Global Investor
December 10, 2009
By David Ebner

To build a $140-million cobalt mine in a national forest in Idaho, tiny Vancouver junior miner Formation Metals Inc.  turned to the state's chief rainmaker, Cecil Andrus.

Mr. Andrus was Idaho's longest-serving governor, a Democrat who was elected four times. Between two stays at the governor's mansion in Boise he was part of President Jimmy Carter's cabinet as secretary of the interior. During his years in office, Mr. Andrus was known for his environmental passion, and opposition to a proposed mine in the state helped get him elected in 1970 to his first term as governor.

He was exactly the man needed by Formation Metals to help open an underground mine in a national forest in federally protected mountainous wilderness.

The company wanted to unearth a metal used in turbines for jet engines and batteries, where demand could spike as electric cars become more common. It would be the only cobalt-focused mine in the United States.

Now Formation Metals has cleared a major hurdle by passing a nearly decade-long environmental assessment completed by the U.S. government, which this week approved the company's plan of operation. Clearing trees from the site is set to begin in January and work on the main facilities is scheduled for spring, with the mine to open in 2011.

The little-known Vancouver upstart had staked a cobalt claim on public land in the mid-1990s in Salmon-Challis National Forest. In 2001, the long process to obtain the required permits began.

Though there had been mining in the region in the past, Formation Metals was still fighting through the paperwork in 2007, six years after it started, when chief executive officer Mari-Ann Green convinced Mr. Andrus that the cobalt mine made sense, environmentally and economically.

Mr. Andrus, who joined the company's board of directors, went to work, trumpeting the merits of the mine to officials in Idaho, and especially at the Department of Agriculture in Washington, of which the Forest Service first reference is a part.

“When you're dealing with the bureaucracy, it always helps to talk to the heads of the various departments, so they understand what you're trying to do,” Mr. Andrus, 78, said in an interview from Boise Thursday. “It's easier to do that face to face, eyeball to eyeball, rather than in e-mails that go unread.”

Before the mine can be built, Formation Metals needs to close deals for debt and equity to finance the project; it officially began that process in November and hopes to conclude before year's end.

The company has periodically raised chunks of cash in its two-decade history, including $20-million in 2007 and $9-million this year. The TSX-listed company has already sunk $50-million into the cobalt project and owns a metals refinery in Idaho.

“There were some very hard days,” Ms. Green said an interview Thursday. “We've gone without paycheques from time to time. When we set out, we set out to find our shareholders a mine and we've done that and we're going to bring that to fruition. We staked the mine at a time people weren't really looking for cobalt. It was difficult to raise money for it. Now everybody's talking rare-earth minerals and lithium and cobalt.”

Ms. Green was educated far from the mining business. She has a bachelor's degree in education from the University of Manitoba and worked as a school principal in that province, British Columbia and Alberta before moving to Calgary in the early 1980s to join the corporate world. She was hired in a do-everything role at small junior energy company and learned on the job.

“I had an entrepreneurial streak,” she said. In 1988, she and a trio of geoscientists started Formation Metals, which now has about 50 employees.

Ms. Green met Mr. Andrus several years ago and sold the green politician on a mine that would bring jobs without destroying the land. Mr. Andrus was eventually convinced and in turn quelled opposition among environmentalists in the state with the promise of the “greenest mine in America.”

“He's a statesman,” Ms. Green said. “He really helped us.”

The Idaho Conservation League last year withdrew a threat of a court challenge when Formation Metals said it would put up $30-million in reclamation bonds and spend $150,000 annually on watershed projects when the mine operates.

The cobalt mine could product 1,525 tonnes of the high-purity metal annually for at least a decade, the company has said. The volume is about 3 per cent of global production and would be enough to supply more than 10 per cent of the demand in North America.

The U.S. is the biggest user of cobalt. Cobalt reserves are most prevalent in Democratic Republic of the Congo and selling is dominated by mining giants Xstrata PLC and Glencore International.

The U.S. wants to wean itself off foreign oil, but the same sentiment exists in cobalt, where the country is “captive” to Xstrata, Mr. Andrus said.

Local politicians in the Lemhi County, home of the mine, have backed the project from the beginning.

“It's good for the country, to produce something for a change,” said Robert Cope, a county commissioner. “I'd like to see this country move away from a service-based economy back to manufacturing.”