Electra Battery Materials has snagged a US$20-million ($27.4 million) grant from the U.S. Department of Defense (DoD) to finish construction of its cobalt refinery in the Temiskaming area.
It’s a huge endorsement for a small and ambitious Toronto company that most investors and industry watchers would have to undertake a Google search on to find out its particulars.
Electra is out to displace China as the world’s dominant player in critical minerals processing.
Their ace in the hole is having the most advanced cobalt refinery in North America that’s relatively close to startup and considered a vital security investment by Washington to source “key precursor material” for large-capacity batteries in supplying both the defence and commercial sectors.
The funding comes through the Defense Production Act Investments (DPAI) office and draws from a funding pot under the Ukraine Supplemental Appropriations Act of 2022 to expand domestic production of critical minerals. The award is of one 35 made by the DPAI program this fiscal year and one of three awards made to Canadian companies.
“It’s the first investment in the battery mid-stream (processing) that they’ve made,” said Electra CEO Trent Mell in an interview. “We’re pretty excited to be at the forefront.”
The funding, which Electra will be paid over the next two fiscal periods, will cover one-third of the cost to finish the refinery.
The plant, located between the town of Cobalt and Temiskaming Shores, is currently valued at $280 million. A fully completed facility will boost its replacement value to $360 million.
The funding comes ahead of any substantial upstream investment from Ottawa and Queen’s Park in key critical minerals processing in this province. The bulk of the subsidies have been spent in downstream battery manufacturing and electric vehicle assembly plants in Windsor, St. Thomas, Niagara and Port Colborne.
Mell said talks continue with the Canadian government to access various funding programs, but there’s “no news at this point.”
Electra has been scrounging for cash since putting construction of the cobalt plant on hold last summer. The company began refurbishing and expanding the former Yukon refinery in 2022 before running into inflation and supply chain problems that inflated the project price tag.
The company acquired the formerly mothballed Yukon refinery in 2017 and rebuilt the fully permitted plant to refine cobalt and nickel, recycle and recover valuable minerals from spent batteries, and build out an ambitious battery materials industrial park.
“They came to us,” said Mell in telling the funding story that was more than a year in the making.
A Department of Defense representative directly approached Electra to encourage them to consider funding opportunities under the Title III of the Defense Production Act. Mell found department officials “extremely informed and diligent” in their review of the company’s spending and plans.
“To get a grant — free money — on your balance sheet like this is a huge benefit for us,” said Mell.
“They said from a working capital perspective, we can get monthly disbursements. They’re mindful that we’re a startup and they want to make sure we’re successful.”
Other than using the funds to finish the refinery, Mell said there are no strings attached.
“Zero” per cent of their proposed production will have to go south of the border, he said.
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Electra has an existing supply agreement with South Korea’s LG Energy Solution, one of the world’s largest battery-makers, to deliver 80 per cent of Electra’s cobalt sulfate production for the first five years in operation. “Several buyers,” Electra said in a news release, are vying for the remaining production.
Electra maintains the cobalt that will be shipped to Temiskaming will be “ethically sourced” from the Democratic Republic of Congo through Glencore and Eurasian Resources Group-owned mines.
The timing of the funding is very fortunate to Electra’s continuance as a going concern. Heading into next year without a substantial strategic investment would’ve been “challenging," said Mell.
”I would say this is the first (funding) domino and we hope to have more coming into place.
“I’m not too worried. Outwardly, it may look dire. Inwardly, it’s a process we’ve had to follow. It does take long — longer than I like — but the outcome is worth the wait.”
Just as Canadian media pundits have sharply criticized government investments in southern Ontario battery and car plants, spending by the Pentagon in a Canadian minerals processing company is sure to raise alarm bells.
Mell responded that the U.S. government understands the importance of creating a safe and secure critical minerals supply chain and decreasing its reliance on China. As the world’s policeman, he appreciates the “clarity of vision” of what they want to accomplish through the whole onshoring movement.
Washington, he adds, appreciates it’s a tilted playing field when it comes to small processors sourcing financing. Chinese critical minerals processors have a huge advantage in accessing capital at lower interest rates, compared to Canada, to fuel China's global strategy of building excess industrial capacity.
To that end, the Biden Administration has passed the more well-known Inflation Reduction Act and the Additional Ukraine Supplemental Appropriations Act, where this funding came from.
“From the DoD perspective, it’s about expanding the domestic production base in this case for critical minerals.”
This kind of support dates back to the early 1950s during the Korean War and carried on through the Cold War to ensure the U.S. had what it needed by way of critical minerals and manufacturing capability during time of war or emergencies, he said.
“In this case, they get both,” said Mell. “Pretty unique. A brick-and-mortar investment like this we haven’t seen in many, many years.” No different than U.S. military procurement of light armoured vehicles from Canadian companies like Bombardier, he said.
At the site, during the construction downtime, Electra turned its attention to battery waste recycling, running in a pilot program inside the original refinery footprint.
It’s proved to be a very promising side gig that enabled them to ship out a high-quality nickel-cobalt mixed hydroxide precipitate product (MHP) to customers during its ‘black mass’ trials as well as test some new ideas in the lab, including a new approach to lithium recoveries they they think will yield a higher quality production.
But over the last 60 days, Mell said, they’re turning their attention back to construction, putting out tenders, reviewing their scheduling, and preparing to hire some senior managers.
“We’re starting to feel a bit better that we need to get our game face on and get ready to get back to work.”
Mell understands they’ll have their work cut out to win back contractors and labour. But he said they’ve been fortunate on the local workforce front that the prospect of a 15-minute drive to a job is more preferable than commuting an hour or more to mines in the Kirkland Lake area.
With mining projects like Côté Lake in Gogama finished, they’ll be turning to an available pool of contractors in North Bay, Sudbury and elsewhere to finish the job.
“TBD on what that’s going to look like.”
