Construction at North America's only cobalt refinery slows down amid rising costs

Electra Battery Materials CEO Trent Mell says he has had to make the "tough decision to slow things down" in Temiskaming Shores, the northern Ontario town where the company's ambitious battery materials park project is located.

Construction work began there two years ago to expand an existing cobalt refinery facility. Mell says the company was caught off guard by "supply chain delays and inflationary costs linked to the project."

Once it finishes the build, Electraaims to both process raw cobalt and to recycle black mass obtained from used batteries.

It intends to process the materialsused in thebatteries for electric cars and other electronic devices.

Currently, China is the world's top producer of refined cobalt, according to Natural Resources Canada.

For now, Mell says the company will prioritize black mass recycling as it already has operational capacity to do that.

However, construction work to expand the existing cobalt refinery will be delayed until the company manages to raise an additional $80 million, says Mell.

"We're not going away," he said. "People want to get this built. The challenge we have is one of timing and fund allocation."

The company signed a three year battery grade cobalt supply agreement with LG Energy Solutions, one of the world's largest battery companies, back in 2022.

Mell says construction delays at the cobalt refinery are not hurting Electra's partnership with LG.

"Our delay is not consequential to them as the onshoring of the North American supply chain of electric vehicles is really a 2025 onward story," he said.

Mell adds that LG even asked to extend the supply agreement by another two years, to process 19 000 tons of cobalt instead of 7 000 tons.

To get the funds it needs, Electra recently completed a round of equity financing in the capital markets.

It plans to generate some revenue from its black mass recycling operation, but it hopes to get both federal and provincial government support to cross the finish line.

"It's going to take participation by government and industry stakeholders to make sure we can get it completed," he said.

Subsidy "inequities" a problem

Mell says that in addition to competing with China on its operation costs, it also has to compete with firms south of the border who are benefiting from the Inflation Reduction Act in the U.S.

"The amount of money that gets deployed to our U.S. competitors relative to the capital available for Canadian start-ups is just so stark," he said.

Canada and Ontario also recently announced up to $28 billion in subsidies for battery manufacturing plants in southwestern Ontario.

Mell says the current pause in Electra's cobalt refinery project will allow the company to engage with government stakeholders to "discuss some of those inequities and figure out a strategy."

"As a society, Canada, Ontario, we haven't yet figured out how to extend a measure of support to the upstream companies. Would it be mines and refineries like us.

"I think Northern Ontario's turn will come. I will say we're not there yet, but there is an awareness that we need to replicate what we're seeing in the south in some fashion.

"Until that's been resolved, we're going to have to go slow," said Mell.