Jan 2 (Reuters) -

Cobalt miner Jervois Global ( JRVMF ) said on Thursday that

one of its lenders will take the company private as part of a

pre-packaged bankruptcy, the latest Western miner scrambling to

survive as competition from China intensifies.

U.S. fund manager Millstreet Capital Management will

take control of Jervois as part of the pre-packaged Chapter 11

filing, inject $145 million into the company and convert more

than $100 million of loans into equity.

Western miners and policymakers are in a precarious

position as Chinese-linked companies boost production using

safety and environmental practices that are often looser than

those expected by many governments and manufacturers.

The deal will wipe out all existing shareholders in

Jervois, which has not turned a profit in seven years. The

company

idled its Idaho cobalt mine in 2023

, laying off 250 workers, weeks before it was set to open.

That site was the only U.S. source of cobalt, used to make

electric vehicle batteries, electronics and a range of weapons.

"It's been a difficult few years for us," Jervois CEO

Bryce Crocker told Reuters. "We needed to restructure." The

company has said the Idaho mine would not be viable until cobalt

prices rise to about double their current level.

Jervois, which has received

financial support from the U.S. Department of Defense

, began to struggle after China's CMOC Group

opened a mine in the Democratic Republic of Congo in 2023,

pushing global production of the metal to an all-time high even

as electric vehicle sales have failed to meet bullish forecasts.

Cobalt prices have plunged 72% since hitting a peak in

April 2022, and shares in Australia-based Jervois have slid.

The price of another Jervois product, nickel,

has fallen by more than half over the past two years.

Millstreet, which loaned $100 million for the Idaho

project and $25 million to the company, will convert that debt

into equity. That and the injection of $145 million into Jervois

will allow the fund manager to take full control of its assets,

which include a cobalt refinery in Finland and nickel refinery

in Brazil.

Jervois had been working with an investment bank on

potential funding arrangements since the Idaho site was

mothballed. It hosted Millstreet at all three of its sites,

Crocker said.

Ultimately, Millstreet decided it did not want to

partner with other potential investors, a step that helped make

negotiations straightforward, he added.

"Millstreet didn't want to have other investors in

there," said Crocker, a former Glencore executive who

joined Jervois in 2017. "There was a willingness on their part

to equitize the debt."

Representatives for Boston-based Millstreet were not

immediately available to comment.

The company's top two shareholders are Australia's largest

pension fund, AustralianSuper, and commodity trader Mercuria,

with stakes of 23% and 7.6%, LSEG data showed.

AustralianSuper's holding in Jervois almost tripled to

roughly 400 million shares between June 2022 and June 2024,

according to holdings data for its largest fund. Over the same

period, the value of that shareholding fell to A$6 million from

A$170 million.

AustralianSuper and Mercuria both declined to comment.

It was not immediately clear if Millstreet intends to

re-domicile Jervois as a U.S.-based company or if Millstreet

will keep the existing Jervois management.

A $15 million grant from the Pentagon will be unaffected

by the bankruptcy and continue to fund a study on whether

Jervois should build a cobalt refinery in the U.S., Crocker

said.

Jervois will continue to operate as normal during the

bankruptcy, which is expected to be completed before the end of

April.

The Idaho mine site is likely to remain mothballed until

prices for the metal hit at least $20 per pound, roughly double

current levels.

Jervois said last month U.S. President-elect Donald Trump

should eschew broad-based metals tariffs and instead encourage

or even require manufacturers to buy cobalt from Western miners.

"These markets aren't free, and governments need to

decide if they want to rebalance the playing field," said

Crocker.

"The key message for the U.S. government and others, is

that while the shareholders of Jervois may be changing, the

strategy to protect national security supply chains for cobalt

has not."