Electra Battery Materials (FCC) - The North American Battery Hub

By
Morgan Leighton
·
November 17, 2021

Electra Battery Materials (Formerly known as First Cobalt Corp.) is building North America's only fully integrated, localized and environmentally sustainable battery materials park. Leveraging the company's own mining assets and business partners, the Electra Battery Materials Park will host cobalt and nickel sulphate production plants, a large-scale lithium-ion battery recycling facility, and battery precursor materials production. This facility will serve both North American and global customers. 

Matt Gordon caught up with Michael Insulan, Vice President, Commercial, Electra Battery Materials. Michael has over 2 decades of experience in the oil & gas industry, bulk commodities, base, and minor metals.

He has previously worked for Royal Dutch Shell, CRU, and Eurasian Resources Group. Over the past 4 years, Michael has been primarily focused on the cobalt market, building his reputation as an industry expert. His educational credentials include a PhD in Economics with a focus on extractive industries. 

Company Overview

Electra Battery Materials is an integral part of the North American battery supply chain, providing low-carbon, sustainable, and traceable raw material for the region's fast-growing electric vehicle industry. The company is listed on the Toronto Stock Exchange (TSX-V: FCC), and the OTC Markets (OTCQX: FTSSF). 

Electra Battery Materials was previously known as First Cobalt. The company had a copper and cobalt exploration site called the Iron Creek that was located within the Idaho Copper Belt in the United States. It featured a cobalt sulphate plant that was used to process cobalt hydroxide into battery-grade cobalt sulphate. This supply was intended for sale to precursor makers in Ontario, Canada. 

The Battery Metals Market

The majority of battery salts supply for the North American and European markets is procured from Finland. However, due to a limited supply and growing demand, the countries often have to rely on China. The industry is actively seeking alternate routes to fulfil this supply.

Electra Battery Materials is looking to fill in that supply gap. The company plans to offer cobalt sulphate in the first stage of operations. It already has a ready market for sulphates within the Atlantic region. The company anticipates that the existing PCAM (Precursor Cathode Active Material) plants in North America and Europe will grow in both size and number as demand continues to rise. 

Following the company's rebranding, Electra Battery Materials is looking to expand its portfolio beyond cobalt to include other metals including nickel, battery precursor, and a recycling component. There are several battery supply chains being set up in Europe and North America as a way to remove the reliance on China. 

The Battery Supply Chain

A battery supply chain features 5-6 steps. Once the materials are extracted, it goes through the refining phase, converting them into salts or sulphates. In the case of an NCM (Nickel Manganese Cobalt) battery, the resultant materials are nickel sulphate, cobalt sulphate and manganese sulphate. During the PCAM stage of the supply chain, these sulphates are mixed together to form a powder. This powder is the precursor that is used as a cathode active material (CAM). The powder is then transferred to a cathode active materials plant where lithium is added. Finally, the CAM is sent to the cell plant where it is rolled with the anode and electrolytes, forming a cell. 

Revenue Guidance

Electra Battery Materials plans to become an important link in the battery supply chain across the Western Hemisphere. It is looking to cover extraction, primary refining, precursor, and recycling. This would make it the only company in North America covering all 4 steps, placing it in a unique market position.

Each step in the process has a potential for margins. The company is looking for a JV (Joint Venture) partner for setting up the precursor plant, the step with the highest potential for profits. 

The recycling stage also offers strong margins, however, the market is currently in its infancy. The company is also looking to grow its black mass side of the business where the current volumes are smaller. The company is looking to refine the black mass and grow the primary refining facility alongside the battery materials park in Ontario. This will enable the company to service cobalt sulphate clients across Europe, Asia, and North America. 

Electra Battery Material is currently working on an internal financing model for all 4 phases for its battery material operation. This includes cobalt sulphate, recycling, nickel sulphate and precursor. Based on the current analysis, the operation is expected to be highly profitable. The company is looking to be a premium battery materials supplier. 

The company plans to release forecast numbers in the coming months. These metrics will incorporate all 4 phases for the battery materials park. 

Company Vision

Electra Battery Materials seeks to build a battery materials park that includes precursor material in Canada. The company is looking to operate cobalt sulphate and nickel sulphate production along with its own recycling facility. The company has a strong on-site team and infrastructure to operate the assets. Since both nickel and cobalt sulphate use similar technologies, it's convenient for the company to have in-house production. 

For the precursor plants, the company is looking for either a 50-50 or 60-40 joint venture partnership. As this technology has IP (Intellectual Property) the company is looking to bring the facility into operation at the earliest. A joint venture with an entity already operating in the precursor domain will enable the company to jumpstart its operations. 

Electra Battery Materials Park

Electra Battery Materials is looking for source nickel to develop a consistent nickel sulphate supply. Since the company's battery materials park is based in Canada, an extremely resource-rich country, the company is looking to add value to the country by exporting finished materials. The battery materials park enables companies to supply intermediate materials, leading to added value. 

The Electra Battery Materials Park has been under planning for a long time and the company has carried out commercial negotiations for the past 2 years. Electra Battery Materials has found several strong partners for the raw material feed. These partners originate both from the mining side and OEMs that have secured raw materials. The company also has offers for processing the raw material. The company has carried out an in-depth analysis of the North American market and seeks to become an integral part of the battery materials supply chain. 

Infrastructure Planning

In the past 6 months, Electra Battery Materials has added significant land to its existing site in Canada. The company is open to the possibility of leasing the additional property to different businesses and functioning as a landlord. However, this isn't a priority at the moment. 

The company seeks to finalize the construction of the cobalt sulphate plant and the recycling facility. Following this, the company plans to build a nickel sulphate plant. It already has a construction crew in place and is looking to start building at the earliest. This infrastructure will enable Electra Battery Materials to capture margins from recycling, cobalt sulphate and nickel sulphate production. 

On the precursor side of the business, the company is looking for potential partners with IP to produce precursor material. The company has found a large number of entities that are looking for sites within North America. The company isn't facing a barrier to entry into the electric battery metals market as it already has a strong in-house team and construction know-how. The company is currently acquiring permits for construction. The operation also requires extensive environmental planning, a massive barrier that the company has already surpassed. 

The main barriers to entry within the battery materials space are permitting, construction, and process engineering. Additionally, there's a steep learning curve to the process. Due to these challenges, the possibility of growing competition is slim in the near future. Electra Battery Materials has garnered significant interest and support from OEMs, the ore and cell industries for its battery materials park.

Targets 2021 and Beyond

Electra Battery Materials is looking to sign multiple MOUs (Memorandum of Understanding) in the coming 3-6 months. The majority of these MOUs will be for commercial cobalt sulphate. The company is looking to start selling cobalt sulphate by 2025-2026. Its nickel and precursor plants are planned to commence operations within the next 5 years. 

The company is looking to lock-in long term deals through MOUs. This will enable the company to expand the cobalt sulphate production capacity to fulfil these contracts. 

An Environmentally-Conscious Operation

Electra Battery Materials is looking to become the greenest battery materials supplier globally. A sustainable battery materials operation will enable the company to charge a green premium for its products. 

It is widely accepted across the industry that in the near future, companies will be expected to pay a premium for a commodity that was developed through a greener operation or manufacturing process. Additionally, there are ongoing considerations for a Carbon Border Adjustment Mechanism in Europe, and an upcoming Carbon Tax in the North American region. These taxes will act as a penalty by the government for operations that generate a significant amount of carbon, causing environmental harm. Since Electra Battery Materials' operation is environmentally-conscious, it will help the company capture a part of the margin from the carbon tax perspective as well. 

To measure the impact, Electra Battery Materials carried out a third-party analysis. Based on this analysis, it was found that the company's plant would generate essentially half the carbon emissions when compared to its biggest competition, Huayou in China. This is mainly because Electra Battery Materials' operations are powered through a hydroelectric grid in Ontario, while the Huayou operations are powered by coal. 

As Electra Battery Materials is looking to operate the supply chain in North America, it cuts down the freight transport distance to half, leading to a 50% drop in emissions. Shipping to Europe will generate 30% lower emissions compared to shipping the material through China. Taking into consideration added tariffs and carbon pricing, the overall shipping costs for the company will be significantly lower than their Chinese counterparts. 

Electra Battery Materials is looking to employ the rail network that runs from the Port of Montreal as it offers both inbound and outbound cargo. This rail network is situated near the company's refinery. The company is in talks with the government for the construction of an additional 2km line near the refinery as the company isn't looking to employ trucks for this operation. 

Cash Position

Electra Battery Materials has a current market cap of $230M. The company's share price has seen a jump from $0.12 to $0.42 in the past 12 months. Additionally, the company raised $37M-$38M in July 2021. The company plans to utilize the raised capital on the first and second phase construction items. It seeks to get the cobalt sulphate plants up and running by 2022 end. Following this, the company is looking to initiate work on the recycling plant. Through the recycling facility, the company plans to produce nickel and cobalt from black mass and other battery supply chain outputs along with lithium and copper products.

To find out more, go to the Electra Battery Metals Website

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