Jervois Global, a mining firm based in Australia that primarily produces cobalt, recently entered into a recapitalization agreement with alternative investment firm, Millstreet Capital Management. A significant drop in the price of cobalt has seen the firm enter bankruptcy proceedings in an effort to save itself and its workforce.
Since hitting a new high in April 2022, the price of cobalt globally has dropped by over 70%.
Jervois’ recapitalization proposal will see it go private, receive $145 million in new capital and get delisted from the Australian Securities Exchange. The funding is expected to support the business and growth initiatives, including a cobalt-nickel refinery located in Brazil.
Additionally, over $100 million of loans will be converted into equity while some assets will be transferred to a Millstreet nominee. These include a cobalt refinery in Finland.
The bankruptcy process, as stipulated under Chapter 11, is expected to commence this month. The process is expected to be finalized by the end of April 2025 and will eliminate the firm’s current stakeholders. Top shareholders include AustralianSuper, the biggest pension fund in Australia, and Mercuria, a commodity trader.
This development comes after the mining firm shut down its Idaho cobalt mine, the only source of the mineral in the United States. During the mine’s closing, Jervois noted that this property wouldn’t be viable until the price of cobalt rose to about twice its present level.
Prior to making this decision, the company had carried out extensive negotiations and due diligence for potential asset sales, partnerships or equity capital injections. In a statement, Jervois stated that various factors had affected negotiations and made it difficult for it to recapitalize its balance sheet on more favorable terms.
Bryce Crocker, the firm’s CEO, added that it had been a few difficult years for the company. For seven years, Jervois Global had reported no profit.
The opening of a cobalt mine in the DRC by China’s CMOC Group had only made it harder for Jervois to compete in the global market, even with financial support from the federal defense department. Chinese firms continue to increase their production of cobalt, facilitated by the lack of strict environmental and safety practices.
It should be noted that the $15 million grant awarded to Jervois by the Pentagon earlier won’t be impacted by the bankruptcy and will continue funding research on whether the company building a cobalt refinery in America is feasible.
Other North American companies like Aston Bay Holdings Ltd. (TSX.V: BAY) (OTCQB: ATBHF) are making progress in developing cobalt-rich properties. Over time, this vital mineral could become readily available outside Chinese-controlled supply chains.
NOTE TO INVESTORS: The latest news and updates relating to Aston Bay Holdings Ltd. (TSX.V: BAY) (OTCQB: ATBHF) are available in the company’s newsroom at https://ibn.fm/ATBHF
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