TORONTO - Electra Battery Materials Corporation (NASDAQ: ELBM; TSX-V: ELBM) and Eurasian Resources Group S.A.R.L. (ERG) have entered into a binding letter of intent for the long-term supply of cobalt hydroxide. This agreement, effective from April 1, 2024, is part of an effort to establish a local battery supply chain in North America and reduce dependency on foreign refiners.
Starting in 2026, ERG will supply Electra with 3,000 tonnes per annum of cobalt hydroxide for three years, which will be sourced from ERG's Metalkol operation in the Democratic Republic of the Congo. This supply is sufficient to meet the annual capacity of Electra's refinery located north of Toronto, which is North America's first cobalt sulfate refinery.
The partnership aims to support the growing demand for electric vehicles (EVs) by ensuring a supply of IRA-compliant cobalt. The United States Inflation Reduction Act stipulates that from 2025, EVs must use critical minerals not sourced from Foreign Entities of Concern to qualify for a $7,500 electric vehicle credit.
Electra's CEO, Trent Mell, emphasized the importance of partnering with a sustainable mining leader like ERG to provide secure and ethically sourced battery materials. ERG's CEO, Benedikt Sobotka, also highlighted the alignment of their cobalt hydroxide supply with ERG's commitment to ethical production and the expansion of North America's battery supply chain.
The two companies are also considering further collaboration for the construction of a second cobalt refinery in Bécancour, Quebec. Electra's current refinery complex is set to be the first in North America to integrate the production of critical minerals for EV batteries and the processing of black mass material from recycled lithium-ion batteries.
Electra has previously secured a five-year offtake agreement with LG Energy Solution for a significant portion of its production, and demand for the remaining production reportedly exceeds capacity. The refinery, once fully operational, could produce enough cobalt for up to 1.5 million electric vehicles annually.
This news is based on a press release statement.
InvestingPro Insights
As Electra Battery Materials Corporation (ELBM) solidifies its position in the North American battery supply chain through strategic partnerships, its financial health and market performance remain critical to investors. According to InvestingPro data, Electra has a market capitalization of 26.8 million USD, which is relatively small, reflecting its status as a niche player in the industry. The company's Price / Book ratio as of the last twelve months ending Q3 2023 stands at 0.28, indicating that the stock is trading at a low multiple of its book value. This could be seen as an opportunity for investors looking for undervalued stocks, especially in a sector with growth potential like battery materials.
However, Electra faces significant financial challenges. It operates with a considerable debt burden and has been quickly burning through cash. The company's operating income, adjusted for the last twelve months as of Q3 2023, is reported at -12.85 million USD, and it has not been profitable over the last twelve months. These are critical considerations for investors, as reflected by the InvestingPro Tips, which highlight that analysts do not expect the company to be profitable this year, and the stock price has been quite volatile, with a 1-year price total return of -77.22%.
For those looking to delve deeper into Electra's financials and future prospects, InvestingPro offers additional insights. There are 11 more InvestingPro Tips available, which can provide a more comprehensive understanding of ELBM's position in the market. Interested readers can explore these tips by visiting InvestingPro and can take advantage of an additional 10% off a yearly or biyearly Pro and Pro+ subscription with the coupon code PRONEWS24.
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