Electra seeks cash for stalled cobalt refinery

Electra Battery Materials (Nasdaq, TSXV: ELBM) says it is restructuring its finances to complete what may be North America’s first cobalt sulphate refinery.

The battery metals developer said Thursday it plans to convert about $40 million (C$55.3 million) of its outstanding debt into equity and raise $30 million on the stock market. It should be enough to finish the $250-million refinery in northern Ontario that it halted in August 2023 because of high costs and supply shortages. 

The note restructuring is “undeniably dilutive and difficult” for shareholders, but it is “both timely and necessary” for the company, Electra CEO Trent Mell said in a release. “With shareholder approval, lender participation and government support, we will soon be in a position to complete construction.”

Shares in Electra Battery Materials gained 2.1% on Friday afternoon in New York to 97¢ apiece, valuing the company at $23.9 million. 

The cobalt market is grappling with persistent volatility, shaped by oversupply from the Democratic Republic of Congo, where most global production is concentrated, and uncertainty over long-term demand as battery manufacturers seek to reduce cobalt content in electric vehicle chemistries. Prices have fallen sharply from pandemic highs, while geopolitical risks, ethical sourcing concerns, and pressure to secure reliable, low-carbon supply chains have added layers of complexity for miners, refiners and end-users alike.

Million EVs

The plant in Temiskaming Shores is expected to produce about 6,500 tonnes of battery-grade cobalt per year, enough to support the manufacturing of a million electric vehicles.

The debt conversion gives Electra’s lenders shares priced at 60¢ each. This exchange would result in a 60% reduction in Electra’s total debt to $27 million. Its remaining notes will take the form of a new three-year loan.

The company’s equity financing is to offering units priced at 75¢ each. The units each contain one common share and one share purchase warrant, with the latter exercisable for three years at $1.25 a share. Existing lenders have committed to $10 million of the financing.

Working capital

The financing package will also include $2 million in short-term loans to fund working capital. In return, the lenders will have the right to appoint a director to Electra’s board, which will be expanded to seven members after the transaction.

To date, Electra has received federal government support from both sides of the border, including a $20-million award last year from the U.S. Department of Defense and a recent funding on a similar scale (C$20 million) from the Canadian government.

“By significantly reducing our debt and securing new capital, we are strengthening our financial foundation and aligning our funding with a clear, executable path to production,” Electra CFO Marty Rendall said in the same release.