Jervois suspends Idaho mine on largest U.S. cobalt deposit amid low metal price, inflation

Jervois Global (TSXV: JRV; ASX: JRV) is delaying final construction of its Idaho project on the largest cobalt resource in the United States because of inflation and low commodity prices even though the mine is already built.  

The Melbourne-based company has spent about US$130 million constructing its Idaho Cobalt Operation (ICO), commissioning the mine last October and producing some 27,000 tonnes for processing. Commercial production was supposed to have started this quarter at the site 350 km northeast of Boise.  

“The current U.S. inflationary construction and cost environment, particularly at ICO’s remote location, has proven challenging for Jervois to manage effectively,” the company said in a statement on Wednesday. “Jervois expects cobalt prices to recover over the medium term, including from the influences of the energy transition.”  

Cobalt sells for less than half of what it did a year ago. It’s now at about US$15.20 per lb. compared with US$37.40 per lb. on Mar. 25, 2022, according to Mining.com.  Prices were last this low in January 2021.

Jervois said it expects to complete construction of ICO when cobalt prices recover, which it also expects will align with cobalt refining capacity in the U.S. brought into operation by Jervois and/or third parties.  

The company is also betting on more potential funding from the US. government and that purchasers will want to buy cobalt from companies with solid environmental, social and governance standards.   

Washington has already awarded Jervois US$15 million through the Department of Defense and the company has applied for funding for drilling to expand the resource and assess the construction of a cobalt refinery from the US$370-billion Inflation Reduction Act promoting clean technologies. Cobalt is used in electric vehicle batteries.  

The world’s leading cobalt supplier, the Democratic Republic of the Congo, is often criticized by ethics watchdogs for poor ESG standards.  

ICO has 5.2 million measured and indicated tonnes grading 0.4% cobalt, 0.7% copper and 0.5 gram gold per tonne for 89,000 oz. contained gold, according to a December estimate. 

Jervois also runs cobalt refineries in Kokkola, Finland, 480 km north of Helsninki, and in São Paulo, Brazil. It’s exploring the Nico Young nickel-cobalt deposit 180 km northwest of Canberra and has a 2% interest in Cameco’s (TSX: CCO; NYSE: CCJ) Virgin River uranium project in northern Saskatchewan.  

Jervois says it has US$52 million of cash, has paid down US$45 million of its US$150 million loan from Cyprus-based commodity trader Mercuria, and remains in compliance with covenants on its US$100 million senior secured bonds due in July 2026. There’s no expected adverse impact on the bonds from the suspension, it said.  

“Jervois has determined that not mining ICO cobalt at cyclically low prices will preserve the optionality and inherent strategic value of ICO for shareholders and key stakeholders including local communities and the State of Idaho,” the company said. “Not mining ICO at current prices is consistent with U.S. government critical mineral policy objectives.” 

Shares in Jervois Global fell by more than a third on Wednesday in Toronto to 7¢ each, within a 52-week range of 6¢ to 96¢, valuing the company at $139.3 million.