Electra Battery Materials Corporation Q1 FY2023 earnings call

Key milestones included the battery recycling black mass refining demonstration plant, first MHP production, production of high-quality lithium carbonate and graphite; closed a $14M convertible debt; sold non-core assets in the Canadian cobalt belt; released a new resource estimate for the Iron Creek copper and cobalt asset; Renata Cardoso discussed sustainability framework and ESG scorecard; cash and marketable securities at $12.9M at Q1 end, up from $8.4M prior quarter; completed $51M convertible debt financing; refinery rebase line review resulted in $110M-$121M capital cost estimate; black mass scoping study showed potential $6M-$9.9M EBITDA; launched strategic review to address refinery funding shortfall.

Withdrew prior refinery guidance due to supply chain issues, equipment damage, inflation; refinery capital cost estimate $110M-$121M, needing additional funding; refinery construction timeline estimated at 14 months once funding in place; black mass scoping study projects $6M-$9.9M EBITDA in first two years; strategic review launched to evaluate alternatives for funding shortfall.

Supply chain issues, equipment damage, inflation impacting refinery construction; funding shortfall for refinery and black mass projects; potential recession affecting access to capital.

Q: Hi, good morning. So, a lot in there just a couple of questions on. Let's start with the refinery. So it sounds like you're current stalled construction here. When you do just figure out your cash issue and you reengage in construction, how long would it take to complete the build and get it commissioned?

A: Yes, that we -- thank you Matt, and good morning. We haven't disclosed that in part, because it really is capital dependent. So we continue to receive equipment. I think comfortably conservative number, realistic number once we've got funding in place ready to go might be 14 months. You could do it faster; you could do it slower. But where we are right now with detailed engineering is at 98%, 99% procurement. Largely the big stuff is done. So we've got some piping and cables and whatnot that we need but a lot of that custom fab SX tanks and all that have been received or coming. And so really it's execution now. And so we're talking about a couple hundred people on site doing piping and electrical work. And what that schedule looks like is going to be a function of how your funding aligns and how quickly you can crew up.

Q: And on the financing side. You said you're -- you spoke a lot about partnerships and aren't going mention too much about who or what. But are we looking at across the gamut here from traditional lenders to automakers to either strategic -- like other mining companies or processors, or is it more narrow than that?

A: It's pretty broad. We talked about in the presentation the $5.1 million that we expect to receive from government. There are a couple of other streams two or three other streams including application with the U.S. Department of Defense. They're hard to predict what those look like,. but certainly a lot higher than $5 million each of the other streams, I'm looking at The downstream partners, yes, I think that's going well. The reality is with a rebase line underway, we needed to get this out in order to complete those conversations. So I can think of one downstream partner in particular that's not in the public domain that wants to have the conversation now that we've got this back out so they can understand how they are part of a bigger solution. And then of course the strategic process and what that may yield.

Q: And then if I could ask one more question just on the black mass. For you -- you said $6 million CapEx actually two things there. One maybe explain how -- that doesn't sound like a lot to generate $10 million of EBITDA. Maybe you can explain what goes into that. And does that require the completion of the refinery in order for you to engage in the black mass processes?

A: Yes, I'll let Mark talk to that high level what we're doing -- because the refinery and I know you've been you've been through there the refinery is running today, right? We're running -- we can run up to a tonne of material per day through that plant. And so it's basically taking what we've got for the demo plant, adding some tanks, building out a bigger lithium circuit, and scaling that up using what we have. So unlike a new build the feed handling system is there the warehouse the lab the maintenance crews. And Mark, maybe I'll let you add some narrative to that.

Q: Hey guys. Thanks for taking my questions. So, just following up a bit on the black mass operation, do you expect to announce a full economic study before moving to commercialization there? Are you comfortable moving forward with the work that's been done so far on the 2,500-tonne a day scenario?

A: Yeah. Back to my point I made about proving out your process your IP and then partnering, we're at the partnering stage now leveraging somebody else's balance sheet whether it be through a commercial relationship or otherwise. So yeah, there'll be more work required. This is a desktop. So this is that -- Mark's team got this up and running for $3 million re-commission the plant and get, the plant going on a demonstration basis. So it's that same crew of operators and metallurgists that came up with this work. We're still doing our mets and modeling among other things that there will be more work required. I think we'll be able to share some of this publicly as well as the results of the study slightly redacted but we'll have a report available on our website to give you a sense of the amount of work that was done.

Q: Hey, good morning, everyone and congratulations you got into this stage. My questions are in line with what's already been asked. But the forecasted decrease in EBITDA is that largely based on consensus commodity price forecast or are there other factors at play?

A: Before I hand it over to Craig, the EBITDA that we presented there Gordon relates just to the black mass, right? Other EBITDA that we had previously presented was for the cobalt sulphate production activities. But as we've indicated we withdrew those guidance numbers earlier this year. So numbers today are presented just for the scoping study on black mass.

Q: Correct. But the products coming out of that -- the black mass recycling are you generating EBITDA based on commodity prices, correct?

A: That's correct, yeah.

Q: Okay. So as for the mill, is there an opportunity for debottlenecking or additional fine tuning? The mill is now being used for different product than originally designed. So I'd assume there's room for improvement there unless you prefer to keep it as is for the future cobalt production correct?

A: Do you want to take that Mark?

A: I mean, as far as black mass processing yeah we've been -- since we started this back in December we have been tweaking the process as we go. In fact, that's one of the things that is nice about this whole demonstration is that it gives us that ability to increase recoveries, increase throughput by getting feedback on what's working well and what isn't working so well and then moving forward. As far as the hydroxide project, we've done a pilot plant a complete pilot plant on that right through to processing and manufacturing cobalt sulphate. So, we're pretty confident in our flow sheet and the people that we've -- the vendors that we had involved, with supplying equipment have supplied equipment to other cobalt sulphate plants around the world. So, there's a level of confidence that we have in that process. But overall, the opportunity that we have right now for the black mass circuit is, really adding value to our steps moving forward and expanding out to 2,500 tonnes. Yes, there is ongoing tweaking that we're doing almost every week here and finding little ways to improve recoveries as I mentioned, at full production rates.