Government funding 'painstakingly slow' for Temiskaming cobalt refiner

Electra Battery Materials CEO Trent Mell thinks it’s high time government starts picking some winners from Northern Ontario to begin feeding the critical minerals supply chain.

Ottawa and Queen’s Park have been strategizing, promoting and encouraging Canadian miners and manufacturers to produce and process more critical minerals. 

But so far, the big surfboard cheques have been delivered to the end users, the big car companies and battery cell manufacturers in Windsor, St. Thomas, Alliston and Port Colborne.

Mell sees the inequities.

“What about Northern Ontario? There are a lot of opportunities but there are no investments.”

In Mell’s conference-going travels on both sides of the border, he finds the narrative at these events is the same. Government investments have been made in the downstream end; now the attention needs to be turned further upstream. 

As the proponent of a cobalt refinery project in the Temiskaming region, Mell said government investment in mid-stream processing facilities can be a catalyst toward freeing up market capital.

Electra’s plant will be the first dedicated facility of its kind in Canada. 

The Toronto company is refurbishing and expanding the former Yukon refinery, located between Temiskaming Shores and the Town of Cobalt in northeastern Ontario. Electra acquired the shuttered facility in 2017. They’re looking for government support to push the project over the finish line, 

“We’ve put $100 million into the asset ourselves over the last three, four years. For this next round, I think government has to go first,” said Mell.

Electra is one of a half-dozen companies with an ambition to process cobalt and nickel and convert them into a precursor material of battery-grade quality that’s much coveted by electric vehicle manufacturers..

Its refinery project is the foundational piece for a proposed battery materials industrial park.

Construction on the project stalled last year after the company halted work when the project price tag ballooned due to inflation, supply chain issues and other difficulties that delayed completion. 

It plunged Electra into survival mode in 2023.

The priority this summer and fall is to put together a financing package “sooner than later,” Mell said, from a combination of government, clients, strategic partners, and private investors to resume construction by year’s end. All the expensive lead-time equipment is on site. It’ll take a year to install and commission the refinery.

At last count, Electra was short US$60 million ($80 million) to finish construction. Ottawa did provide $5 million last February for some pre-construction preparatory work, but Mell is waiting on a bigger commitment.

Mell was in Sudbury in June to accept $5 million in federal funding to prove out Electra’s proprietary battery recycling technology. Black mass recycling has been an exciting venture with much upside as a niche industry in Ontario. 

”I’m grateful for the money, but we’re working on the main prize, which is cash flow from cobalt refining,” said Mell. 

Mell said federal and provincial officials are keenly aware of the value proposition in Temiskaming. When fully built out, he said the refinery will be a $360-million asset. But his company can’t go on forever without funding “or else we’re done. We gotta keep the lights on.”

Frustrated, but diplomatic, Mell couldn’t provide an approximate date on when funding is expected to arrive. “It is coming, but it’s painstakingly slow.”

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It’s a battle to attract financing these days. Unlike the U.S., where there’s easier access to capital, plus funding and tax credits from Washington’s Inflation Reduction Act (IRA), it’s much tougher sledding to raise money for large projects in Canada.

“The private sector is really gun shy right now, even with bigger assets.”

Government has to step in and go first, Mell said, and show confidence in a select few projects.

“I keep arguing that if (government) could signal who the winners are — play favourites, don’t try to sprinkle money to everybody — I think that’ll help to unlock a lot of capital.”

The same case could be made in northwestern Ontario where four lithium companies with advanced and mine-ready projects each have designs on building lithium conversion chemical refineries to supply battery cell manufacturers. But no government dollars have been committed.

The lack of a roll-out in provincial government funding and a decline in electric vehicles sales has forced Umicore to hit the skids in constructing its battery plant in eastern Ontario. 

Though Canadian government subsidies in major industries, like EV plants, have been panned by media pundits, Mell said consider that China — the world’s largest processor of critical minerals — subsidizes its domestic industry to supply a global market while suppressing mineral commodity prices.

The U.S. government is now championing an ‘on-shoring’ movement, through the IRA, to source domestic supplies of these high-tech minerals. Electra wants to be part of that, and operate in an environmentally responsible way.

“If (government) can help us on the capital side we will operate efficiently and compliantly with ESG and IRA and all the other acronyms you can throw at us,” said Mell.

Securing customers isn’t a problem for Electra.

South Korean battery maker LG Energy signed on last year for a heaping scoop of Electra’s sulfate product, once they enter production.

Others OEMs (original equipment manufacturers) have called, Mell said, including one of the world’s bigger electric vehicle manufacturers, looking to secure production.

“At some point there should be a frenzy to get their hands on our material.” 

With about 30 battery plants under construction in North America, Mell said there’s no way Electra alone will be able to satisfy demand.

“We’re not at all worried about selling our product. We’ve got indicative demand that’s two times our production profile. That’s only going to grow.”

Once in operation, Mell said they intend to expand cobalt processing production from 5,000 tonnes to 6,500 tonnes a year, such is the potential order book. 

Electra has secured “ethically sourced” cobalt from the Democratic Republic of Congo. Their order is on hold with their suppliers until they’re ready to go, Mell said.

While there may be temptation to put up the For Sale sign in Temiskaming, Mell said they’re determined to stay the course.

Electra was invited by the Quebec government to set up a refinery in Becancour, an emerging battery metals hub in a subsidy-rich environment that’s attracting some of the world’s biggest mining and technology players.

In Temiskaming, they are on a fully permitted site with room to grow, access to hydroelectric power and a knowledgeable workforce.

“Temiskaming Shores has been really good to us. We’ve got great, great people.

“You’re sitting between Rouyn-Noranda and Sudbury, not to mention Timmins and Kirkland Lake. So, not a bad place to set up.”

Mell said Temiskaming refinery remains its flagship asset. Any future expansion to Quebec or the U.S. he views as “growth opportunities, not a substitute.”