Electra Battery Materials (ELBM) - European Expansion a Possibility

Electra Battery Materials Corp. (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 Trent Mell, President, CEO, and Director, Electra Battery Materials. Trent Mell founded First Cobalt in 2017, bringing in over 20 years of international business and operational experience. His mining career includes mine permitting, development and operations with Barrick Gold, Sherritt International, North American Palladium, and AuRico Gold. His commercial experience includes M&A (Mergers and Acquisitions), joint ventures, offtake contracts, and over $2.6Bn in equity and debt financing.

He previously served as the CEO at Falco Resources, owner of the Horne project which has mineral reserves of over 6 million gold equivalent ounces. During his time as the President and Head of Mining at PearTree Securities, he created a mining team and led the firm to become the largest provider of flow-through capital in Canada, placing more than $300M in capital in the first year. His educational credentials include an EMBA from the Kellogg School of Management and Schulich School of Business, an LL.M degree from Osgoode Hall along with a B.A., B.C.L., and LL.B. from McGill University. 

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: ELBM), and the OTC Markets (OTCQX: ELBMF). 

Electra Battery Materials has acquired the funding for its cobalt plant that is currently under construction. The company is looking to finish the construction and commission a cash flow in 2022. The company also has plans to advance the other 3 phases of the project that include recycling, nickel processing, and precursor production to develop the first battery park in North America.

Team Building

Electra Battery Materials is in the process of growing its existing team. It is currently seeking a Vice President to manage the company's growth and sustainability. The VP will be responsible for ESG (Environmental, Social, and Governance) initiatives while also focusing on the growth of the battery park initiative. The company is also looking to appoint a sustainability lead that would function directly under the VP to help the company with its transparency initiatives, and carbon footprint. Over the past year, the company has been successful in doubling its on-site team. It is looking to double its workforce once again in 2022. 

The company has a near-zero carbon footprint facility that runs on hydroelectricity. The project is situated in a location that does not suffer from water shortages. This year, the company is looking to commence multiple initiatives that cater to the supply market and the downstream market. The company seeks to get its supply chain certified starting with cobalt. It is looking to carry out carbon footprinting for its project. 

The Glencore Deal

Electra Battery Materials signed a 5-year tolling contract with Glencore, the world's largest cobalt miner. This deal enables Glencore to use the company's refinery in Ontario to upgrade additional cobalt hydroxide into battery-grade cobalt. As per the agreement, Glencore can toll up to 1,000t of cobalt on a yearly basis. 

As per the company, the Glencore deal is the first of the contracts that it is looking to sign. The company seeks to produce 5,000t cobalt in a sulphate product by 2022 end. It is looking to ramp up production to 6,500t in 2023. The increased production numbers demonstrate that the company is looking to fulfill the growing demand for cobalt sulphate in North America and beyond. 

Glencore is facing the battery market with Electra Battery Materials to develop one of the greenest cobalt products in the world. Both companies will work towards acquiring a premium for the end product. The company's remaining cobalt supply is also planned for downstream. The Glencore deal will help the company through existing relationships and global exposure. 

Electra Battery Materials has seen a surge in demand for cobalt sulphate. In fact, the company can sell its entire product to mill traders. However, the shareholders and the board are in favor of the company entering direct relationships to become a part of the supply chain. The company has sent out proposals and is currently going through legal reviews. It is looking to announce its first OEM (Original Equipment Manufacturer) contract in the first half of this year. 

Cash Position

Electra Battery Materials raised $51M equity in 2021. The company has a weekly expenditure of $1.3M for its refinery that comes out to $5M a month being invested in the cobalt plant. It currently has CAD$61M in cash flow and is expecting an additional CAD$10M from the government. Given the growth and advancements achieved in the past 2 years, the company has found it significantly easier to raise additional capital. 

The company has a $180M market cap. In 2021, it raised $45M in debt along with $5M in conversions. It is looking to rebalance its debt portfolio by the end of 2022. Once the company has an OEM contract, a lift in its share price is expected. 

Ongoing Association with Glencore

Electra Battery Materials has plans to purchase a large portion of feedstock from Glencore-IXM. In 2019, Electra Battery Materials had plans to carry out 100% tolling with Glencore. The association with Glencore is part of the company's broader strategy. 

The two companies have a strong working relationship. Glencore offered Electra Battery Materials the initial $5M funding loan to conduct a Feasibility Study. This enabled the company to gain a stronger footing within the market while preserving its independence. Currently, the company does not have any dues with Glencore and the ongoing relationship between the two is strictly commercial.

Glencore is located 2 hours away from the company's operations in Sudbury. Electra Battery Materials expects that once it starts working on reagents or off-spec materials, the 2 companies could have potential synergies in the future. 

Glencore is already operating in the recycling business while Electra Battery Materials plans to enter the market. The company is looking towards Glencore for its sourcing and supply chain certification. The company is also looking to conform to the industry standards set by the Cobalt Institute, OECD Guidelines along with mutually-agreed standards by Glencore, Tesla, and Volkswagen. The company anticipates that it will garner support from Glencore for conforming to these standards. 

The Electra Battery Materials Park

The Electra Battery Materials Park is designed for cobalt and nickel production, along with battery precursor development and battery recycling. The company is looking to time the opportunity to enter the battery metals space based on the EV (Electric Vehicle) market penetration. In the US, the EV production was 750,000 units in 2020, while Europe and China had production at 2M and 3M units respectively. There are projections that the US market will observe a 33% increase, bringing the number of EV units produced to 1M units in 2022. 

North America saw major announcements last year for the development of EV assembly plants and EV battery plants. Electra Battery Materials seeks to domesticate the entire EV supply chain through the manufacture of CAM (Cathode Active Materials) and PCAM (Precursor Cathode Active Materials) cells. The company is currently looking to source nickel and battery precursors. In order to supply the European market, Finland and China, precursors need to be in place to refine new materials. 

Refining new materials has a complex permitting process that encompasses tailings, water issues, and more. In order to attain permitting for cobalt, recycling is a major component, making Canada the ideal ecosystem. The company's proximity operations are located 2 hours from Sudbury, one of the biggest nickel belts in the world.

The company is currently in talks with multiple parties including nickel producers, nickel projects, PCAM companies, and ex-Chinese precursor manufacturers in order to secure a nickel supply. The company anticipates that it will either enter a partnership or a joint venture with a PCAM precursor manufacturer in the coming months. 

Scaling Up Operations

Electra Battery Materials already has plans to scale up its cobalt supply from 5,000t to 6,500t, based on market projections. The company anticipates that a 5,000t supply will generate a $35M EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), while a 6,500t supply will generate a $45M EBITDA. 

The company is looking to take a modular approach towards its recycling operations. This is because the recycling market isn't mature for a large-scale operation. This has led to the creation of 2 key markets, secondary waste, and battery scrap. The company is looking for an increase in the number of battery plants in North America to scale operations accordingly. It plans to initiate recycling operations through smaller modules, processing 4,000t black mass initially and scaling it to 10,000t, 15,000t over time. The company already has the required equipment for the recycling plant and has carried out the technical work. The market metrics are expected over the course of Q1 2022. 

The cost projections for building a cobalt plant are estimated at $60M, while a nickel plant has an estimated build cost of $300M-$400M. Electra Battery Materials is looking to bring a PCAM partner on board to co-locate on its massive, permitted property. The company anticipates that the recycling, PCAM, and nickel part of the business will take over 3 years to commence operations. It is looking to carry out a joint battery park study along with a partner to publish actual data. The expected timeline for this study is 4-6 weeks. 

Guidance Metrics

Electra Battery Materials anticipates that the actual guidance numbers will be available by the second half of 2022, leading to a 2-year roadmap. The company is currently spending $5M monthly as it moves towards generating cash flow. The majority of the company's team is focused on the execution of the immediate project at hand. 

The company anticipates that 2022 is a re-rate year and that its valuation will be driven by the cobalt refinery. The decision to work on a broad number of projects has been well-received by the company's shareholders, stakeholders, and the government. 

The company is currently looking to either treat its Iron Creek Project in Idaho either as a captive feedstock or use it as a feed for its refinery business, leading to better margins. There are also considerations to either spin out the project or treat it as an earn-in opportunity. 

Idaho has a strong resource base and the company would need significant time and monetary resources to turn the Iron Creek project into a mine. Over the past year, the company has been working on de-risking the asset along with networking and permitting. The company is considering various options to monetize the asset over the next 12 months. 

Targets 2022 and Beyond

Electra Battery Materials has 4 phases of operations, namely cobalt, recycling, nickel, and PCAM. The company is currently prioritizing the cobalt operation and is working towards acquiring OEM contracts and battery partners. The company is in discussions with various entities on a daily and weekly basis for the same. It anticipates that these discussions would serve as an important catalyst for a future NASDAQ listing. 

For recycling, the company is focused on refining the black mass. It has had EOI (Expression of Interest) from 26 parties that have shown interest in a working relationship. The majority of these parties are based in North America. The company is working towards a demonstration plant in the summer where the feedstock would be supplied by its partner. This plant will help the company showcase the quality of its product, leading to the resumption of commercial discussions. The company is looking to validate its technology before solidifying its recycling supply chain.

PCAM is the second-highest priority for the company. The company has had discussions with multiple ex-Chinese precursor manufacturers in Asia, Japan, and Korea. At least 3 of these manufacturers are actively looking for a jurisdiction to set up operations. Manufacturer partnerships will enable the company to develop a supply chain in Canada. 

Once the company has a PCAM manufacturer, a battery maker, and OEM on board, it will solve several supply issues surrounding nickel-cobalt. The company is aiming at finalizing OEM contracts by Q1, 2022. The precursor will serve as the second big commercial catalyst which is planned for mid-2022. 

The company also has a battery materials park study planned for Canada. It is awaiting an additional permit coming in for a closure plan. This includes the construction of a building by the end of spring and the supply of equipment from the US. 

Electra Battery Materials has plans to publish drill results for Iron Creek, Idaho as it works towards resource expansion. The demonstration plant for recycling is planned for mid-2022. The recycling plant will remain a second priority for the company after cobalt until it has further expanded the workforce. 

The company is looking to build a cobalt sulphate plant in Canada. Once it has the partners on board, the company has plans to replicate the expansion strategy into Europe.

Market trends suggest that there's going to be a shortage of batteries, raw materials, and processors in the market in the coming years. The company intends to relocate the team from the current project once construction is complete. It has a first-mover advantage due to market positioning. 

Europe already has a developed market when it comes to recycling and the lithium space. The company has plans to build another battery materials park in Europe and start with cobalt sulphate production. However, the development of a standalone recycling plant without the tie-in to the supply chain won't generate a lot of value.

Electra Battery Materials has a world-class team along with Metso Outotec and Hatch, its process experts. The company seeks to provide concrete guidance numbers later this year.

To find out more, go to the Electra Battery Materials website