Cobalt 27 Acquires a Cash Flowing Cobalt-Nickel Stream on Producing Ramu Nickel-Cobalt Mine for US$113 Million (C$145 Million)

TSX Venture:  KBLT
FRA:  27O

Cobalt 27 is pleased to announce the transformational acquisition of a producing cobalt-nickel stream over a long-life, world-class asset that provides immediate cash flow to the Company

The world's first producing cobalt-nickel stream on the world-class Ramu Nickel-Cobalt Mine

• Stream over 55.0% and 27.5% of Highlands Pacific Limited's ("Highlands") attributable share of cobalt and nickel production, respectively, from the Ramu Nickel-Cobalt Mine ("Ramu") in exchange for a US$113 million (C$145 million) upfront deposit (the "Transaction")
• Highlands management estimates a mine life in excess of 30 years
• As a result of the Transaction, Highlands' effective attributable ownership of Ramu will increase from 8.56% to 11.3%
• Estimated attributable stream production of approximately 450,000 lbs of cobalt and 2.25 million lbs of nickel in concentrate per year
• Expands and diversifies portfolio: cobalt and nickel are important battery metals positioned to benefit from global adoption of electric vehicles and grid storage systems
• Cobalt 27 is in advanced discussions with two local PNG stakeholders which own an equity interest in Ramu (collectively "MRDC") to negotiate a US$87 million stream agreement on the same terms for a proportionate metal stream based on their aggregate attributable interest in Ramu
• Ramu has successfully ramped up since construction completed in 2012 and is now operating at peak production and in the 1st quartile of the global cost curve and maintains robust margins at spot and long-term consensus prices.‎

Transaction transforms Cobalt 27 into leading battery metals streaming and royalty company

• Long-life and low-cost nature of Ramu underscores strength and attractiveness of investment for Cobalt 27 shareholders
• Ramu is operated by a first in class operator, Metallurgical Corporation of China Ltd. ("MCC"), which has market capitalization of approximately US$12 billion
• Stream has no impact on production cost structure from operator's perspective
• Transaction to be funded through Cobalt 27's cash on hand and new debt facility; no additional funding is required to complete the Transaction or the additional MRDC stream
• Expected to generate meaningful free cash flows and deliver significant value to Cobalt 27's shareholders
• Accretive to Cobalt 27's NAV per share
• Expected significant potential upside in cobalt and nickel pricing

Conference Call scheduled for May 23^rd at 8:30 am EDT ahead of TSXV market open, dial in details below

TORONTO, May 23, 2018 /PRNewswire/ -- Cobalt 27 Capital Corp. ("Cobalt 27" or the "Company") (TSXV: KBLT)(FRA: 27O), is pleased to announce that its wholly-owned subsidiary Electric Metals Streaming Corp. ("Electric Metals Streaming") has entered into a Metal Purchase and Sale Agreement ("MPA") with Ramu Nickel Limited ("RNL"), a wholly owned subsidiary of Highlands (HIG.AX), for a cobalt-nickel stream on its attributable interest in the producing Ramu mine, located in Papua New Guinea ("PNG") (the "Ramu Cobalt Nickel Stream") which is operated by MCC. 

Key Transaction Terms

• The Ramu Cobalt Nickel Stream is governed by the MPA, pursuant to which Cobalt 27 has agreed to acquire the right to purchase 55.0% of RNL's attributable share of the payable cobalt metal and 27.5% of RNL's attributable share of the payable nickel metal produced at Ramu, for the life of mine, in exchange for a US$113 million (C$145 million) upfront cash deposit payable to Highlands.  Highlands, which owns 100% of RNL, currently holds an effective 8.56% ownership interest in Ramu.  However, Highlands will use proceeds from the Transaction to increase its effective ownership interest in Ramu to 11.3% through the repayment of its share of outstanding Ramu construction and development loans. For clarity, the Ramu Cobalt Nickel Stream will be over RNL's pro forma 11.3% ownership interest in Ramu.
• In addition, Electric Metals Streaming will make ongoing payments of US$4.00 per pound of payable cobalt and US$1.00 per pound of payable nickel, each subject to annual inflation adjustments beginning on June 30, 2023.
• Cobalt 27's Ramu Cobalt Nickel Stream will be secured by a first-priority ranking pledge over Highlands' shares in RNL and a guarantee by Highlands.
• In connection with the Ramu Cobalt Nickel Stream, Cobalt 27 has also agreed to complete a strategic equity investment in the Common Shares of Highlands, which will result in the Company owning an approximate 13.0% pro forma interest in Highlands (the "Equity Investment"). Subject to ASX and POMsoX approvals, Cobalt 27 will be provided with anti-dilution rights with respect to the Equity Investment.  In connection with the Equity Investment, Cobalt 27 will also have the right to appoint a member to Highlands' board of directors, and accordingly, concurrent with the close of the Equity Investment, Anthony Milewski, Chairman and CEO of Cobalt 27, will be appointed to the board of directors of Highlands.
• Cobalt 27 and Highlands have agreed that the proceeds from the US$113 million stream are to be used by Highlands to fund repayment of Highlands' attributable Ramu partner loans.  Highlands currently owns an 8.56% interest in Ramu which, through the repayment of its outstanding attributable balance of the Ramu partner loans, will immediately increase to 11.3%.
• In addition to the MPA, Cobalt 27 has entered into advanced discussions with two local PNG stakeholders which own an equity interest in Ramu to negotiate a US$87 million stream agreement on the same terms as the MPA with a proportionate metal stream based on their attributable aggregate interest in Ramu. MRDC currently holds a collective 6.44% interest in Ramu, which would increase to 8.7% through the repayment of their proportionate share of outstanding Ramu construction and development loans.
• Highlands has retained the right to purchase an interest in the Ramu Cobalt Nickel Stream from Cobalt 27 of up to approximately US$15 million for a period of 90 days following closing on the same terms as the Transaction. In the event that MRDC enters into a streaming agreement with Cobalt 27, Highlands will have the right to purchase an additional interest in the Ramu Cobalt Nickel Stream from Cobalt 27 of up to approximately US$10 million on the same terms. 
• Highlands is the ideal project partner for Cobalt 27 due to its deep experience in the region having successfully operated in PNG for over 20 years. Cobalt 27 looks forward to partnering with Highlands to review additional opportunities in Australia and the broader Asia-Pacific region.
• In order to further strengthen the partnership between Cobalt 27 and Highlands, Mr Craig Lennon, CEO of Highlands Pacific, has agreed to join Cobalt 27's Advisory Board.  Mr. Lennon has been with Highlands for 17 years and is an expert in the region.

"This transaction represents the fulfillment of our promise to investors to deliver a cash flowing cobalt stream on a world-class mine.  Ramu is a large world-class, high-margin and long-life asset which we view as the ideal candidate for our inaugural stream. We believe the exposure to both cobalt and nickel, another key battery metal, will yield significant returns to our investors as electric vehicles begin to change our society in the coming years. Our partnership with Highlands will help Cobalt 27 continue to grow its position as the leader in battery metal streaming" commented Anthony Milewski, Chairman of Cobalt 27 Capital Corp.

More

Ramu, located near Madang on the north coast of PNG, is majority-owned and operated by MCC which holds a 67.02% stake in MCC-JJJ Mining Development Company Limited which owns 100% of MCC Ramu NiCo Ltd. ("MCC – Ramu"), holder of an 85% joint venture interest in Ramu. The Government of PNG and local landowners (the "PNG Stakeholders") own a 6.44% stake in Ramu. Following repayment of the Ramu construction and development loans by Highlands, MCC - Ramu's ownership will decrease to 82.3%.  The Ramu mine was financed and constructed by MCC for US$2.1 billion which, at the time, was China's largest overseas mining investment.  MCC is listed on the Hong Kong Stock Exchange and Shanghai Stock Exchange with a market capitalization of approximately US$12 billion.  MCC's interest in Ramu is supported by a consortium of three of the largest enterprises in the Chinese nickel and stainless steel industry, namely Jinchuan Group Limited, Jilin Jien Nickel Industry Limited, and Jiuquan Iron & Steel Limited. 

The Ramu Cobalt Nickel Stream offers a number of positive benefits to the shareholders of Cobalt 27, Highlands and Ramu, including:                          

• The Transaction provides Cobalt 27 with its inaugural producing stream and represents a cornerstone asset for the Company to support continued growth through future acquisitions of producing battery metals streams, royalties and related investments.
• Cobalt 27 will receive immediate cash flow representing a short payback period on a world class stream.
• Ramu is a large scale nickel-cobalt mine, ranking first-quartile on the global cost curve, and has a long mine life with significant resource upside potential.
• The Ramu Cobalt Nickel Stream will reduce uncertainty for Highlands by allowing for immediate debt repayment of Highlands' Ramu partner loans and accelerate cash flows from Ramu to Highlands.
• With Cobalt 27's acquisition of the Ramu Cobalt Nickel Stream from a non-operating joint venture partner, MCC as operator will not experience any direct impact on its production costs as a result of the stream. 

About the Ramu Mine

• Construction and commissioning of the US$2.1 billion Ramu mine was completed in 2012 by owner/operator MCC, as its cornerstone asset in a nickel-focused resource portfolio.
• The Ramu Nickel Mine is a large scale nickel-cobalt asset with total estimated reserves of 1 billion pounds of nickel and 100 million pounds of cobalt. Management of Highlands currently estimates a mine life of 30+ years.  Ramu produces approximately 3% of annual global mined cobalt as a co-product metal.
• Ramu exceeded annual production projections in 2017, reporting net cash flow of US$170 million (unaudited), on production of 34,666 tonnes of contained nickel and 3,308 tonnes of contained cobalt, both in excess of nameplate capacity. 
• Ramu is among the most efficient nickel-cobalt operations in the world, ranking in the first quartile of the 2017 global nickel asset cost curve.  During the first quarter of 2018, nickel prices averaged US$6.02/lb; cobalt prices averaged US$39.30/lb and reached over US$43/lb.

In addition to MCC's investment in Ramu, a number of other prominent resource companies successfully operate in PNG and are responsible for significant and widespread investment in, and economic development of, the country in recent years.  The most notable of these include Harmony Gold and Newcrest Mining's proposed US$2.8 billion Wafi-Golpu Joint Venture copper and gold mine; Newcrest's US$7.2 billion merger with Lihir Gold Limited in 2010; and, Barrick Gold's US$298 million sale of 50% interest in the producing Barrick Niugini (Porgera) Gold Mine to China's Zijin Mining Group in 2015.  Additionally, oil and gas majors, ExxonMobil and France's Total recently announced plans to invest an additional US$13 billion in LNG assets and Repsol has had upstream operations in PNG since 2015.