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Independent Reviews for Venture Investors

ELBM.V - Capital Structure.


Electra Battery Materials (ELBM.V) (circa First Cobalt; FCC.V) aims to be the most sustainable producer of battery materials. The Company owns North America's only permitted cobalt refinery, a critical asset in the development and manufacturing of batteries for electric vehicles. ELBM.V also owns the Iron Creek cobalt-copper project in Idaho, USA.


Electra is also planning to build a fully integrated, localized and environmentally sustainable battery materials park. Leveraging the Company's own assets and business partners, the Electra Battery Materials Park will host cobalt and nickel sulfate production plants, a large-scale lithium-ion battery recycling facility, and battery precursor materials production, which will serve both North American and global customers.


Previous coverage issued May 2018, October 2018, May 2019, March 2020, October 2020 and July 2021.


News releases


July 22 - Recovers Lithium, Nickel and Copper from Battery Recycling Testwork: Metallurgical test work was conducted by SGS Labs on black mass material provided by upstream battery recyclers in the U.S. and Europe. Bench scale testing has demonstrated expected extractions of lithium, nickel, cobalt, copper, manganese and graphite.


A global engineering firm has been retained to study the leaching of black mass within the existing refinery to produce nickel, cobalt, copper and manganese products using the existing flowsheet and to produce lithium and graphite products with recommended modifications. Completion of the engineering study is expected in Q4.


July 28 - Partners with Timiskaming First Nation on Plant Study: Joint study with Timiskaming First Nation of regional medicinal plants and mushrooms to assess the historic effects of settlement, logging, mining and industrial practices.


Joint study with First Cobalt will be completed over a two-year period to collect baseline data to identify the risk of contaminants from human and industrial activity on TFN land to harvested products. Phase 1 is now underway, beginning with a field survey to identify priority medicinal plants and mushrooms for future monitoring


Aug. 23 - Announces Financing for Construction of North American Battery Materials Refinery: Arranged a combined secured convertible debt and brokered equity financing package with an aggregate value of approximately US$45 million to finance the construction of its wholly-owned hydrometallurgical refinery.


1. An offering of US$37.5 million principal amount of 6.95% senior secured convertible notes due December 1, 2026 (the "Notes") led by Cantor Fitzgerald & Co. and 2. An overnight-marketed public offering of common shares in the capital of the Company led by BMO Capital Markets for gross proceeds of approximately C$9.5 million at a price tbd.


"This is one of our most important catalysts for the year, as this financing will allow us to advance construction of our Canadian battery material refinery," said President & CEO Trent Mell. "Every director and officer is participating in the financing, underlining our confidence in our business strategy and strengthening our alignment with shareholders."


Upon completion, the Company will advance discussions on a non-dilutive working capital facility to cover (i) a minimum liquidity requirement of US$5M, and (ii) cobalt hydroxide feed purchases.


Aug. 24 - Prices US$7.5M Overnight-Marketed Public Offering and US$37.5M Secured Convertible Note Offering: Overnight-marketed public offering (the "Equity Offering") at a price of C$0.25 per Common Share.


Secured Convertible Note Offering of US$37.5M at 6.95% due December 1, 2026 will be 4.05M shares per US$1,000, (equivalent to an initial conversion price of approximately US$0.25 per share).

The Company intends to use the aggregate net proceeds of the Note Offering and the Equity Offering for capital expenditures associated with the expansion and recommissioning of the Refinery, including buildings, equipment, infrastructure, and other direct costs, as well as engineering and project management costs.


Aug. 27 - Files Second Quarter 2021 Financial Results: Cash of $11.5M and working capital of $14.7M as of June 30, 2021


Sep. 3 - Closes US$45 Million Financing to fund North American Battery Materials Refinery


Sep. 7 - Options Cobalt Camp Assets to Kuya Silver


Sep. 23 -Resumes Drilling at its U.S. Cobalt-Copper Project: The Company’s objective is to double the size of the current resource over the next two years, in light of stronger commodity prices and an acceleration of EV adoption.


C$2.5 million budget will include 4,000 metres of drilling to test extensions to the deposit, which is currently open to the east, to the west and at depth, demonstrating excellent potential for resource growth.


Sep. 30 - Observes Canada's National Day for Truth and Reconciliation


Oct. 5 - Awards Milestone Construction Contract to Metso Outotec for its Canadian Refinery: Design, manufacturing of solvent extraction cells,technical support for the layout of a new solvent extraction plant and process control.


Commissioning of Phase 1 of First Cobalt’s low-carbon hydrometallurgical refining strategy is scheduled for Q4’2022, targeting annual production of 25,000 tonnes of cobalt sulfate annually


Oct. 14 -Receives Key Permit for its North American Battery Materials Refinery: Receipt of the Air & Noise Environmental Compliance Approval from the Ontario Ministry of the Environment, Conservation and Parks.


Oct. 20 - Announces US$7.5 Million in Proceeds from Exercise of Investor Option: Received notice of the full exercise of a US$7.5 million option by investors in the recently completed offering of 6.95% senior secured convertible.


Oct. 22 - Closes US$7.5 Million in Secured Convertible Notes: Completed the sale of additional Secured Convertible Notes, for an aggregate amount of US$7.5M, as part of the recently completed offer of senior secured convertible notes.


Nov. 8 - Strategic Shift; Make Battery Precursor and Nickel Sulfate; Rebrands as Electra Battery Materials: to provide battery grade Ni and Co, recycled battery materials and precursor material to the North American supply chain.

Global consultancy firm CRU has been retained to complete a nickel market study, which will assess market conditions for a battery grade nickel sulfate plant in North America.


Nickel sulfate production is a fundamental part of Electra's four-phased growth plan, encompassing battery recycling, cobalt refining, nickel refining, and lithium-ion battery precursor material manufacturing.


Electra is in talks with several potential nickel suppliers to secure raw material for its battery grade nickel sulfate facility in 2024-25. Electra is also in early talks with precursor manufacturers to partner on the construction of a facility by 2025.


First Cobalt has granted certain newly recruited employees of the Company 50,000 Restricted Share Units (RSUs) and incentive stock options to purchase an aggregate of 250,000 common shares of First Cobalt at C$0.35. The Company has also issued 35,714 Deferred Share Units (DSUs) to a director as compensation for their services.


Nov. 10 - Increases Capacity of its Canadian Battery Materials Refinery: A 30% increase in the design capacity of its cobalt refinery. First production is scheduled for Q4 2022; i) 6,500 tonnes of annual cobalt production, a 30% capacity increase from the feasibility study design of 5,000 tonnes; ii) Project control budget for the larger circuit is US$67 million, which can be funded from treasury, compared to a feasibility study estimate for a smaller plant of US$60 million; iv) Previously MoU with IXM SA for cobalt hydroxide feed material formalized as contract.


Nov. 29 - Files Third Quarter 2021 Financial Results: Cash of C$61.2M as of September 30, 2021. Contracts and purchase orders awarded to date of C$30M to advance the refinery. Receipt of C$1M worth of Kuya Silver shares.


Nov. 30 - Increases Base Shelf Offering by $50 Million: Increase the total offering price from $20M to $70M.


Dec. 6 - Announces Annual Meeting Results and New Canadian Stock Symbol


Dec. 7 - Engineering Report Gives Electra Green Light for Battery Recycling: Positive results from engineering studies and metallurgical test work for lithium-ion battery recycling. ELBM.V intends to commence refining the key components of electric vehicle batteries, known as black mass, in mid-2022.


Through extensive testwork, the Company has developed a flowsheet that can recover key elements from batteries, including lithium, nickel, cobalt, copper and graphite; patent applications are pending. Engineering studies confirmed that Electra’s existing refinery complex has the infrastructure, scale and equipment to process a bulk sample of material on a full production scale basis in mid-2022 with an initial investment of under US$3M.


Electra will grow its recycling business in a staged, modular fashion, initially targeting black mass from consumer electronics and subsequently targeting primary battery scrap material from North American EV cell manufacturers


The Company has been contacted by more than 20 black mass producers in North America and around the world who are interested in selling their feed material to Electra for beneficiation.


Dec. 30 - Announces Commercial Agreements with Glencore: Glencore will have an option to toll approximately 1,000 tonnes of contained cobalt at Electra’s refinery and Electra will have an option to purchase an additional undisclosed quantity of cobalt hydroxide feed material from Glencore, each on an annual basis for a five-year term for refining.


As part of its commitment to sustainable production, Electra intends to join the Fair Cobalt Alliance and adopt the Cobalt Institute's Cobalt Industry Responsible Assessment Framework, To date, Electra has concluded feed supply contracts with Glencore and IXM SA for a total for 4,500 tonnes of contained cobalt per year for a five-year term


Jan. 13 - Electra Establishes $20 Million ATM Program and Changes U.S Trading Symbol to ELBMF: Intends to use the net proceeds from any sales of Common Shares under the ATM Program, if any, for growth initiatives relating to its battery materials complex, for Iron Creek exploration activities and for general corporate purposes.


Jan. 19 -Electra signs Battery Recycling and Cobalt Supply Agreement with Marubeni: MOU encompasses sourcing of black mass derived from recycled lithium-ion batteries for Electra’s Canadian refinery and marketing of Electra’s cobalt sulfate in Japan. Marubeni’s wide network of battery recyclers in Asia and elsewhere will assist in the sourcing of lithium-ion battery material for Electra’s hydrometallurgical recycling operation in Ontario, Canada.


Incentive Plan Grants: Issued 639,959 Deferred Shares Units (DSUs), 205,000 Restricted Share Units (RSUs), 325,000 Performance Share Units (PSUs) and 4,000,935 stock options to Directors, Officers, Employees and Contractors of the Company. The stock options grant employees the right to purchase common shares of Electra at yesterday’s closing price of $0.30 for a period of five years and vest over a three-year period.


Feb. 10 - Announces Receipt of Key Permit: The receipt of the Industrial Sewage Works Environmental Compliance Approval (ECA) is a major achievement for the Company. It governs how process water and tailings will be managed to ensure the environment is protected. In conjunction with securing this ECA, in the coming days Electra will be filing an amendment to its current permit to take water. The amendment will align the volumes in the water permit to those included in the final approved Industrial Sewage Works ECA.


Feb. 16 - Provides Update on Refinery Construction and Commissioning: The project remains on budget and on schedule for a December 2022 commissioning.i) Project control budget remains at US$67 million (C$84 million). ii) Experienced 12-person owner’s team overseeing the work of key contractors, including EXP Services Inc., Metso Outotec, Hatch Ltd. and GEA Systems. iii) US$27 million (C$34 million) committed to procurement activities as of February 1, for a 40% commitment rate. Fabrication of major long lead equipment packages is underway, including solvent extraction, crystallization and filters with the arrival of key equipment on site commencing in May 2022


Feb. 23 -Electra, Glencore and Talon Partnering with Government of Ontario on Battery Materials Park Study: The consortium will collaborate on engineering, permitting, socio-economic and cost studies associated with the construction of a nickel sulfate plant as well as a battery precursor cathode active materials (PCAM) plant.


The C$700,000 study will be funded by the government and the participating companies, with the provincial government contributing C$250,000; $250,000 from Electra and C$100,000 each from Glencore plc and Talon Metals.


Electra is in discussion with PCAM producers in Europe, Japan and Korea, several of which are assessing expansion opportunities in North America. One or more PCAM companies may participate in this study at a future date.


Mar. 1 - Government of Canada to Fund Electra, Glencore and Talon Metals Study: A financial commitment of C$250,000 from the Government of Canada in support of a recently announced battery materials park study.


Project contributions from all parties total C$950,000 and to be completed in phases during Q2 2022 and Q3 2022.


The project will be expanded to encompass additional ESG studies as well as further engineering and cost studies associated with the construction of a nickel sulfate plant and a battery precursor cathode active materials plant.


Mar. 7 - Announces Closure Plan Approval: for the refinery expansion and recommissioning was approved on March 4, 2022. This approval enables Electra to accelerate new construction and industrial activities at site.


A closure plan outlines how the affected land will be rehabilitated and the costs associated with doing so. A closure plan must be developed and approved by the government before certain aspects of development can take place.


The Company’s cobalt sulfate refinery is on schedule to commence commissioning in Q4 2022. In mid 2022, the Company will perform bulk sample testing of black mass from recycled lithium batteries, based on extensive testwork conducted over an 18-month period. Commercialization of the battery recycling plant is expected in 2023.


Mar. 14 - Extends Cobalt and Copper Mineralization at Idaho Project: Drill results to the west of its Iron Creek cobalt-copper project has successfully extended mineralization by 130 metres along strike and by 110 metres at depth. Drill results have been received for 3 of the 6 holes completed in the 2021 drilling campaign.


Iron Creek currently has an NI 43-101 compliant Mineral Resource Estimate, outlining an Indicated Resource of 2.2 million tonnes at 0.32% cobalt equivalent (0.26% cobalt and 0.61% copper) for 12.3 million pounds of contained cobalt and Inferred Resource of 2.7 million tonnes at 0.28% cobalt equivalent (0.22% cobalt and 0.68% copper) for an additional 12.7 million pounds of contained cobalt. There is potential to extend mineralization in all directions with ongoing drilling.



Summary


Iron Creek

June 2021, ELBM.V begun a $2.5M exploration program. Drilling resumed September 2021 (4,000M campaign) with the aim of doubling the size of the current resources over the next two years. March 2022, initial results were reported.


Broad widths of copper mineralization continue to be intercepted along with high grade cobalt intercepts (all widths reported are true widths); i) 29m of 0.70% Cu, including 0.51% Co over 1.5m and 2.19% Cu over 3m, ii) 25m of 0.63% Cu, including 0.27% Co over 1.2m and 1.72% Cu over 3.7m, iii) 17m of 0.42% Cu, including 2.18% Cu over 1.5m. 3)Awaiting drill results from the eastern extension of the deposit, where higher grade cobalt mineralization is frequently encountered.


Silver Camp/Kerr

(Sep.2021) Optioned Cobalt Camp Assets to Kuya Silver.


Refinery

January 2021, a long-term cobalt hydroxide feed aggreement with Glencore AG and IXM SA, a subsidiary of CMOC, for a total of 4,500 tonnes of contained cobalt per year starting in 2022 was obtained. March 2021, a long term offtake agreement with Stratton Metal Resources (with option to sell up to 100% of Cobalt Sulfate Production) was signed.


July 2021, reported recovery Li, Ni, and Cu, Mg, and Graphite from black mass material (US and EU). October 2021, ELBM.V awarded construction contract to Metso Outotec for design, manufacturing of extraction cells, technical support and process control. Phase 1 to be complete for Q4 2022 with annual production of 25,000 tonnes of cobalt sulfate annually. Also in October 2021, ELBM.V acknowledge receipt of Air and Noise Environmental Compliance Approval Permit from Ontario Ministry of Environment, Conservation and Parks.


November 2021, First Cobalt re-branded as Electra Battery Materials as it expands mandate to providing battery grade Nickel and PCAM. Electra now plans Nickel Sulfate refinning as well as PCAM facility in 2024-2025. Also in November 2021, an increase refinery capacity by 30% to 6,500 tonnes of annual cobalt production for an additional USD$7M (USD$67 vs. USD$60 for 5000 tonnes) was disclosed. Additionaly, MOUwith IXM SA was formalized as contract.


December 2021, Engineering Report deliver positive results for Li-ion battery recycling. ELBM.V reported to commence blackmass refining in mid-2022. The report and test work done were used to develop a flowsheet that can recover Li, Ni, Co, Cu, and graphite. Patents are pending. Associated cost with using existing facility are at US$3M. More than 20 black mass producer have contacted Electra for services. December 2021, a Commercial Aggreement with Glencore: Option to toll 1000 tonnes of contained Co and Electra will have an option to purchase additional quantity of Cobalt Hydroxide for five years. To date, 4,500 tonnes (out of 6,000) are for Glencore and IXM SA.


January 2022, an MOU Battery Recycling (Black Mass Sourcing) and Cobalt Supply Aggreement with Marubeni was completed. February 2022, Receipt of Industrial Sewage Works Environmental Compliance Approval (ECA). February.2022, an update on Refinery Construction and Commissioning was provided. Overall, the Refinery Project is on schedule and budget. Control at US$67M (C$84M); $27M (C$34M) commited at 40%.


March 2022, the Closure Plan Approval was received.


Battery Park

February 2022, Partners with Glencore ($0.1M), Talon ($0.1M) and Government of Ontario ($0.25M) for Battery Material Park Study. The aim is to assess engineering, permitting, socio-economic and cost studies associated with the construction of a nickel sulfate plant, as well as, a battery precursor cathode active materials (PCAM) plant. Electra to contribute ($0.25M). March 2022, Government of Canada ($0.25M) join Battery Material Park Study. This study is expected to be delivered in Phase sometimes between Q2 2022 and Q3 2022.


Financing

August 2021, Financing for Construction of Refinery (USD$45M) consisting of Secure Convertible Notes 6.95% (USD$37.5M) and Brokered Equity Financing (C$9.5M) were disclosed.The Convertible notes were priced at USD$0.25 and Brokered Financing at C$0.25. The proceeds wil go towards expansion and recommissioning of the Refinery.


October 2021, USD$7.5M from Investor Options were received. Also closed an additional USD$7.5M of Secure Convertible Notes at 6.95% were raised. November 2021,C$61M in Cash (as of September 30) with C$30M awarded towards the refinnery. Also in November, an increase in base shelf offering to C$70M from initial C$20M took effect. January 2022, a C$20M ATM program for The Battery Materials Complex & Iron Creek exploration was announced.


Warrants

The number of outstanding warrants are about 4% of the current float. Roughly 7M are below $0.31 cents while 15M are above $0.50 cents. As of September 2021, options outstanding were also at 15M!



Stock Options

Thereafter, (November 2021) 50,000 Restricted Share Units (RSUs) and 250,000 incentive stock options at C$0.35 cents were granted. Also issued 35,714 Deferred Share Units (DSUs). January 2022, 639,959 Deferred Shares Units (DSUs), 205,000 Restricted Share Units (RSUs), 325,000 Performance Share Units (PSUs) and 4,000,935 stock options ($0.30 cents) were issued. While it is absolutely essential to incentivized personel, these quickly add up!


In short

To date, the execution on the refinery has been done with extreme precision. Electra has optimized the annual cobalt production capacity by 30% to 6,500 tonnes (from 5,000) for an incremental 10% (USD$7M) of the funds (USD$67 for 6,500 vs. USD$60 for 5,000 tonnes). The output is accounted for by Glencore, IXM SA, Stratton Metal, and Marubeni.


In tandem, Electra has managed to re-purpose the existing refinery towards the recovery of critical metal (i.e Li, Ni, Co, Cu, and Graphite) from blackmass at an additional cost of USD$3M. This represents a relatively small percentage (4%) of the total refinery budget. Test work and engineering studies were used to develop a flow sheet for which patents are pending. Target date to process the bulk sample of material at full production scale is mid-2022. While Marubeni is the main supplier of blackmass, Electra claims it has been contacted by more than 20 producers.


Otherwise, the company continues to advance Iron Creek with the aim of doubling existing resources in the next two years. The recent results from $2.5M drill campaign of FY 2021 were encouraging. Thus far, three out of six holes have been reported. In addition, Electra also optioned the Cobalt Camp Assets to Kuya Silver , unlocking some of the value.


Recently, Electra Partnered with Glencore ($0.1M), Talon Metals ($0.1M) the Government of Ontario ($0.25M) and the Government of Canada ($0.25M) for a Battery Material Park Study. The aim is to assess the efforts associated with the construction of a nickel sulfate plant as well as a battery precursor cathode active materials (PCAM) plant.


Overall, Electra traded between $0.25 and $0.42 cents for the period. Relatively little variation occured in the period. Even if RedCloud Security (C$0.80) and Cantor Fitzgerald C$(0.75) have set high price target, valuation is stagnant.


The economics of the refinery refurbishing are forecasted to generate an EBITDA of $24.1M (2023), and $34.4M (2024).



Contrasted to the amount of funding required, actual ROI is years away, No doubt the amount raised in less than a year has been impressive. However, it adds to an already large existing share count. Even if the float only went up by 12%, the total number of shares is at 558M and the likelihood of an eventual consolidation (1:5 or 1:7) are still a factor.


The refurbishing and expansion of the cobalt refinery along with the development of Iron Creek are key valuation drivers. As for the recovery of critical minerals from blackmass, it's still early days. To date, Electra describes a modular approach with no revenue projections. Moreover, efforts towards the battery park (Nickel and PCAM refineries) are very much in their infancy in addition to being capital intensive in nature.


Hence, was the re-branding to Electra Battery Materials from First Cobalt pre-mature? Is Electra bitting off more than it can chew? Case in point, the increase in base shelf offering to C$70M from initial C$20M (November 2021), and the C$20M ATM program for The Battery Materials Complex and Iron Creek exploration (January 2022).


The execution on the refinery has been flawless to date but there is still much more to be done to commercialization; the next nine months will be critical. Setting aside the Refinery, Black Mass Recycling and Iron Creek, in light of the intent to pursue a Nickel Sulfate and PCAM refinery, Electra will eventually need to deal with its capital structure.

DISCLAIMER: The work included in this article is based on current events, technical charts, and the author’s opinions. It may contain errors, and you shouldn’t make any investment decision based solely on what you read here. This publication contains forward-looking statements, including but not limited to comments regarding predictions and projections. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. The content of rally is provided for informational and entertainment purposes only and is not a recommendation to buy or sell any security. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions - rally cannot take responsibility for your investment decisions.

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