U.S. military requires high grade cobalt to stay in shape.

Every nation on earth is scratching for strategic resources. Strategic resources are the vital resources nations cannot do without. The Pentagon isn’t advertising it, but super-alloy grade high purity cobalt is critical to defend the nation and is in short supply.

At the top of the list is high grade cobalt. Because it can take extreme temperatures, this substance is vital in creating “super alloys” for use in batteries, aircraft and the space program. It is impossible to make a jet-fighter engine without it. And its relative rarity (high grade) makes it even more essential.

With the U.S. fighting two wars, and America’s defense contractors consuming an ever-increasing amount of this irreplaceable metal, high grade cobalt prices are likely to soar, racking up windfall profits for farsighted investors.

Formation Capital Corporation (TSX: T.FCO, ) ( http://www.formcap.com/s/IdahoCobaltProject.asp ) may be little-known to investors, but it owns huge reserves of cobalt. Once in production, it can provide 3.3% of world supply and it will be able to feed 14.9% of North American demand for cobalt. And with its huge, as yet untapped reserves, this company has unbelievable upside.

The potential to dramatically increase reserves is considered excellent with a district potential of 50 million tons (after Hughes). The project contains over 20 distinct target zones and of those only four have been drilled to date. Of those four, only one is being used (the Ram deposit) in the calculations of reserves and resources in the current mine plan.

If you like the idea of buying a rarity whose price is about to be squeezed higher by the forces of rising demand and limited supply, you shouldn’t miss this one.

Jabecque

What’s the name of the game?

Why this company is likely to be a buyout candidate and certainly in the near future a takeover candidate?

- How big is the company’s deposit? The majors are thinking big here. Companies throw every possible resource they have at growing its reserves and at the end of the process, have fewer reserves than it started with? So the juniors with large deposits are always favorable.

This one has a high grade, I repeat: high grade, primary cobalt deposit unique to North America and the largest primary cobalt deposit in the world, I repeat: primary!

- How far along is the deposit’s development? The majors don’t want a company that’s just begun drilling and doesn’t have a clue how much cobalt it’s actually sitting on. They want a sure thing, something that’s just been discovered, or something that’s just about to go into production.

This one hires yet highly qualified key personnel to assist in the expedition of engineering procurement and construction of the their Cobalt Project and is yet purchasing, shipping and receiving materials. Mine equipment including an Outotec 2.9 metre (9.5 foot) diameter Direct Drive Ball Mill, with an overflow discharge design and a 4.9 metre (16 foot) effective grinding length rated at 560 kW (750 HP) previously ordered has started to arrive in town.

- Is the mine located in a mining-friendly country? The third thing the majors don’t want is what happened in Venezuela, Ecuador, Zimbabwe, DRC, ….. where they seize more or hold the profits for itself. It’s essential the government in the country where the mine is located is mining-friendly.

The project enjoys strong local and state political support from the Lemhi County commissioners as well as the state’s congressional delegation and Governor. The company is pleased to announce that previous four-term Idaho governor and former U.S. Secretary of the Interior, Cecil D. Andrus has agreed to join the Board of Directors. The company is developing a cobalt mine in Lemhi County, Idaho, and is currently operating the Sunshine Hydrometallurgical Facility in Shoshone County, Idaho. In commenting on the appointment the former Idaho governor said he had studied the project carefully, and the environmental protections put in place. “This is the best “green” mining project I’ve ever reviewed.

- Is the mine economic at current prices? If there is not enough information on the resource or if the grades aren’t high enough. Some mines may never pass a feasibility test. In these cases the mine may not end up proving to be economic, this is a clear barrier to any major buyouts.

The company has received a positive bankable feasibility study. This Cobalt Project is expected to produce 3.4 million lbs of cobalt, 2.8 million lbs of copper and 3,600 ounces of gold per year, at a cost of US$8.00/lb of cobalt produced net of credits, Jennings Capital said. Actual price of Cobalt $40/lb!

- Does the company have the ability to put the mine into production? Some companies are looking to “flip” a mine. Essentially I don’t want to look at companies that are just looking to be bought out. I want to make sure a junior has the capability and assets to develop a mine. Major companies will avoid buyouts if the junior looks to be flipping a mine without any intention to mine it themselves.

This company hires highly qualified key personnel. Mine equipment including an Outotec 2.9 metre (9.5 foot) diameter Direct Drive Ball Mill has started to arrive in town.

This 10-bagger blue gold company smiles at me!

What’s the name of the game?

Jabecque

Disclosure: Author is currently long this company.