Cobalt miner Jervois in rescue deal to better compete with China (updated)

Jervois Global

02/01/2025 18:31

(Repeats to more subscribers, no changes)
    By Ernest Scheyder, Eric Onstad
       Jan 2 (Reuters) - 
    Cobalt miner Jervois Global  JRV.AX  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  603993.SS 
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  CMNI3 , 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  GLEN.L  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." 
  

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Cobalt prices tumble as mine supply ramps up    https://tmsnrt.rs/3W4RFxT
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(Reporting by Ernest Scheyder in Houston and Eric Onstad in
London; additional reporting by Clara Denina in London and Lewis
Jackson in Beijing; editing by Jason Neely and David Gregorio)
((mailto:eric.onstad@thomsonreuters.com; +44 20 7542 7093;
Twitter https://twitter.com/reutersEricO; Reuters Messaging:
rm://eric.onstad.thomsonreuters.com@reuters.net/))