Electra Secures Three-Year Cobalt Supply Agreement With Eurasian Resources Group

Trent Mell & Benedikt Sobotka in February 2024 (Photo: Business Wire)

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By Editorial Assistant

Electra Battery Materials Corp. [ELBM-TSXV; ELBM-NASDAQ] and Eurasian Resources Group (ERG) have formalized their commitment to enhancing North America’s battery industry through a binding Cobalt Supply Agreement. The long-term arrangement, effective from April 1, 2024, establishes ERG’s provision of IRA-compliant cobalt hydroxide to Electra’s refinery operations in North America.

Specifically, starting in 2026, ERG will annually deliver 3,000 tonnes of cobalt under a three-year agreement to Electra’s cobalt sulfate refinery located north of Toronto. This significant volume of cobalt hydroxide feed material suffices to meet the capacity requirements of the refinery annually, thus securing a steady influx of raw materials.

The Cobalt Supply Agreement is a strategic move towards ensuring the long-term availability of battery materials in North America. It aligns with the region’s objective to reinforce its supply chain and reduce dependency on foreign refiners. Given cobalt’s critical role in electric vehicle (EV) batteries, this alliance underpins the industry’s foundational needs.

Electra’s refinery is the first in North America capable of producing cobalt sulfate to battery-grade standards. The sourcing of IRA-compliant feedstock from ERG amplifies Electra’s capacity to meet the burgeoning demand within the EV sector.
Additionally, possibilities of further collaboration with ERG hint at a robust future for local cobalt refinement.

The United States’ Inflation Reduction Act (IRA) has reshaped the landscape of the EV battery supply chain. By enforcing guidelines that exclude EVs with minerals sourced from certain foreign entities from tax credits, the IRA has punctuated the importance of onshoring critical mineral supplies.

This Cobalt Supply Agreement leverages IRA-compliant cobalt, which supports the strategic impetus of fortifying the United States’ domestic EV battery supply chain. Both Electra and ERG have echoed the significance of aligning with legislative requirements that reinforce secure and localized supply chains.

With the IRA stipulating stringent sourcing requirements for EV credits, the cobalt provided under this agreement could be instrumental for manufacturers aiming to meet the new regulations. It represents a tangible stride towards qualifying for financial incentives and endorses responsible mineral procurement.

Electra’s CEO has emphasized their partnership with ERG as pivotal in upholding sustainable mining practices essential for production security and ethical sourcing. The collaboration advances the localization of the upstream EV battery supply chain, a critical aspect of the industry’s evolution toward integrated battery supply models.

The Democratic Republic of the Congo (DRC) plays a leading role in global cobalt production, with ERG’s Metalkol operation contributing significantly to this status.

Responsible for a substantial share of the world’s cobalt production, ERG’s Metalkol represents a critical node in the cobalt supply network. With a majority of cobalt, particularly for EV batteries, sourced from the DRC, Metalkol’s position is underscored by its ethical production standards and certification under the Responsible Minerals Assurance Process (RMAP).

The Electra-ERG Cobalt Supply Agreement reduces the need to depend on foreign refiners, as the DRC’s output typically finds its way to markets through China. This new accord facilitates direct access to cobalt for North American refineries, mitigating complex, global supply chain risks.

ERG’s cobalt, produced through environmentally conscious methods from historic tailings, boasts a low carbon footprint, aligning with the sustainable ethos of the Global Battery Alliance. The hydroelectric-powered production furthers ERG’s environmental stewardship.

The future of cobalt production in North America appears increasingly robust, with expansion plans for a second refinery and significant financial input that establish long-term prospects for both Electra and the EV market.

Discussions are ongoing regarding a joint development for a second cobalt refinery in Bécancour, Quebec. This prospective venture would consolidate the domestic supply chain even further, marking a significant upscaling of cobalt availability for regional needs.

To achieve full operational status, Electra’s refinery complex requires an additional investment of $60 million. This financial hurdle is set against the backdrop of derisking measures already undertaken, including securing long-lead equipment and activating a plant for battery recycling trials.

Once operational, Electra’s refinery complex has the potential to generate enough cobalt to power as many as 1.5 million EVs annually. This sizable output presents vast implications for the North American EV market, promising a reliable supply of critical battery materials and supporting the region’s transition to sustainable transport solutions.

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