ELBM.V - On hold.

Updated: Apr 12


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, July 2021. and March 2022.


News releases


Mar. 22 - Advances Construction of Solvent Extraction Plant: Commenced foundation work of the solvent extraction plant. The project remains on budget and on schedule for a December 2022 commissioning. Project control budget remains at US$67 million (C$84 million), and commissioning is on schedule for December 2022.


Apr. 5 - Announces Nasdaq Listing Application and Share Consolidation: In preparation for a potential listing of its common shares on Nasdaq, the Company will undertake a consolidation of its outstanding common share capital on the basis of one (1) post-Consolidation share for every eighteen (18) pre-Consolidation shares.


As of the date of this news release, the Company has 562,414,189 common shares issued and outstanding. Following completion of the Consolidation, the Company is expected to have approximately 31,245,232 common shares issued and outstanding. The exercise price and number of common shares issuable upon the exercise of the Company’s outstanding options, warrants and convertible notes will also be proportionally adjusted upon completion of the Consolidation.


Apr. 6 - Announces Offtake Agreement for Recycled Battery Material: Offtake agreement for nickel and cobalt produced from a battery recycling plant that it expects to commission in 2023. Under the agreement, Glencore AG will purchase the nickel and cobalt products until the end of 2024 on market-based terms.


Electra’s battery recycling strategy is the second of a four-phase development plan for an integrated battery materials park in Canada that will recycle lithium batteries, produce cobalt and nickel from primary feeds and then send the material to a battery cathode precursor manufacturer that would co-locate within the same industrial park.


The first recycling module (Module 1) is expected to produce more than 2,000 metric tonnes per annum of mixed hydroxide precipitate from approximately 4,500 tonnes of black mass. This is the equivalent to recycling batteries from more than 20,000 full electric vehicles per year, or 80,000 plug-in hybrid electric vehicles.


Module 1 is one of several modules that are expected to be constructed over the next decade, as Electra’s recycling capacity grows with market demand for processing of black mass.


Apr. 8 - Files Year-End 2021 Financial Results. Cash of C$58.6 million as of December 31, 2021.


Summary

There was four releases since our last note.


Construction of the Solvent Plant

ELBM.V provided the market with an update of its progress on the construction.


Construction of the new solvent extraction building advanced with concrete pouring for the foundations. Late last year all earthworks for the plant were completed. The pre-engineered building is expected to be completed by the end of April. Brownfield mechanical equipment verification is 77% complete with all major existing equipment having been tested.


The existing mechanical/electrical and instrumentation equipment have demonstrated excellent performance when test run, with few upgrades required. In the coming weeks, the build out of the cobalt crystallizer circuit will begin, with the arrival of key equipment on site between April and June.


Consolidation and Nasdaq Listing

A one (1) post-Consolidation share for every eighteen (18) pre-Consolidation shares was announced along with the intention for ELBM.V to list its shares on the Nasdaq. The rationale given were as such:


i) Uplisting from OTC to Nasdaq provides growth-oriented companies greater exposure

ii) The resulting smaller share count and higher share price is more palatable to U.S. institutional investors. Revised capital structure and higher share price may provide increased ability for U.S. institutional investors to become shareholders.

iii) Target date of April 11 for share consolidation and targeting completion the Nasdaq listing by the end of April.

Glencore Offtake

An Offtake Agreement for Recycled Battery Material was obtained from Glencore.


i) Offtake contract covers 2023-2024 production of nickel and cobalt from refining of black mass feed generated from lithium-ion batteries. Offtake contracts for lithium, copper and graphite are under discussion with other parties;

ii) Electra plans to operate a battery recycling demonstration plant in 2022 using existing equipment at a cost of C$3 million and commission the commercial plant in 2023;

iii) Electra’s hydrometallurgical refinery is expected to provide higher yields at a lower cost and at significantly lower energy intensity, compared to traditional facilities;

iv) Electra’s refinery is 100% powered by clean, hydroelectric power, resulting in nearly zero greenhouse gas emission


In short

Its been an eventful three weeks for ELBM.V. Let's take a deeper look.


Consolidation Ratio

The 1 to 18 ratio is quite an augmented version from the initial from 1 to 5-7.

Even then, a 1 to 10 vs. 1 to 18 ratio is quite the range; almost double.

The Nasdaq listing is admirable but this is a Canadian company. Why not go to the TSX first? Be as it may, the consolidation ratio is proportional to ELBM.V's ambitions. ELBM.V is in a capital intensive industry where the returns on investments are still years aways on the Cobalt Refinery alone. Despite a Nasdaq listing, ELBM.V is still a venture.


Will it be supported by government? Yes, its highly likely! However, will early investors benefit?


Additional funding from new investors usually comes in the form of a discount on existing price. Hence, the benefit to early investors needs to be weighed with the potential upside in valuation appreciation post consolidation.


Again, the gap between a 1 to 10 vs. 1 to 18 ratio is sizeable. And the upside from there is another factor.


Offtake Agreement

An offtake for Recycled Battery Material from a facility that is yet to be funded or built is definitely an achievement! However, it is still early, and there's not much risk on Glencore's part. Instead, a direct investment in ELBM.V would have been more meaningful. This is perhaps a reason for the marginal increase in valuation to date.


Revenue Projections

For the Cobalt Refinery, ELBM.V has provided. For "Black Mass", not yet. Surely revenue projections must be adequate but how much? Its likely that the facility will be built if the demonstrations are successful but the economy of scale need to be further specified. This is another dimension that will go into price discovery going forward.


In addition, Redwood Materials and Li-Cycle (NYSE: LICY) are already large players in this space.

Li-Cycle already has a facility in Kingston Ontario and Rochester, NY with others planned.

A Great Story

Make no mistake, ELBM.V is a great story. It puts Canada on the map for Cobalt Refining and possibly Black Mass Recycling. More importantly, it will be an engine of regional economic growth, creating jobs and reviving industries.


However, sometimes a great story gets in the way of a timely investment.


ELBM.V is going into a consolidation with little appreciation. In fact, for early investors, there has not been much of a sustained increase in valuation to date (and for a while) despite a large number of excellent catalysts.


Share count was an issue but ELBM.V's ambitions emerged as a major factor. Capital will be needed for Iron Creek, Black Mass Recycling, Nickel Sulfate Refinery, and PCAM for which most of the economics are yet to be determined.


As such, coverage of ELBM.V will be on put on hold.

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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