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Cobalt 27 Capital Corp. (TSXV: KBLT; FSE: 27O): Physical Cobalt Material, Streams and Royalties and Mineral Properties, Interview with Anthony Milewski, Chairman

on 1/12/2018
Cobalt 27 Capital Corp. (TSXV: KBLT; FSE: 27O) 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. The company holds physical cobalt and is also focused on growing a cobalt-focused portfolio of streams, royalties and direct interests in mineral properties containing cobalt. We learned from Cobalt 27, that they have just completed a bought deal financing for 97 million dollars and have used the proceeds to buy another 800 metric tons of physical cobalt bringing them to almost 3,000 metric tons. According to Mr. Milewski, this transaction was an opportunity to bring in additional shareholders, bring in more retail, and strengthen their balance sheet ahead of developing their streaming business.

Dr. Allen Alper: This is Dr. Allen Alper, Editor-in-Chief of Metals News, interviewing Anthony Milewski, Chairman of Cobalt 27. Anthony, could you give our readers/investors an overview and update them on what's happening. I know it's been an exciting time for Cobalt 27. You made the news and have been taking very bold steps purchasing Cobalt.

Anthony Milewski: Once again, I appreciate you having me back for a quick catch-up. As always I appreciate your time and your readers/investors’ time. Yes, we have really exciting news! We've just completed a bought deal financing for 85 million dollars plus the banks exercised the green shoe, bringing the total offering size to 97 million dollars, which for a company that just went public in June of 2017, is an impressive show of interest. We will use the proceeds to buy physical cobalt. As you know, we already have around 2,160 metric tons of cobalt. We're adding another 800 metric tons, bringing Cobalt27 to almost 3,000 metric tons. The decision to go ahead and raise the additional funds is to strengthen our balance sheet. As we tell our shareholders and interested parties, we're focused on streaming transactions and bringing scale liquidity into the stock.

So this transaction was an opportunity to bring in additional shareholders, bring in more retail, and to give our balance sheet that added strength, when entering a cobalt streaming transaction. When you're looking at doing a stream, and you’re meeting up with a producing mining company, one of the key questions they'll ask you is where's the money going to come from to do this stream. Of course, you can make promises around the ability to raise capital, and that works to a certain extent, but you ultimately need to show the producer that you have capital. So what this has done, this 3,000 metric tons, is it allows us to use inventory financing. Inventory financing rates are very inexpensive. It allows us to go into producing companies and show that we have a strong balance sheet and access to readily available capital. We're not held hostage to the whim of equity capital markets, which can open and close on any given day, let alone over protracted negotiation.

Dr. Allen Alper: Well that's excellent. Amazing work you and your team have been doing in cobalt! Can you tell our readers/investors what that means in terms of cobalt and what is forecasted for the future?

Anthony Milewski: Cobalt is an interesting commodity. In 98, 99% of cases, Cobalt is a byproduct of copper and nickel mining globally. The exception being a primary mine in Morocco. For a decade now, cobalt has been a relatively stable market. There has been some growth in superalloys, where cobalt is used to manufacture jet engines, but really a stable market by and large. Then, out of nowhere, you have a new source of demand in the form of the electric vehicle. What we've seen transpire, even in recent months, is an acceleration of the adoption of the electric vehicle. Bloomberg published numbers, the last couple weeks, saying that, quarter on quarter, demand globally was up 63% for electric vehicles. Volkswagen is in the market, saying the need for cobalt is accelerating. Another Bloomberg outlet is saying that in 2030 there will be a need for 400 to 500,000 metric tons of cobalt. Today the annual market for cobalt is around 100,000 metric tons.

We’re seeing a commodity that by and large was in equilibrium, and out of nowhere, a brand new, unanticipated source of demand entered the market. And with that, the commodity has come under pressure. People are starting to think about what it means for today's cobalt price and for the next five or 10 years. It's fundamental to the battery that powers the EV. Much of the reduction of cobalt inside a lithium ion battery has already happened. Automakers and battery makers, are highly focused on where they're going to get their cobalt from in the coming years.

Dr. Allen Alper: That's excellent! How many pounds of cobalt is in an average, individual car?

Anthony Milewski: It varies massively. You could have cars in China with as little as four kilograms, larger batteries that might have 30 kilograms, a huge range, not including the new Tesla semi-truck for long haul trips. There's also the electrical vehicle component.

When we speak with automobile makers, around the world, they tell us the electric vehicle isn't just about being electric. It's a platform for a complete restructuring of an industry. Some recent reports by the major auto makers are talking about mobility as a service. They're talking about ride sharing. Your car may one day go around as an Uber during the day, while you're at work. Some of this is years away. In order to implement this new paradigm for the automobile industry, they need a platform that has sufficient technologies, sufficient sensors to implement it, and so that is the electric vehicle. All the times we've focused on the environmental aspect of the electric vehicle, which is important, there's the secondary and probably just as important from a commercial standpoint to the automobile makers, which is that this is the platform for the future of the automobile industry.

Dr. Allen Alper: Well that's great! Really exciting! You're right at the forefront of what is happening with the lithium ion battery market. Could you update our readers/investors on your background, your team, your board?

Anthony Milewski: We have a very interesting board, a fully independent board, except for myself and Justin. We have: Frank Estergaard, who was a partner at KPMG. Nick French, one of the largest traders of cobalt for 20 years and John Kanellitsas, who is an executive at Lithium America. So you have a very sophisticated battery-metals focused board with deep expertise in mine and commodity financing. In addition to that, we have an advisory board that's comprised of well- known and renowned experts such as the former CEO of LG Chem. You have Guy, who is an expert in nickel projects, and that's important because cobalt is often a byproduct of nickel. We've put together a group of individuals, who know the various aspects of the business ranging from mining, processing, all the way up to the automobile industry.

I've spent my career in the mining finance side of the business, and capital market side of the business. Our President and COO, Justin Cochrane was at Sandstorm and has negotiated over 50 streams in royalties during his career. He's really the driver behind the streaming and royalty business. We have a sophisticated group of individuals, well rounded in the different aspects of the value chain, in the electric vehicle story.

Dr. Allen Alper: Excellent! I’m impressed with your plans, your accomplishments, and your vision. Could you review your capital structure for our readers/investors?

Anthony Milewski: We have common shares. Prior to the recent offering, we had about 24 million shares. Post offering, we'll have another 8 million shares outstanding. It's very straightforward. There's no debt on the balance sheet. There are some options outstanding, and warrants outstanding to the directors and officers based on merit and performance. It's a very clean capital structure. There's only one cost of shares. It's publicly traded on the TSX Venture Exchange.

Dr. Allen Alper: Sounds excellent! What are the primary reasons our high- net-worth readers/investors should consider investing in your company?

Anthony Milewski: This is especially important for the retail investors because they don't always have the best access to research or the same access that a big institution might have. We're undergoing a structural change in the energy business, and the automobile industry. Over 50% of crude is used for the automobile industry, and up to 75% total for transportation more broadly. The majority of crude oil is used in transportation. The automobile industry is undergoing a transition with autonomous vehicles, mobilities of service and the electric vehicle. Most investors believe the electric vehicle will be adopted, but do they buy Tesla, Ford, Chevy? Or do they buy the basic materials, the components that make up the batteries that are going to power the electric vehicle in the future?"

If you are an investor, thinking about this space, it's very hard to know which automobile maker is ultimately going to win. However, if you do believe there is going to be a winner or two, then you know definitively the basic materials that comprise the battery are all positioned to be winners. In addition to cobalt, which is my favorite, you should look discerningly at lithium, certain types of nickel, and copper.

The retail investor really wants to focus on the structural change in these industries and boil it down to the basic materials and make sure to be exposed to them through the cycle. I think from my perspective, on a risk adjusted basis, Cobalt 27 should be in that basket, simply because we're not mining, we're not going to build a mine. It's a very clean way to play it. I think it's important to be focused on the transformation that's going on in these industries and the commodities that back them.

Dr. Allen Alper: Well that sounds like an excellent approach, and I appreciate you sharing your insights with our readers/investors. Is there anything else you would like to add, Anthony?

Anthony Milewski: No. I really appreciate your time, Allen, as always.

Cobalt 27 Capital Corp.
4 King Street West, Suite 401
Toronto, Ontario
M5H 1B6
Tel: 647.846.7765

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