Electra Battery up 29% on cobalt supply deal

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Electra Battery Materials Corp. [ELBM-TSXV, NASDAQ] said Thursday it has signed a three-year deal to supply battery-grade cobalt to LG Energy Solution (LGES), a leading manufacturer of lithium-ion batteries for electric vehicles.

Electra shares advanced sharply on the news, rising 29.1% or $1.15 to $5.10 on volume of 129,770. The shares are currently trading in a 52-week range of $7.65 and $3.27.

Electra, a company previously known as First Cobalt Corp, has pledged to supply LGES with 7,000 tonnes of battery grade cobalt from 2023 to 2025.  That material will be supplied from a cobalt sulfate refinery located in Temiskaming Shores, near the Sudbury, Ont., Nickel Basin.

The refinery is in the late stages of commissioning and is expected to commence operations in the spring of 2023.  First Cobalt acquired the facility three years ago when it bought US Cobalt Inc. for about $150 million. At the time of the transaction, First Cobalt described the facility as the only permitted cobalt refinery in North America capable of producing battery materials.

As part of the deal, First Cobalt also picked up the Iron Creek Cobalt property in Idaho, one of only two advanced primary cobalt resource projects in the U.S., and a potential future source of feed for the Ontario refinery.

First Cobalt initial plan was to recommission the refinery as a producer of cobalt sulphate, using third party hydroxide feedstock sourced from cobalt mines in the Democratic Republic of Congo. Backed by a $10 million investment from the Ontario and Canadian governments, the recommissioned refinery is expected to produce 5,000 tonnes per year.

But after recent talks with potential customers in the auto and battery manufacturing sector, First Cobalt has elected to expand the refinery into a Battery Metals Park capable of supplying a variety of materials for the electric vehicle market.

On Thursday, Electra said Cobalt sulfate provided under the term of the contract with LGES will be sufficient to supply up to 1.5 million full electric vehicles.

“LG Energy Solution is a global leader in the electric vehicle supply chain, and we are delighted to sign our first strategic supply agreement with such an important player in the lithium-ion battery market,’’ said Electra CEO Trent Mell.

“Today’s announcement is great news for Canada,’’ said Francois-Philippe Champagne, Canada’s Minister of Innovation, Science and Industry. “This agreement between Electra and LG Energy Solution will see Canadian critical mineral resources and Canadian workers helping to build the car of the future,’’ he said.

Electra will supply 1,000 tonnes of cobalt contained in cobalt sulfate product in 2023 and a further 3,000 tonnes in each of 2024 and 2025 under an agreed pricing mechanism. In addition to the supply agreement, Electra and LG Energy Solution have agreed to co-operate and explore ways to advance opportunities across North America’s EV supply chain, including securing sustainable sources of raw materials. Financial terms of the agreement have not been disclosed.

To meet growing customer demand, Electra announced back in June, 2022, that it is evaluating a second refinery in Quebec by 2025-26, which could source cobalt Electra’s Idaho cobalt and copper project.

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