First Cobalt (FCC.V) is overhauling the business strategy and whereas the company started out as a mining play for battery metals (and more specific, cobalt), First Cobalt will change its name to Electra Battery Materials. It’s not just a name change as the company will re-establish itself as a more pure industrial option.
Most of the mining projects have been sold or joint ventured to third parties and while First Cobalt still has the Iron Creek cobalt project in Idaho it’s still working on, we can see that project being marketed to third parties as well, as that would simplify the value proposition of First Cobalt/Electra Battery Materials.
The main asset First Cobalt will use to kickstart its industrial strategy will obviously be the Battery Metals Park in Ontario where the company plans to produce 6,500 tonnes of cobalt per year by the end of next year. The original plan was to start with an output of about 5,000 tonnes per year but due to the strong demand from automotive companies and cell phone makers, Electra Battery Materials will add additional capacity in the crystallizer circuit. This will boost the output by about 30% per year for only a marginal 12% increase in anticipated capex for the circuit ($67M, up from $60M). The anticipated start-up date remains unchanged and Electra still anticipates to produce its first cobalt by the end of 2022. The company is already thinking about expanding the facility in order to treat black mass from batteries from 2023 on. At that point, Electra won’t be just a producer of cobalt sulfate using green energy, it would also score a lot of points on the ESG front for actually recycling the recovered elements from batteries.
The battery materials park is just the start of the new strategy as the company is mulling over doing the same for nickel material. It could source raw nickel concentrate as feed to a specific nickel plant which should produce battery grade nickel sulfate as end product. Electra has already started discussions with potential nickel suppliers with an anticipated start date in 2024-2025 for the potential new plant which would also be built on the Battery Materials Park site.
And as a third step, Electra Battery Materials is looking into building a precursor facility in Canada.
By moving away from being perceived as a mining company and re-establishing itself as an industrial player, Electra Battery Materials should be valued differently by the market as it should be valued based on cash flows and EBITDA multiples as it won’t be as exposed to the volatility on the commodity markets.
Disclosure: The author currently has no position in First Cobalt/Electra Battery Materials. Please read our disclaimer.
