08:23 AM EDT, 09/10/2024 (MT Newswires) -- Electra Battery Materials Corporation ( ELBM ) was at last look down 1.1% in US premarket on Tuesday as it provided an update on its financing strategy for North America's first battery grade cobalt refinery, announcing that it has received a non-binding term sheet for a US$20 million prepayment facility from an arms-length strategic player in the battery materials sector.

According to a statement, several other financing discussions have been advancing alongside this proposal to raise the $60 million for project completion plus amounts for working capital and operations during the construction and commissioning phases.

Electra CEO, Trent Mell, in the statement said, "Interest from sophisticated strategic partners indicates strong confidence in Electra, and with the continued support of investors, governments and downstream customers, we are well-positioned to realize our vision of a North American battery materials supply chain."

Electra said the strategic investment announced today is equal to the $20 million award it received from the U.S. Department of Defense pursuant to Title III of the Defense Production Act (DPA) last month. More than 90% of battery grade cobalt is produced by Chinese companies today, and none in North America.

Tuesday's statement noted Electra owns a low carbon, permitted hydrometallurgical refining complex north of Toronto that historically produced nickel and cobalt. The facility is being expanded and modified to provide North America battery makers with a domestic source of cobalt sulfate for lithium-ion batteries. The refining complex was also the location of a year-long battery recycling demonstration plant in 2023.

If consummated, Electra said today's investment would be comprised of an immediate investment of $10 million and a follow-on investment of $10 million during the refinery's commissioning phase. As partial compensation, Electra would provide marketing rights for a portion of future production until the facility is repaid. This investment is intended to provide working capital and general and administrative coverage over and above the remaining construction costs. The transaction is subject to conditions precedent, including developments in parallel financing discussions that are well advanced.

Electra added it "continues to make steady progress" in securing other non-dilutive sources of financing, including government programs, to complete construction and commissioning of the refinery. Once fully commissioned, Electra's facility could produce up to 6,500 tonnes of cobalt per year, which could support the production of over one million EVs annually. LG Energy Solution intends to buy up to 80% of capacity over the first five years of operation.

At this time, Tuesday's statement noted, the strategic investment term sheet is a non-binding proposal, and a confirmation of the proposal was received on September 3, 2024. The progression to binding documentation is subject to finalization of diligence and negotiation of customary closing materials and is progressing in line with all parties' agreed timeline. Discussions with other strategic partners are expected to continue until today's proposal becomes binding.

Electra said its near-term priority is to recommission and expand its low carbon Canadian cobalt refinery, which has already been derisked through the delivery of long lead equipment and the operation of a black mass demonstration plant in the legacy refinery. The company added its longer-term vision includes nickel production and battery recycling, thereby onshoring additional critical mineral refining processes needed for the North American electric vehicle battery supply chain.