Jervois Global (JRV) - Capital Raise Timing & Amount Explained

Jervois Global Ltd. is an ASX-listed mining company which aims to play a part in the global battery metals market. The company’s asset portfolio includes its Jervois Finland refinery, which the company acquired from Freeport Cobalt in 2021. The asset consists of a portion of the Kokkola industrial cobalt refining and manufacturing complex in Finland. The Kokkola complex is the largest low-cost leading cobalt refinery in the western world. The complex holds a 15,000 tons capacity, with Jervois Global Ltd. holding 6,250 tons thereof. The company also produces various chemicals and powders at its Finland operations. The company’s asset portfolio also includes the São Miguel Paulista (SMP) nickel and cobalt refinery in São Paulo, Brazil and The Idaho Cobalt Operations near Salmon, Idaho which is the only primary cobalt mine in the United States.

Jervois Global Ltd. announced on the 11^th of November 2022, that it had concluded with a USD$ 150 million capital raise. The institutional placement and entitlement offer of the raise was successful in generating USD$ 115 million, with the remaining USD$ 35 million resulting from a retail component of the placement.

The company plans to implement the raised funds towards restarting its São Miguel Paulista nickel and cobalt refinery and reaching the planned stage 1 production of 10,000 million tons per annum of nickel and 2,000 million tons per annum of cobalt metal cathode. Jervois Global Ltd. expects to commence production at the São Miguel Paulista nickel and cobalt refinery in Q1 2024.

The raised funds will further be implemented towards the planned production ramp-up at the Idaho Cobalt Operations, including exploration and permitting initiatives. The funds will also serve as mine-sustaining capital at the operation. The company further plans to use the funds to complete a bankable feasibility study for the expansion of Jervois Finland.

Jervois Global Ltd. plans to focus on its ESG values and managing its cost pressures in the future ensuring it remains profitable. The quality of the company’s assets and its ability to execute its plans will also prove invaluable in the future. Jervois Global Ltd. does not plan to raise any further funds in the foreseeable future, with the recently raised funds enabling it to have three cash-generating assets at the end of its implementation.

Projects

The company’s asset portfolio consists of four core operations, namely the Jervois Finland refinery, the São Miguel Paulista (SMP) refinery and the company’s Jervois Idaho Cobalt operations.

The Jervois Finland refinery was acquired by the company from Freeport Cobalt in 2021 for approximately USD$ 200 million. The asset consists of a portion of the Kokkola industrial cobalt refining and manufacturing complex in Finland. The Kokkola complex is the largest low-cost leading cobalt refinery in the western world. The complex holds a 15,000 tons capacity, with Jervois Global Ltd. holding 6,250 tons thereof. The company also produces various chemicals and powders at its Finland operations.

The São Miguel Paulista nickel and cobalt refinery (SMP refinery) is located in São Paulo, Brazil and is a 100%-owned asset acquired by the company from Companhia Brasileira de Alumínio. The SMP refinery is a past-producing asset and is the only nickel-cobalt refinery in Latin America. The company aims to position itself as a vertically integrated supplier of refined nickel and cobalt products in the America’s through the asset. The stage 1 restart of the SMP refinery holds a bankable feasibility study completed by the company in April 2022 and shows a 10,000 metric tons per annum production rate in total with 2,000 metric tons per annum production of refined nickel and cobalt respectively.

The Jervois Idaho Cobalt operation is located in the Salmon-Challis National Forest and consists of a 1200-ton-per-day underground hard-rock mine with a milling and flotation circuit. The company commenced production at the operation in H2 2022 and is underway ramping up production to full capacity, which will be reached in Q1 2023.

Capital raise

Jervois Global Ltd. announced on the 11^th of November 2022, that it had concluded with a USD$ 150 million capital raise. The institutional placement and entitlement offer of the raise was successful in raising USD$ 115 million, with the remaining USD$ 35 million resulting from a retail component of the placement. The capital raise saw a total of 549,598,088 new shares issued at AUD$ 0.42 per share for aggregate gross proceeds of approximately USD$ 150 million. Bryce Croker the Chief Executive Officer and Executive Director of the company explains the capital raise as follows.

“We raised USD$ 150 million and the reason we did so was really to retain 100% of 3 geopolitically significant assets and to have them unencumbered. So, the unencumbered aspect isn’t necessarily a popular argument. Everyone loves the concept of off-takes, but off-takes have real value. I’ve always said that the theory of Jervois since day one has been open register, open off-take in so far as we do believe that the dynamic is a bell curve or a hockey stick - it’s going to get more intense.”

The capital raise has been able to provide Jervois Global Ltd. with the flexibility to have three operating assets in the future, positioning the company for the anticipated demand increase in nickel and cobalt.

“It’s about having the flexibility to have 3 operating assets that we maintain 100% control of ourselves, and as we look forwards into 2024 and 2025, where the demand is projected and we anticipate based on the discussions we’re having with OEMs to increase materially, it’s really about retaining as much equity upside to that as we possibly can for ourselves and other shareholders.”

Raised funds allocation

The USD$ 150 million raised by Jervois Global Ltd. has allowed the company to be able to pursue its future plans as it sees fit, according to Croker.

“It’s just a very different conversation when you’re fully funded, and you’ve got USD$ 150 million additional capital behind you. That’s not the only reason we chose to raise what we did, but it does change that dynamic, it does allow us to do things on our own terms…”

The company plans to implement the raised funds towards restarting its São Miguel Paulista nickel and cobalt refinery and reaching the planned stage 1 production of 10,000 million tons per annum of nickel and 2,000 million tons per annum of cobalt metal cathode at the operation. Jervois Global Ltd. expects to commence production at the São Miguel Paulista nickel and cobalt refinery in Q1 2024.  

The raised funds will further be implemented towards the planned production ramp-up at the Idaho Cobalt Operations, including exploration and permitting initiatives. The funds will also serve as mine-sustaining capital at the operation. The company further plans to use the funds to complete a bankable feasibility study for the expansion of Jervois Finland. Bryce Croker explains the raised funds provide the company with the flexibility to advance its 100%-owned projects as it sees fit, without being dependent on any other party.

“The raise is firstly about São Miguel Paulista, restarting São Miguel and having the flexibility to do so on our own terms without requiring a partner. So, USD$ 80 million to USD$ 85 million of the proceeds are for São Miguel. Then there is an assumption on the Idaho sources and uses where we only sell 60% of the cobalt product in 2023. We want to have that flexibility and what that means is that allowing us to fund the programs in Idaho as we build out the mine development capital across 2023 gives the commercial team much more flexibility.”

Remaining profitable

The nickel and cobalt spheres are poised for growth in the future, but that does also incite competition. Croker believes that the ability of Jervois Global Ltd. in the future to remain profitable is through the quality of the company’s assets and also the company’s ability to execute its plans.

“I think it’s really around the selection of assets and the ability to execute, and then the ability to operate. If we look at São Miguel Paulista, with margin compression and the macro impacting that, we’ve actually got margin expansion in Brazil, which is why we’re doing Brazil now. We’ve got downward pressure on input costs associated with the raw material due to the rise of mixed hydroxide products coming out of Indonesia. We’ve got upwards pressure on revenue, not only because of the nickel price but because of the premier. Because of the fact that 25% of class 1 global nickel market is Norilsk, and obviously, Russia is now a persona non grata in the international community and you are getting a significant disconnect in terms of how the product is trading. So, the product, the electrolytic nickel, is going to trade at a significant premium, we believe, and that premium is going to increase relative to other brands, not decrease.”

Croker further believes that the company’s ability to maintain and promote its ESG values will contribute to its ability to remain profitable. The ESG values of a company have been seen in recent times to play a large role in the stability and profitability of a company with the investor community becoming conscientious regarding a company’s impact on communities and environments.

“The concept of ESG - ESG now is an increasingly more important decision in terms of not only how investors allocate capital, but also how customers are buying products. São Miguel Paulista runs on hydro, it’s going to be among the lowest carbon nickel that’s going to be available on the market to US OEMs, and European OEMs but obviously, geographically more proximate to the United States. And there’s real value in this facility coming onto the market at a time when there’s certainly a significantly rising demand.”

The management of cost pressures will also prove to be a valuable skill required by Jervois Global Ltd. to ensure its profitability. The management of commodity prices as the sector grows and competition equates to lower margins and commodity prices will be paramount to the company’s success. Jervois Global Ltd. however believes that it is set to be able to remain profitable at predicted commodity prices.

“In Idaho, this is an operating site, where obviously there’s operating cost pressure. We articulated that in the equity raise where we’re circa USD$ 10 million operating ahead of where the BFS would have been. Now, we’re optimistic that over time, the pricing, the way that inflation flows through on pricing, we’re going to see some commensurate benefits from that. I think USD$ 3 copper and ultimately, we think a USD$ 25 cobalt price is also going to be proved conservative in the fullness of time. So, we’re doing well to manage the cost pressures.”

Jervois Global Ltd. does not plan to raise any further funds in the foreseeable future. The recently raised funds will enable the company to have three cash-generating assets at the end of its implementation.

“I think the key is that we don’t need any more capital for the current portfolio. That was the basis of raising USD$150M. That gives us a fully funded pathway, we’re off to the races, and then we’ve got 3 cash flow generating assets that are all on the sources side of not the uses.”

To find out more, go to the Jervois Mining website