This article was first published by Northern Ontario Business, a Village Media publication.
An unfinished Temiskaming cobalt refinery project was deemed so vital to North American critical minerals production that the U.S. Department of Defense (DoD) dropped $27.4 million (US$20 million) on the project last month to complete its construction.
Electra Battery Materials’ good fortune prompted an elated Ontario Premier Doug Ford to tweet his congratulations and pledge his government’s ongoing support.
But how much has Ontario invested in Electra’s refinery project over the last four years? $165,000.
That was all Electra was able to pull from a $5-million grant provided by the Northern Ontario Heritage Fund Corp. (NOHFC) before funding was stopped by the regional development agency. The grant was part of a joint $10-million investment to the company — then known as First Cobalt —announced in tandem with the federal government in December 2020, to advance construction of the plant.
According to disclosure documents filed last month by Electra Battery Materials in its 2024 second quarter filings, full access to the funding was “paused” some time ago by NOHFC and is now no longer available to them.
The lack of major provincial support is mystifying to Timiskaming-Cochrane MPP John Vanthof, who’s taken note of the provincial government’s spending spree to build electric car and battery plants in places like Windsor, St. Thomas, Brantford, Brampton, Alliston and Port Colborne.
“Considering the investments in electrification in other parts of the province,” said Vanthof, “this cancellation (by NOHFC) was somewhat puzzling.”
Vanthof said he’s toured the Electra refinery site and came away impressed with what’s been accomplished.
Since acquiring the shuttered Yukon refinery in 2017, the Toronto company says it’s spent $100 million to modernize and expand the once-shuttered refinery, between the communities of Cobalt and Temiskaming Shores.
But the company ran into financial difficulties during construction, stemming from inflation-related costs and lagging supply chains. Construction was halted at the site in May 2023, resulting in layoffs and putting the company in survival mode.
When in operation, the refinery would take cobalt hydroxide, mined in the Democratic Republic of Congo, and convert it into cobalt sulfate, a battery-grade material used by electric vehicle battery manufacturers.
Electra insists customers will be lining up once they begin their initial production run of 5,000 tonnes per year of cobalt sulfate. South Korean battery maker LG Energy Solution is already signed up to take 80 per cent of production with other manufacturers jockeying for the rest.
The facility would appear to be a strategic processing linchpin to the Ford government’s desire to establish a domestic mines-to-car plants critical minerals supply chain.
But an apparent change in the scope of the refinery project, exacerbated by the construction halt, contributed to funding delays, said a source familiar with discussions between the agency and the company.
Even with the DoD funding coming this fall, Electra said its priority is to secure additional financing, including equity and debt financing, to finish the job in Temiskaming.
The company estimates it would cost US$60 million to finish the refinery. No date has been announced to resume construction.
Not securing the money to finish the refinery and meet its liabilities, heading into 2025, could impact Electra’s ability to continue operating.
Whether or not the Ontario government still supports Electra’s development plans through another funding pot, another agency or another ministry remains unknown at this point.
Requests for an interview with Northern Development Minister Greg Rickford, the chair of NOHFC, were declined.
In a 2021 YouTube video, Rickford pledged his government’s support to see Electra’s concept for a Temiskaming battery metals industry park come to fruition.
An Electra spokesperson said they continue to keep the province and Invest Ontario apprised of their progress with regular project updates.
“The specifics of those conversations with Ontario are confidential,” said Heather Smiles, vice-president of investor relations and corporate development, “though I can confirm that they shared our excitement with the confidence demonstrated by the DoD.”
After being approached by the U.S. government, the company said it went through an extensive due diligence process of its financials and plans that took more than a year before the award was announced. Electra was one of three Canadian companies amid 35 awards announced in August to receive funding through the Defense Production Act.
However, a letter made available to Northern Ontario Business suggests the NOHFC grant was re-offered to Electra, but the company chose not to take it.
The grant had been restructured in 2023 to put toward the company scaling up its ‘black mass’ battery recycling trials to create some cash flow for the struggling company.
In Electra’s recent June 27 letter to Rickford and NOHFC executive director John Guerard, company CEO Trent Mell declined the grant, saying the focus had changed from battery recycling back to cobalt refining.
Based on the “significant progress” being made with DoD, Mell was optimistic that a sizable funding package for the refinery would materialize.
Mell wrote there’s “significant interest from additional governments beyond Ontario, as well as strategic and other market participants, in supporting the cobalt sulfate refinery as the first development stage of the Ontario project.”
As a result, Mell wrote, “we have repositioned our priorities to align with Canadian and U.S. strategic priorities. As the only asset of its kind in North America, the cobalt refinery has been singled out by both governments in the effort to onshore the battery supply chain and reduce reliance on China.”
Electra’s schedule for its recycling program and NOHFC’s timeframe to access the grant didn’t appear to match up.
Mell told NOHFC since they have no plans to invest in battery recycling over the next 24 months, the company is “unable to accept the NOHFC funding as granted.”
A spokesperson in Rickford’s office would only say Electra had “declined” NOHFC’s funding offer for the recycling program.
Electra officials had relayed to Vanthof that the cancellation of the NOHFC funding “caused an overall dampening effect on their ability to raise private capital.”
Vanthof said he contacted Rickford on the company’s behalf.
“We had a good conversation about the project, but he did not change his position. Since I don't have access to the information that the NOHFC does, I can't really judge it.”
High construction costs during the pandemic were the norm that impacted many projects under development across Canada, said Vanthof.
Considering the challenges Electra has faced, Vanthof said he’s “encouraged” by Washington’s support of the refinery.
“Their evaluation was obviously not the same as the Ontario government's.”
Smiles agreed that having the province’s support would give them a major bounce in the market.
“It is our opinion that any strategic investment for the cobalt refinery in Temiskaming Shores could unlock further sources of capital, including strategic or private equity markets.”
She said Ottawa’s recent announcement of tariffs on imported Chinese electric vehicle “demonstrates the strategic and geopolitical importance of developing every link in North America's domestic supply chain, including projects like Electra's refinery."
While Queen’s Park hasn’t committed any funds toward Electra so far in 2024, Ottawa has contributed $10 million this year, including a $5-million FedNor loan toward the refinery’s construction along with a $5-million grant from NRCan for ongoing research in the battery recycling program.
The Ontario government did provide Electra with $250,000 in February 2022 toward a nickel sulfide production study, which was matched by Glencore and Talon Metals.
Electra’s broader plans are to create a large-scale cobalt and nickel battery materials industrial park, similar to one being assembled and provincially subsidized in Becancour, Que.
