Electra expands LG cobalt supply deal with delayed start date

Electra Battery Materials (NASDAQ, TSXV: ELBM) has enhanced its battery-grade cobalt supply agreement with LG Energy Solution, a leading global manufacturer of lithium-ion batteries, from terms initially announced in September 2022.

Under the updated terms, Electra will supply LG with 3,000 tonnes of cobalt contained in a cobalt sulfate product in 2025 and a further 4,000 tonnes in each of the following years through 2029 for a total of 19,000 tonnes under an agreed pricing mechanism.

Previously, Electra had agreed to supply LG with 7,000 tonnes of battery-grade cobalt over a three-year period, starting in 2023. The value of the initial deal was estimated at $63 million.

“LG Energy Solution continues to strengthen its position as a global leader in the electric vehicle supply chain through its investments in Ontario and active collaboration with Canadian companies developing critical minerals and battery materials,” Electra CEO Trent Mell said in a news release.

Consistent with the original terms of the supply agreement, Electra and LG will also explore ways to advance opportunities across North America’s EV supply chain, including securing sustainable sources of raw materials. Financial terms of the new agreement were not disclosed by the companies.

The material will be supplied from the Electra’s cobalt refinery located north of Toronto, Ontario, which is currently under construction. Once complete, it would be the only cobalt sulfate refinery in North America.

Concurrent with the refinery construction, Electra is also running a plant-scale black mass recycling trial to recover high-value elements contained in expired lithium-ion batteries, including lithium, nickel, cobalt, manganese and graphite.

To date, the results from its plant-scale trial have met or exceeded results achieved previously in a lab setting, Electra said. It anticipates commercialization of its black mass recycling capabilities in 2024 pending completion of funding commitments.

At full capacity, Electra’s battery materials park in Temiskaming Shores could produce enough cobalt sulfate to supply up to 1.5 million electric vehicles per year and process 2,500 tonnes of black mass materials per year.

Electra is currently pushing for North American sourcing of materials for EVs, citing CRU Business Intelligence figures showing that China accounts for 71% of the world’s refined cobalt, 76% of refined nickel and 93% of refined manganese used in EV batteries.

Electra also expects a lift from US President Joe Biden’s recently passed Inflation Reduction Act, which offers a $7,500 tax for vehicles that don’t contain minerals from China and Russia.

Shares of Electra Battery Materials rose 5.9% by 11:30 a.m. ET Monday. The company has a market capitalization of approximately C$51 million.