Electra converts debt, launches $30M raise to jumpstart stalled cobalt refinery

[Redator]

Electra Battery Materials (NASDAQ, TSXV: ELBM) says it is conducting a “comprehensive financial restructuring” to shore up its balance sheet as it looks to advance the commissioning of what would be the first cobalt sulfate refinery in North America.

On Thursday, the battery metals developer announced plans to convert approximately $40 million of its outstanding debt into equity, with its lenders receiving shares priced at $0.60 each. This exchange would result in a 60% reduction in Electra’s total debt to $27 million. Its remaining notes will take the form of a new three-year loan.

The company will also launch a $30 million equity financing, offering units priced at $0.75 each. The units each contain one common share and one share purchase warrant, with the latter exercisable for three years at $1.25 a share. Existing lenders have committed to $10 million of the financing.

Electra’s shares closed at $0.95 apiece on the NASDAQ at Thursday’s close, giving the Toronto-based company a capitalization of $17 million. The stock opened Friday’s session one cent higher at $0.96.

Together, the debt conversion and equity financing are designed to strengthen Electra’s capital structure and provide the funding required to advance the commissioning of its cobalt refinery project, the company stated in a press release.

“Today marks a turning point for Electra,” Electra’s CEO Trent Mell said in a press release. “By equitizing a majority of our debt and securing bridge financing, we are taking decisive action to create a sustainable capital structure and advance the steps required to complete the cobalt refinery.”

Stalled refinery project

The $250 million refinery in Temiskaming Shores, Ontario, has been on hold since its construction was halted in August 2023 due to cost overruns and supply chain disruptions. At the time, approximately $60 million was still required to complete the project.

Electra has been focused on raising this capital to finish building the facility, from which it expects to produce about 6,500 tonnes of battery-grade cobalt per year, enough to support the manufacturing of a million electric vehicles.

To date, it has received federal government support from both sides of the border, including a $20 million award last year from the US Department of Defense and a recent funding on a similar scale (C$20 million) from the Canadian government.

“With shareholder approval, lender participation, and government support, we will soon be in a position to complete construction of North America’s first cobalt sulfate refinery,” Mell stated, acknowledging that the note restructuring is “undeniably dilutive and difficult” for shareholders, but it is “both timely and necessary” for the company.

“By significantly reducing our debt and securing new capital, we are strengthening our financial foundation and aligning our funding with a clear, executable path to production,” Electra CFO Marty Rendall added.

The financing package will also include $2 million in short-term loans to fund working capital. In return, the lenders will have the right to appoint a director to Electra’s board, which will be expanded to seven members post transaction.