through Falconbridge Nickel Mines Ltd. And while it was an excellent prospect and property then, it's better now, with enhanced exploration and monetization potential from accessible southern extensions of veins from the Cobalt Contact Mine property. Remember, in the mining sector, past performance is an excellent predictor of future success.
Fuse is doing its part to make history repeat. Work they completed at the Glencore Bucke property delineated two mineralized zones, the Main Zone and Northwest Zone, measuring 500 ft (152.4 m) and 200 ft (70.0 m) in length, respectively. Both can be value drivers. By the way, before the 2022 mineral exploration season, FUSEF completed 21 diamond drill holes as part of its first phase of drilling intended to confirm and extend the existing known mineralized zones on the property. Results and highlights from that 2017 diamond drill program include but are not limited to:
Note: The above intervals represent core length and not true width of the structures or intervals. Sample and assay information was taken from the NI 43-101 Technical Report on the Teledyne Cobalt and Glencore Bucke Project Feb 4, 2021. Bolded Intervals represent grade composites.
Developing Value From Glencore-Bucke And Teledyne Cobalt
FUSEF continued to explore, and, again, the results are encouraging. In 2018, they completed their phase ll operation, drilling an additional 24 diamond drill holes at Glencore-Bucke. They also successfully intersected mineralized zones along strike in addition to both vertically above and below previous intersections reported on the Main and Northwest Zones. One of the holes, GB18-44, intersected visible cobalt mineralization and returned grades of 0.11% Co, 9.4 ppm Ag, and 1.04% Cu over a core length of 8.40 m from 110.60 to 119.00m. Those results were included in its NI 43-101 Technical Report on the Teledyne Cobalt and Glencore Bucke Project, published in February 2021.
And they inspire optimism. Located on its northeast corner, the Glencore-Bucke Property adjoins the former cobalt-producing Agaunico Mine, which from 1905 through to 1961, produced a total of 4,350,000 lbs. of cobalt and 980,000 oz of silver. Notably, cobalt unearthed from the Agaunico Mine is greater than any other mine in the Cobalt Mining Camp. While production ceased in 1961 due to depressed cobalt prices and over-supply, don't take that as a negative for FUSEF's prospects. Remember, the green-energy initiative was just a faint blip on the radar screens during that time. Of course, things have changed.
A bias of market analysts expects demand to outstrip supply by as much as 10X over the next ten years. Still, surging long-term demand is just one aspect making the FUSEF investment proposition attractive. FUSEF is also showing that there is depth to its operations. Their properties in Bucke and Lorrain Townships consist of 5 patented mining claims totaling 79.1 hectares (195.46 miles) and 46 unpatented mining claim cells totaling approximately 700 hectares (1729.74 miles).
Its Teledyne Cobalt project is also in play. Sitting along the west boundary of its Glencore-Bucke property, Fuse's Teledyne Cobalt Project is another contributor to FUSEF's bullish proposition. Fuse's 100% interest in that property, also in Cobalt, Ontario, adjoins the south and west boundaries of claims that hosted the Agnico Mine. By the way, FUSEF's properties have more than an excellent heritage; they can be efficiently explored and developed.
Infrastructure Matters In The Valuation
Each is supported by a well-managed and designed infrastructure, making projects easily accessible by highway 567 and an established secondary road already in use to support cost-effective operations. That infrastructure is getting more robust, and it adds value.
On an inflation-adjusted basis, over $25 million ($CAD) has been spent developing its Teledyne Property infrastructure. That includes creating a development ramp and a modern decline going down 500 ft parallel to the main cobalt mineralized vein, providing an accelerated opportunity for FUSEF to capitalize on and maximize potential while mitigating financial risk. It does more.
Most importantly, the infrastructure can be leveraged on-demand to provide quick access to projects and enable targeting more business quickly from a battery metals sector that is fundamentally strong despite being in the early innings of the sector lifecycle. But robust infrastructure provides another fundamental contribution- it helps materially de-risk projects. And FUSEF appears to be paying attention to that reality by actively de-risking its battery metal exploration projects by staying focused on mineral discovery project lifecycles.
That's good practice for FUSEF and excellent news for investors.
Investors Benefit From A De-Risked Fuse
Frankly, investors can benefit significantly from FUSEF doing its part to mitigate the downside while developing opportunities for the exponential upside. It's a trickle-down of sorts and a product of FUSEF staying focused on project "timing" and "lifecycle" indicators to maximize returns and minimize new and existing project risk. Put another way, FUSEF is doing more than working to create value; they are preserving it. Actionable evaluations during the concept, pre-discovery, and development phases often expose big-picture opportunities and limit unnecessary financial exposure.
Investors also benefit from a team of proven leaders and advisors that intimately understand their industry, have a track record of finding accretive valuable resources, and know how to make, plan, and advance projects in world-class regions. FUSEF investors get plenty of intrinsic and inherent asset inclusions, especially from a roughly $0.07 stock. They also get low-priced exposure to a battery metals sector expected to be a trillion-dollar industry by the decade's end. And with some sector analysts claiming that the global battery metals supply chains must expand by 10x to meet projected critical battery metals needs by the end of this decade, that bullish assumption also keeps FUSEF in the sweet spot of opportunity.
Know this, too. The International Energy Agency (IEA) is on record saying that the mining industry must build at least 17 more cobalt mines by 2030 to meet global net carbon emissions goals. But that estimate was made before headlines from last month. Adding to the battery metal demand is additional forecasting that includes several states planning to eliminate sales of gas-powered vehicles entirely by 2035. More states are suggesting they will join that move, and some even have legislation connecting them to other states' decisions. So, there could be a snowballing of market size forming larger and faster than ever expected.
Of course, FUSEF and its investors should embrace those plans. Cobalt is a vital fuel to the sector; without it, the EV sector is virtually powerless.
Mining-Friendly Jurisdictions Can Help Expedite Growth
Perhaps the most significant factor contributing to the Fuse Cobalt investment proposition is that they are ideally positioned for potentially exponential growth resulting from operating in Ontario, Canada, one of the world's most mining-friendly jurisdictions. Working there minimizes the risk of interference from geopolitical conflict, disruptive changes to environmental regulations, and lacking a skilled and able workforce. Ontario, Canada, is ranked #12 out of 77 for "Investment Attractiveness" by Fraser Institute's 2021 mining survey, with part of that ranking attributed to government and regulatory stability. Better still, capital investment is pouring into the region.
Investments of over $50 million (CAD) have been committed to accelerating the development of cobalt mining projects where FUSEF operates. That includes $5 million from the Canadian Federal government, $5 million from Ontario's provincial government, and a loan commitment of $45 million from mining and commodities trading giant Glencore Plc ($GLNCY) to refurbish and reopen the regions only refinery.
Those efforts enhance project visibility and allow FUSEF to expedite exploration and development by leveraging that fortified infrastructure from its projects close to essential roads, power, equipment, and field service companies.
A Compelling Proposition In-Play
The sum of FUSEF's parts presents a compelling and timely investment proposition for investors. And the better news is that as the company continues to do its groundwork, an even stronger case for significantly higher valuations can be supported by tangible assets and evidence. At roughly $0.07, it is not appropriately factored that FUSEF has enough capital to complete its exploration projects through the end of 2022. That puts up to several updates in the queue, any of which could fuel an already hot stock.
Don't under-appreciate that FUSEF is also uniquely positioned to ride the tailwind created by major players like Glencore Plc, whose massive regional investments are revitalizing the country's only cobalt refinery. Here's another thing to know. FUSEF doesn't necessarily need to unearth cobalt and other minerals or metals to deliver potentially exponential value to investors. Proven assets underground are also valued; just check the valuations of junior miners in the precious metals sector. Some score valuations up to hundreds of millions of dollars before taking an ounce of metal from the ground. A similar dynamic could emerge if results from its Alpha IPTM geophysical survey post as expected.
In the meantime, there's plenty to like about Fuse Cobalt, Inc. For less than $0.10, investors are getting into a company having activity on the ground, a significant number of exploratory holes drilled, and geological surveys and project updates expected near-term. It's a price deserving of a raise on intrinsics alone.
However, markets are forward-looking, so while intrinsics can support a leg up, inherent value can offer another. Combined, and assuming good news is coming, its 62% gain in August may be the precursor to higher prices. Investing ahead of it may therefore be a wise consideration.
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