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Cobalt 27 Capital Corp. (TSX.V – KBLT): Acquiring Physical Cobalt, Focused Portfolio of Streams, Royalties and Direct Interests in Mineral Properties Containing Cobalt, Anthony Milewski, Chairman and CEO

on 10/14/2017
Cobalt 27 Capital Corp. (TSX.V – KBLT) is a minerals company that offers pure-play exposure to cobalt, an integral element in key technologies of the electric vehicle and battery energy storage markets. Cobalt 27 intends to acquire and hold physical cobalt, as well as manage and grow a cobalt-focused portfolio of streams, royalties and direct interests in mineral properties containing cobalt. We learned from Anthony Milewski, Chairman, CEO and director of Cobalt 27, that they are the single largest holder of physical Cobalt metal outside of the Chinese government stockpile. Their market cap today is around $240 million and they are underpinned by 2160 metric tons of Cobalt. In 2017/2018 Cobalt 27 Capital is actively reviewing a number of opportunities in the streaming and royalty space. According to Mr. Milewski, if you believe in electric vehicles you might want to own the basic materials and relative to other mining stock Cobalt 27 is a low risk way to play the beta.

Physical Cobalt Material

Dr. Allen Alper: This is Dr. Allen Alper, Editor-in-Chief of Metals News, interviewing Anthony Milewski, chairman and CEO and director of Cobalt 27 Capital. Could you give our readers/investors an overview of your company and what differentiates Cobalt 27 Capital from other Cobalt resources companies?

Mr. Anthony Milewski: Sure, and thanks for interviewing me again. I think there are a few things that differentiate Cobalt 27 from some of the other Cobalt companies. The first, and probably most important thing, is that we are a holder of physical Cobalt metal. We're the single largest no producer holder of physical Cobalt metal outside of the Chinese government stockpile. That really creates a balance sheet for us. The market cap today is around $240 million and we're underpinned by 2160 metric tons of Cobalt. That really allows us to move forward with the strategy, streaming, which over time requires additional capital to execute on the streaming strategy. That's in contrast to other Cobalt names, which are also interesting in their own right, but are more exploration and development plays.

When we think about Cobalt 27 and where we are, we like to think about the 20-year inflation adjusted average for Cobalt, which in CRU puts us in the mid to low 20s. Today, the price of Cobalt is at $30. If you think about that, that probably implies that the downside for Cobalt, and possibly the stock, is 10-15% in terms of the NAV, but the upside is a multiple. It's the asymmetric risk profile, whereby you have a mid-scale downside and the prized unlimited upside.

And so when I look at our share registry and think about a lot of our core investors, they're people who believe in electric vehicles, and they believe in the electric vehicle schematic. But maybe they're not keen on the risk reward profile of an exploration company where it might go down 75% or it might go up 30 times. That's a really different kind of company from us. It's a valid model it's just a different risk profile.

Dr. Allen Alper: Sounds good. Could you tell us a bit more about your plans for the rest of 2017 and into 2018?

Mr. Anthony Milewski: We are actively reviewing a number of opportunities, especially in the streaming and royalty space. We can perceive that hopefully there will be deals to be done this year or next year, timing is always a tricky thing with these types of deals. We're very focused on searching through deals and trying to find the right deal, or several deals that will create value. We're also looking at the physical market. When the time is right, we would like to acquire additional physical material, although that market is very tight at this point and so it's hard to buy large quantities of physical material now. Large automobile companies are coming into the market and trying to get multi-year long off-take agreements.

We think what our investors really want from us is to give scale and liquidity in the stock. As I said earlier, right now the market cap is nearly 240 million Canadian, our objective is to transact on large liquid streams, which hopefully bring market cap and liquidity into the stock in kind of chunky transactions.

Dr. Allen Alper: Sounds very good. Could you refresh the memories of our readers/investors about your background, your team and your board?

Mr. Anthony Milewski: Yeah. We've put together what we think is a very unique group of individuals. Let me start with the board first. We are really fortunate with our directors. We have Frank Estergaard, who spent 30 years at KPMG as a partner. He had an Audit Committee. We have Nick French, who spent his entire career since the 70's trading cobalt, at certain points he was totally the largest cobalt trader in the world. I don't know anyone who has a better knowledge of the physical cobalt market than Nick. We have other directors that some of your readers would know including Jon Kanellitsas from Lithium Americas and Jon Hykawy, who's an analyst and myself.

If you look at the management team, you have Justin Cochrane, he spent a decade working on streaming transactions as an investment banker. He left banking and actually ran cooperate development at Sandstorm for five years. He has transacted on over 40 streams of royalties. He has a very deep knowledge of how to structure these transactions.

I've spent my career in the middle of the mining and energy business in funds. I've transacted a lot and have a sense for what we can do in terms of deals to create stronger value.

One really unique aspect of Cobalt 27 is our Advisory Board. In addition to the board and our management team, we have a group of individuals who are industry professionals and have great jobs. Whether that's the former CEO of LG Chem, one of the largest battery makers in the world, or one of our members who is a Senior Battery Executive at Ford or Neil Warburton and Phil Day who are mining experts. We've kind of uniquely put together this advisory board to help out the board and management as we go through the world looking at ideas and deals.

Dr. Allen Alper: Sounds excellent. That's a great team you have supporting Cobalt 27. You have deposits, you have royalty streams and you have physical cobalt, is that correct?

Mr. Anthony Milewski: It's a three-fold strategy. We have the physical cobalt sitting in warehouses in Baltimore, Rotterdam and Antwerp, LME bonded warehouses. They are all fully insured. That is the first arm of the business. The second and probably, going forwards, a very critical arm of the business is the streaming and royalty arm of the business. We currently have a number of royalties, they are really out of the money options. We look at those as options as much as anything else, but the growth really will come through the large streaming transactions.

The third arm of the business is the ability to invest in a project level. I think for us, that creates optionality around streams. There could be instances in the future where we want to put a couple million dollars of equity in, in order to get the stream. The streams in the early days won't look like that. Because we're really talking about streaming currently producing half that. As time goes on and the market develops it may be the case, in certain situations, that you would also provide a certain amount of equity as part of the streaming package.

Dr. Allen Alper: Sounds great. Are you also investing in mines?

Mr. Anthony Milewski: The Company as a whole, at the moment is not. Personally, in addition to cobalt, I very much like the nickel market. Not really that far of stretch if you think about it. Because when you look at battery chemistries, nickel and cobalt are very interlinked in terms of transferring units across chemistry and also in terms of how the batteries are bound and stabilized. As a natural extension of cobalt, personally I look at nickel quite a bit. Although Cobalt 27 is focused solely on cobalt at this point. I think certain types of nickel, such as nickel sulfate, are going to be very interesting moving forward.

Dr. Allen Alper: Great. What are the primary reasons our high-net-worth readers/investors should consider investing in Cobalt 27?

Mr. Anthony Milewski: I think the reason is very straightforward, if you look around the world and you think, much like 10 years ago when the iPhone launched and people said, "Oh, look. Someday people will buy these smartphones and someday 10, or 20, or 30% of people will have them."

Fast-forward 10 years and now 100% of people, who want them, have them. If you think, on any level, that electric vehicles are going to take off and people are going to buy these vehicles, and by the way, the data supports the idea that they are going to buy them, but if you believe that to be true, you have to ask yourself a question, which is how do you invest in this? Well, you might say, Tesla is interesting, or Ford is interesting, or Chevy is interesting, but who is going to be the winner there? I don't know, it's hard to say, there are a lot of twists and turns on the road to victory. What I will say is that if you have conviction that there is going to be a winner, whether it's Tesla, or Chevy, or whoever it ends up being, then what you know automatically is that the basic materials that are the key inputs to the battery that powers those vehicles are going to be a winner.

And so if you're a high-net-worth individual, if you're a retail client, and you're thinking about how should I invest in the electric vehicle story and battery fuse story, I think the best way to do that is through basic materials and in particular cobalt. The reason cobalt is interesting on the flip side of those materials, mainly copper, nickel, lithium and cobalt is because unlike those other materials, the supply side is very constrained. All of those materials have great demand side dynamic and that's critical to a bold market, but what can make a bold market particularly unique is when you have the demand side of the story and then you have a constraining supply side and that's what we have for cobalt.

So if you are looking at this phase and you're looking at electric vehicles and if you think they're real, then you have to own the basic materials and Cobalt 27 is relative to other mining stocks, a low risk way to play the data.

Dr. Allen Alper: Those sound like excellent reasons for our high-net-worth readers/investors to consider investing in Cobalt 27. Is there anything else you'd like to add Anthony?

Mr. Anthony Milewski: I think by and large the high-net-worth readers/investors and a lot of retail investors are really missing a unique opportunity. I look at the electric vehicle as a story in the same way that China was to iron ore, coal, and copper. It is a bold market. Not everyone knows that yet. I would admonish your readers/investors to really look at the electric vehicle story. You're talking about a structural change in one of the most important industries in the world, the automobile industry, and a structural change in probably the most important industry in the world, namely, the energy industry.

Even if you don't buy our stock, you need to think about the impact the demand for electric vehicles is going to have on a variety of commodities. You need to be thinking about this space in general because it's going to be part of the conversation for the next 10 years and there is going to be a tremendous amount of wealth created by picking the right names.

Dr. Allen Alper: That sounds excellent. I appreciate you sharing your insights with our readers/investors.

Anthony Milewski
Chairman, CEO & Director
416.504.3978 Ext 226

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