UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO
RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of May 2024
Commission File Number: 001-41356
ELECTRA BATTERY MATERIALS CORP.
(Translation of registrant’s name into
English)
133 Richmond Street West, Suite 602
Toronto, Ontario, Canada M5H 2L3
(416) 900-3891
(Address of
principal executive office)
Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F.
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
Electra Battery Materials Corp. |
|
(Registrant) |
|
|
|
|
|
|
|
Date: May 23, 2024 |
By: |
/s/ Trent Mell |
|
|
Name: Trent Mell |
|
|
Title: Chief Executive Officer and Director |
Form 6-K Exhibit Index
Exhibit 99.1
ELECTRA BATTERY MATERIALS CORPORATION
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND
2023
(UNAUDITED)
(EXPRESSED IN THOUSANDS OF CANADIAN DOLLARS)
ELECTRA BATTERY MATERIALS CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
AS AT MARCH 31, 2024 AND 2023
(expressed
in thousands of Canadian dollars)
| |
March 31,
2024 | | |
December 31,
2023 Restated
(Note 19) | |
ASSETS | |
| | | |
| | |
Current Assets | |
| | | |
| | |
Cash and cash equivalents | |
$ | 5,648 | | |
$ | 7,560 | |
Restricted cash | |
| 417 | | |
| 888 | |
Marketable securities (Note 6) | |
| 761 | | |
| 595 | |
Prepaid expenses and deposits | |
| 1,442 | | |
| 468 | |
Receivables | |
| 586 | | |
| 1,081 | |
| |
| 8,854 | | |
| 10,592 | |
Non-Current Assets | |
| | | |
| | |
Exploration and evaluation assets (Note 5) | |
| 87,732 | | |
| 85,634 | |
Property, plant and equipment (Note 4) | |
| 51,541 | | |
| 51,258 | |
Long-term restricted cash | |
| 1,208 | | |
| 1,208 | |
Total Assets | |
$ | 149,335 | | |
$ | 148,692 | |
| |
| | | |
| | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | |
| | | |
| | |
Current Liabilities | |
| | | |
| | |
Accounts payable and accrued liabilities | |
$ | 7,711 | | |
$ | 8,828 | |
Accrued interest | |
| 6,358 | | |
| 5,730 | |
Convertible notes payable (Note 9) | |
| 47,382 | | |
| 40,101 | |
Warrants (Note 9) | |
| 1,972 | | |
| 1,421 | |
US warrants (Note 11 (c)) | |
| 37 | | |
| 7 | |
| |
| 63,460 | | |
| 56,087 | |
Non-Current Liabilities | |
| | | |
| | |
Government loan payable (Note 8) | |
| 5,406 | | |
| 4,299 | |
Government grants (Note 8) | |
| 2,009 | | |
| 849 | |
Royalty (Note 9) | |
| 974 | | |
| 858 | |
Lease liability | |
| 165 | | |
| 175 | |
Asset retirement obligations (Note 7) | |
| 2,858 | | |
| 3,126 | |
Total Liabilities | |
$ | 74,872 | | |
$ | 65,394 | |
Shareholders’ Equity | |
| | | |
| | |
Common shares (Note 10) | |
| 306,357 | | |
| 304,721 | |
Reserve (Note 10) | |
| 25,181 | | |
| 25,579 | |
Accumulated other comprehensive income | |
| 539 | | |
| (1,557 | ) |
Deficit | |
| (257,614 | ) | |
| (245,445 | ) |
Total Shareholders’ Equity | |
$ | 74,463 | | |
$ | 83,298 | |
Total Liabilities and Shareholders’
Equity | |
$ | 149,335 | | |
$ | 148,692 | |
Commitments and Contingencies (Note 15) | |
| | | |
| | |
Subsequent events (Note 18) | |
| | | |
| | |
Approved on behalf of the Board of Directors
and authorized for issue on May 21, 2024
|
|
|
Susan
Uthayakumar, Director |
|
Trent
Mell, Director |
See accompanying notes to consolidated financial statements.
ELECTRA BATTERY MATERIALS CORPORATION
CONSOLIDATED STATEMENTS OF LOSS AND OTHER COMPREHENSIVE LOSS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31,
2024 AND 2023
(expressed
in thousands of Canadian dollars)
| |
Three
months
ended March
31, 2024 | | |
Three
months
ended March
31, 2023 Restated (Note 19) | |
Operating expenses | |
| | | |
| | |
General and administrative | |
$ | 523 | | |
$ | 900 | |
Consulting and professional fees | |
| 1,123 | | |
| 600 | |
Exploration and evaluation expenditures | |
| 63 | | |
| 77 | |
Investor relations and marketing | |
| 178 | | |
| 33 | |
Refinery, engineering and metallurgical studies | |
| - | | |
| 624 | |
Refinery, permitting and environmental expenses | |
| - | | |
| 28 | |
Salaries and benefits | |
| 896 | | |
| 1,328 | |
Share-based payments | |
| 561 | | |
| 218 | |
Operating loss before noted items below: | |
| 3,344 | | |
| 3,808 | |
Other | |
| | | |
| | |
Change in fair value of marketable securities (Note 6) | |
| 92 | | |
| 110 | |
Loss on financial derivative liability – Convertible
Notes (Note 9) | |
| (6,811 | ) | |
| (14,862 | ) |
Changes in fair value of US Warrant (Note 11 (c)) | |
| (30 | ) | |
| (94 | ) |
Other non-operating loss (Note 12) | |
| (2,076 | ) | |
| (1,692 | ) |
Net loss | |
$ | (12,169 | ) | |
$ | (20,346 | ) |
| |
| | | |
| | |
Other comprehensive income: | |
| | | |
| | |
Foreign currency translation gain (loss) | |
| 2,096 | | |
| (71 | ) |
| |
| | | |
| | |
Net loss and other comprehensive
loss | |
$ | (10,073 | ) | |
$ | (20,417 | ) |
| |
| | | |
| | |
Basic loss per share (Note 13) | |
$ | (0.22 | ) | |
$ | (0.57 | ) |
Diluted loss per share (Note 13) | |
$ | (0.22 | ) | |
$ | (0.57 | ) |
Weighted average number of common shares outstanding - Basic (Note 13) | |
| 56,066,030 | | |
| 35,566,169 | |
Weighted average number of common shares outstanding
- Diluted (Note 13) | |
| 56,066,030 | | |
| 35,566,169 | |
See accompanying notes to consolidated financial statements.
ELECTRA BATTERY MATERIALS CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31,
2024 AND 2023
(expressed
in thousands of Canadian dollars)
| |
Common
Shares | | |
| | |
Accumulated Other Comprehensive | | |
| | |
| |
| |
Number
of shares | | |
Amount | | |
Reserves | | |
Income (Loss) | | |
Deficit | | |
Total | |
Balance – January 1, 2024 | |
| 55,851,327 | | |
$ | 304,721 | | |
$ | 25,579 | | |
$ | (1,557 | ) | |
$ | (245,445 | ) | |
$ | 83,298 | |
Other comprehensive earnings for the period, net of taxes | |
| - | | |
| - | | |
| - | | |
| 2,096 | | |
| - | | |
| 2,096 | |
Net loss for the period | |
| - | | |
| - | | |
| - | | |
| | | |
| (12,169 | ) | |
| (12,169 | ) |
Share-based payment expense | |
| - | | |
| - | | |
| 561 | | |
| - | | |
| - | | |
| 561 | |
Performance based incentive payment | |
| 165,257 | | |
| 134 | | |
| - | | |
| - | | |
| - | | |
| 134 | |
Shares and units issued for: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Exercise of restricted and performance share units (Note 10) | |
| 338,845 | | |
| 959 | | |
| (959 | ) | |
| - | | |
| - | | |
| - | |
Settlement of interest on 2028 Notes
(Note 9) | |
| 843,039 | | |
| 543 | | |
| - | | |
| - | | |
| - | | |
| 543 | |
Balance – March 31, 2024 | |
| 57,198,468 | | |
$ | 306,357 | | |
$ | 25,181 | | |
$ | 539 | | |
$ | (257,614 | ) | |
$ | 74,463 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance – January 1, 2023 | |
| 35,185,977 | | |
$ | 288,871 | | |
$ | 17,892 | | |
$ | 525 | | |
$ | (180,779 | ) | |
$ | 126,509 | |
Other comprehensive loss for the period, net of taxes | |
| - | | |
| - | | |
| - | | |
| (71 | ) | |
| - | | |
| (71 | ) |
Net loss for the period | |
| - | | |
| - | | |
| - | | |
| - | | |
| (20,346 | ) | |
| (20,346 | ) |
Share-based payment expense | |
| - | | |
| - | | |
| 218 | | |
| - | | |
| - | | |
| 218 | |
Directors’ fees paid in deferred share units | |
| - | | |
| - | | |
| 885 | | |
| - | | |
| - | | |
| 885 | |
Convertible Notes Conversion (Notes 9
and 10) | |
| 242,997 | | |
| 662 | | |
| - | | |
| - | | |
| - | | |
| 662 | |
Balance – March 31, 2023 (Restated Note
19) | |
| 35,428,974 | | |
$ | 289,533 | | |
$ | 18,995 | | |
$ | 454 | | |
$ | (201,125 | ) | |
$ | 107,857 | |
See accompanying notes to consolidated financial statements.
ELECTRA BATTERY MATERIALS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31,
2024 AND 2023
(expressed
in thousands of Canadian dollars)
| |
Three months ended
March 31, 2024 | | |
Three months ended
March 31, 2023 Restated (Note 19) | |
Operating activities | |
| | | |
| | |
Net loss | |
$ | (12,169 | ) | |
$ | (20,346 | ) |
Adjustments for items not affecting cash: | |
| | | |
| | |
Share-based payments | |
| 561 | | |
| 218 | |
Change in fair value of marketable securities | |
| (92 | ) | |
| (110 | ) |
Depreciation | |
| 14 | | |
| 15 | |
Changes in fair value of convertible
2028 Notes | |
| - | | |
| 5,076 | |
Interest expense on convertible 2028
Notes | |
| 1,036 | | |
| - | |
Loss on extinguishment of 2026 Notes
and recognition of 2028 Notes (Note 8) | |
| - | | |
| 18,727 | |
Fair value loss (gain) on convertible
notes and warrants 2028 Notes (Note 10) | |
| 6,811 | | |
| (8,941 | ) |
Changes in fair value of royalty | |
| 49 | | |
| 94 | |
Directors’ fees paid in DSU’s | |
| - | | |
| 885 | |
Incentive payment in common shares | |
| 134 | | |
| - | |
Unrealized loss
on foreign exchange | |
| 1,151 | | |
| 954 | |
| |
| (2,505 | ) | |
| (3,428 | ) |
Changes in working capital: | |
| | | |
| | |
Decrease in receivables | |
| 495 | | |
| 1,645 | |
Decrease (increase) in prepaid expenses and other assets | |
| (974 | ) | |
| 364 | |
(Decrease) increase in accounts payable
and accrued liabilities | |
| (1,117 | ) | |
| 454 | |
Cash used in operation activities | |
| (4,101 | ) | |
| (965 | ) |
| |
| | | |
| | |
Investing activities | |
| | | |
| | |
Transfer to restricted cash | |
| 471 | | |
| - | |
Capital long-term prepayments | |
| - | | |
| (37 | ) |
Proceeds from sale of marketable securities | |
| 28 | | |
| 35 | |
Additions to property, plant and equipment | |
| (565 | ) | |
| (12,245 | ) |
Cash used in investing activities | |
| (66 | ) | |
| (12,247 | ) |
| |
| | | |
| | |
Financing activities | |
| | | |
| | |
Proceeds from government loan | |
| 2,267 | | |
| 238 | |
Payment of lease liability, net of interest | |
| (10 | ) | |
| (9 | ) |
Proceeds from 2028 Notes (Note 9) | |
| - | | |
| 68,049 | |
Repayment of 2026 Notes (Note 9) | |
| - | | |
| (48,036 | ) |
Settlement of transaction costs on 2028 Notes (Note 9) | |
| - | | |
| (2,100 | ) |
Interest settlement of 2026 Notes (Note
9) | |
| - | | |
| (1,656 | ) |
Cash provided by financing activities | |
| 2,257 | | |
| 16,486 | |
Change in cash during the period | |
| (1,910 | ) | |
| 3,274 | |
Effect of exchange rates on cash | |
| (2 | ) | |
| 3 | |
Cash, beginning of the period | |
| 7,560 | | |
| 7,952 | |
Cash, end of period | |
$ | 5,648 | | |
$ | 11,229 | |
See accompanying notes to consolidated financial statements.
ELECTRA BATTERY MATERIALS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31,
2024 AND 2023
(expressed
in thousands of Canadian dollars)
| 1. | Significant Nature of Operations |
Electra Battery Materials Corporation
(the “Company”, “Electra”) was incorporated on July 13, 2011 under the Business Corporations Act of British
Columbia (the “Act”). On September 4, 2018, the Company filed a Certificate of Continuance into Canada and adopted Articles
of Continuance as a Federal Company under the Canada Business Corporations Act (the “CBCA”). On December 6, 2021, the
Company changed its corporate name from First Cobalt Corp. to Electra Battery Materials Corporation. The Company is in the business of
producing battery materials for the electric vehicle supply chain. The Company is focused on building a supply of cobalt, nickel and
recycled battery materials.
Electra is a public company which is
listed on the Toronto Venture Stock Exchange (TSX-V) (under the symbol ELBM). On April 27, 2022, the Company began trading on the
NASDAQ (under the symbol ELBM). The Company’s registered office is Suite 2400, Bay-Adelaide Centre, 333 Bay Street, Toronto,
Ontario, M5H 2T6 and the corporate head office is located at 133 Richmond Street W, Suite 602, Toronto, Ontario, M5H 2L3.
The Company is focused on building
a North American integrated battery materials facility for the electric vehicle supply chain. The Company is in the process of constructing
its expanded hydrometallurgical cobalt refinery (the “Refinery”), assessing the various optimizations and modular growth
scenarios for a recycled battery material (known as black mass) program, and exploring and developing its mineral properties.
Going Concern Basis of Accounting
The accompanying condensed interim
consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business for the foreseeable future, and, as such, the consolidated financial statements do not
include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities
that might be necessary should the Company be unable to continue in existence.
The Company has recurring net
operating losses and negative cash flows from operations. As of March 31, 2024 and December 31, 2023, the Company
had an accumulated deficit of $257,614 and $245,445, respectively, though, the Company was in compliance with all required
covenants as of March 31, 2024, and December 31, 2023. The Company’s recurring losses from operations and negative
cash flows raise substantial doubt about the Company’s ability to continue as a going concern. The global economy, including the
financial and credit markets, has recently experienced extreme volatility and disruptions, including increasing inflation rates, rising
interest rates, foreign currency impacts, declines in consumer confidence, and declines in economic growth. Additionally, the Company
suspended construction of the refinery due to lack of sufficient funding. All these factors point to uncertainty about economic stability,
and the severity and duration of these conditions on our business cannot be predicted, and the Company cannot assure that it will remain
in compliance with the financial covenants contained within its credit facilities.
In order to continue its operations,
the Company must achieve profitable operations and/or obtain additional equity or debt financing. Until the Company achieves profitability,
management plans to fund its operations and capital expenditures with cash on hand, borrowings, and issuance of capital stock. Until
the Company generates revenue at a level to support its cost structure, the Company expects to continue to incur substantial operating
losses and net cash outflows from operating activities.
ELECTRA BATTERY MATERIALS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31,
2024 AND 2023
(expressed
in thousands of Canadian dollars)
The Company is actively pursuing various
alternatives including government grants, strategic partnerships, equity and debt financing to increase its liquidity and capital resources.
On August 11, 2023, the Company completed a private placement for gross proceeds of $21,500, consisting of a brokered placement
for $16,500 and a non-brokered placement for $5,000 (refer to Note 10). An additional government loan from FedNor was received on February 2,
2024 in the amount of $2,267. The Company is also in discussion with various parties on additional financing opportunities and alternatives
to finance the funding of feedstock purchases. Although the Company has historically been successful in obtaining financing in the past,
there can be no assurances that the Company will be able to obtain adequate financing in the future, or that a strategic review process
will culminate in any transaction or alternative. These condensed interim consolidated financial statements do not include the adjustments
to the amounts and classifications of assets and liabilities that would be necessary should the Company be unable to continue as a going
concern. These adjustments may be material.
| 2. | Material Accounting Policies and
Basis of Preparation |
Basis of Presentation and Statement
of Compliance
The Company prepares its condensed
interim consolidated financial statements in accordance with International Financial Reporting Standards (“IFRS”) as issued
by the International Accounting Standards Board (“IASB”). These condensed interim consolidated financial statements have
been prepared in accordance with IAS 34, Interim Financial Reporting (“IAS 34”). These condensed interim consolidated
financial statements should be read in conjunction with our most recent annual financial statements. These condensed interim consolidated
financial statements follow the same accounting policies, estimates, and methods of application as our most recent annual financial statements.
All amounts on the condensed interim
consolidated financial statements are presented in thousands of Canadian dollars unless otherwise stated.
The condensed interim consolidated
financial statements were authorized for issue by the Board of Directors on May 21, 2024.
Certain comparative have been restated
to conform with current accounting presentation.
| 3. | New Accounting Standards Issued |
Certain new accounting standards and
interpretations have been published that are either applicable in the current year or not mandatory for the current period. The Company
has assessed these standards, including amendments to IAS 1 – Non-current liabilities and Covenants, and determined a reclassification
of the convertible notes from long-term to current liabilities applies in the current period. In addition, Lease Liability in a Sale
and Leaseback (Amendment to IFRS 16 Leases) - is effective January 1, 2024. The adoption of this amendment did not have an impact
on the Company’s consolidated financial statements.
ELECTRA BATTERY MATERIALS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31,
2024 AND 2023
(expressed
in thousands of Canadian dollars)
| 4. | Property, Plant and Equipment and Capital Long-Term Prepayments |
Cost | |
Property,
Plant and Equipment | | |
Construction
in Progress | | |
Right-of-
use Assets | | |
Total | |
January 1, 2023 | |
$ | 5,989 | | |
$ | 76,048 | | |
$ | 301 | | |
$ | 82,338 | |
Additions during the year | |
| - | | |
| 16,942 | | |
| - | | |
| 16,942 | |
Transfers from capital long-term prepayments | |
| - | | |
| 3,968 | | |
| - | | |
| 3,968 | |
Impairment | |
| - | | |
| (51,884 | ) | |
| - | | |
| (51,884 | ) |
Balance December 31, 2023 | |
$ | 5,989 | | |
$ | 45,074 | | |
$ | 301 | | |
$ | 51,364 | |
Additions during the year | |
| - | | |
| 565 | | |
| - | | |
| 565 | |
Asset retirement obligation - Change
in estimate from discounting | |
| | | |
| (268 | ) | |
| | | |
| (268 | ) |
Balance March 31, 2024 | |
$ | 5,989 | | |
$ | 45,371 | | |
$ | 301 | | |
$ | 51,661 | |
Accumulated Depreciation | |
Property,
Plant and Equipment | | |
Construction
in Progress | | |
Right-of-
use Assets | | |
Total | |
January 1, 2023 | |
$ | 10 | | |
$ | - | | |
$ | 40 | | |
$ | 50 | |
Change for the year | |
| - | | |
| - | | |
| 56 | | |
| 56 | |
Balance December 31, 2023 | |
$ | 10 | | |
$ | - | | |
$ | 96 | | |
$ | 106 | |
Change for the year | |
| - | | |
| - | | |
| 14 | | |
| 14 | |
Balance March 31, 2024 | |
$ | 10 | | |
$ | - | | |
$ | 110 | | |
$ | 120 | |
| |
| | | |
| | | |
| | | |
| | |
Net Book Value | |
| | | |
| | | |
| | | |
| | |
Balance December 31, 2023 | |
$ | 5,979 | | |
$ | 45,074 | | |
$ | 205 | | |
$ | 51,258 | |
Balance March 31, 2024 | |
$ | 5,979 | | |
$ | 45,371 | | |
$ | 191 | | |
$ | 51,541 | |
Most of the Company’s property,
plant, and equipment assets relate to the Refinery located near Temiskaming Shores, Ontario, Canada. The carrying value of property,
plant, and equipment is $51,541 (December 31, 2023 - $51,258), all of which is pledged as security for the 2028 Notes (Note 9).
During the year ended December 31,
2023, an impairment charge was recognized on the Refinery in Ontario. On October 23, 2023, the Company released updated economics
and capital spending estimates leading to the impairment charge. The impairment loss of $49,743 was determined based on the recoverable
amount of the Refinery CGU that was based on value in use, assuming that commercial production will commence in 2026, and applying a
discount rate of 20%. The recoverable amount of the Refinery CGU was determined as $44,899. In addition, costs of $2,141 related to the
black mass program were included in the impairment charge.
Capitalized development costs for the
three months ended March 31, 2024 totaled $565 (December 31, 2023 - $14,801) of which capitalized borrowing costs were $Nil
(December 31, 2023 - $2,781).
Capital long-term prepayments relate
to payments for long-term capital contracts made for Refinery equipment purchases that have not yet been received by the Company, all
of which are pledged as security for 2028 Notes (Note 9). As at March 31, 2024 capital long-term prepayments are $Nil (December 31,
2023 - $Nil).
ELECTRA BATTERY MATERIALS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31,
2024 AND 2023
(expressed
in thousands of Canadian dollars)
| 5. | Exploration and Evaluation Assets |
| |
Balance
January 1,
2023 | | |
Foreign
Exchange | | |
Balance
December 31,
2023 | | |
Foreign
Exchange | | |
Balance
March 31,
2024 | |
Iron Creek, USA | |
$ | 87,693 | | |
$ | (2,059 | ) | |
$ | 85,634 | | |
$ | 2,098 | | |
$ | 87,732 | |
Total | |
$ | 87,693 | | |
$ | (2,059 | ) | |
$ | 85,634 | | |
$ | 2,098 | | |
$ | 87,732 | |
The comparative balance has been restated
for a change in the functional currency resulting in a decrease to Exploration and Evaluation assets of $71 at March 31, 2023 to
$87,622 (see Note 19).
All of the Iron Creek mineral properties
are pledged as security for the Convertible Notes issued on February 13, 2023 (Note 9). Upon successful commissioning of the Refinery,
the Iron Creek mineral properties will be released from the Convertible Notes security package.
Certain claims relating to the Iron
Creek properties were acquired by the Company against earn-in and option agreements entered with the original owners of such claims.
These agreements provide a working interest in the property to the Company, upon making certain milestone payments and/or incurring certain
expenditures on the property. The claims are also subject to future net smelter royalty (NSR) payments.
Marketable securities represent Kuya
Silver Corp (“Kuya”) shares held by the Company. The Kuya shares were acquired via the Kerr Assets sale on February 26,
2021 and January 31, 2023 described below (“2023 Sale”). The total value of marketable securities at March 31,
2024 was $761 (December 31, 2023 - $595). These shares were marked-to-market at March 31, 2024 resulting in a unrealized gain
of $92 being recorded during the three months ended March 31, 2024 (Three months ended March 31, 2023 – $110).
On January 31, 2023, the Company
completed the sale of the remaining assets of Canadian Cobalt Camp consisting of Keely-Frontier patents (“Cobalt Camp”) which
Kuya did not own, as well as their associated asset retirement obligations. To complete the sale, Kuya issued to the Company 3,108,108
shares at a deemed price of $0.37 per share (being the share price equivalent to the VWAP prior to issuance) comprised of 2,702,703 shares
as consideration for the $1,000 sale price and an additional 405,405 to settle $150 of payables to the Company. Kuya had also entered
into a royalty agreement with the Company whereby it will grant the Company a two percent royalty on net smelter returns from commercial
products derived from the remaining assets. The Company will retain a right of first offer to refine any base metal concentrates produced
from the assets at the Company’s Ontario refinery.
ELECTRA BATTERY MATERIALS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31,
2024 AND 2023
(expressed
in thousands of Canadian dollars)
| 7. | Asset Retirement Obligations |
As at March 31, 2024, the estimated
cost of closure is $3,142. The Company maintains a surety bond for $3,450 as financial assurance based on the October 2021 closure
plan.
The full estimated closure cost in
the latest closure plan incorporated a number of new disturbances that have yet to take place, such as new roadways, new chemicals on
site, and a new tailings area. The latest closure plan also included cost updates relating to remediating disturbances that existed at
March 31, 2024. The following assumptions were used to calculate the asset retirement obligation:
| ● | Discounted
cash flows of $3,126 (December 31, 2023 - $3,126) |
| ● | Closure
activities date of 2037 (December 31, 2023 – 2037) |
| ● | Risk-free
discount rate of 3.45% (December 31, 2023 – 3.98%) |
| ● | Long-term
inflation rate of 3.0% (December 31, 2023 – 3.0%) |
During the three months ended March 31,
2024, the asset retirement obligation was increased by $Nil (December 31, 2023 - $1,336) due to a revised estimate of closure cost
activities for current Refinery infrastructure, offset by changes in estimate of discounted cash flows. The continuity of the asset retirement
obligation at March 31, 2024 and December 31, 2023 is as follows:
| |
March 31, 2024 | | |
December 31, 2023 | |
Balance at January 1, | |
$ | 3,126 | | |
$ | 1,790 | |
Change in estimate from discounting | |
| (268 | ) | |
| 126 | |
Change in estimate of costs | |
| - | | |
| 1,210 | |
Balance | |
$ | 2,858 | | |
$ | 3,126 | |
| 8. | Long-Term Government Loan payable and Government Grant |
On November 24, 2020, the Company
had entered into a contribution agreement with the Ministry of Economic Development and Official Languages as represented by the Federal
Economic Development Agency for Northern Ontario (“FedNor”) for up to a maximum of $5,000 financing related to the recommissioning
and expansion of the Refinery in Ontario. The contribution was to be in the form of debt bearing a 0% interest rate and funded in proportion
to certain Refinery construction activities. The Company received approval for an additional $5,000 funding under the agreement on December 27,
2023. During the first quarter $2,000 was received with an additional $2,000 received in April 2024.
Once construction is completed, the
cumulative balance borrowed will be repaid in 19 equal quarterly instalments starting on June 30, 2026. The funding is provided
pro rata with incurred Refinery construction costs, with all other conditions required for the funding having been met. The loan is discounted
using a market rate of 7.2% with the resulting difference between the amortized cost and cash proceeds recognized as Government Grant.
ELECTRA BATTERY MATERIALS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31,
2024 AND 2023
(expressed
in thousands of Canadian dollars)
On November 30, 2020, the Company
had entered into a separate contribution agreement with the Northern Ontario Heritage Fund Corporation (“NOHFC”) for up to
a maximum of $5,000 financing related to recommissioning and expansion of the Refinery in Ontario. The contribution was to be in the
form of a non-repayable grant. Contributions will be made as a reimbursement of a portion of the Refinery construction costs incurred.
No funds have been received to date.
The following table sets out the balances
of Government Loans and Government Grant received at March 31, 2024 and December 31, 2023.
| |
Government
Loan | | |
Government
Grant | | |
Total | |
Balance at January 1, 2023 | |
$ | 3,777 | | |
$ | 1,121 | | |
$ | 4,898 | |
FedNor loan (Nickel Study) – February 2023 | |
| 250 | | |
| - | | |
| 250 | |
Accretion | |
| 272 | | |
| (272 | ) | |
| - | |
Balance at December 31, 2023 | |
$ | 4,299 | | |
$ | 849 | | |
$ | 5,148 | |
FedNor loan – February 2024 | |
| 2,267 | | |
| - | | |
| 2,267 | |
Fair value adjustment | |
| (1,240 | ) | |
| 1,240 | | |
| - | |
Accretion | |
| 80 | | |
| (80 | ) | |
| - | |
Balance at March 31, 2024 | |
$ | 5,406 | | |
$ | 2,009 | | |
$ | 7,415 | |
| 9. | Convertible Note Arrangement |
On February 13, 2023, the Company
completed subscription agreements with certain institutional investors in the United States with respect to $68,049 (US$51,000) principal
amount of 8.99% senior secured notes due February 2028 (“2028 Notes”). The initial conversion rate of the Notes is 403.2140
Common Shares per US$1,000 principal amount of Notes (equivalent to an initial conversion price of approximately US$2.48 per Common Share)
subject to certain adjustments set forth in the Note Indenture. The Notes are convertible at the discretion of the lenders. The Notes
bear interest at 8.99% per annum, payable in cash or common shares semi-annually in arrears in February and August of each
year and mature in February 2028. During the first twelve (12) months of the term of the Notes, the Company may pay interest through
the issuance of Common Shares at an increase annual interest rate of 11.125%. In the event the Company achieves a third-party green bond
designation during the term of the Note Indenture, the interest rate on future cash interest payments shall be reduced to 8.75% per year.
The investors in the offering also
received an aggregate of 10,796,054 warrants to purchase common shares in the Company. The Warrants are exercisable for five years at
an exercise price of US$2.48, subject to certain adjustments. The warrants were subsequently re-priced to $1.00.
Upon early conversion of the 2028 Notes,
the Company will make an interest make whole payment equal to the lesser of the two years of interest payments or interest payable to
maturity, which may be made in cash or shares at the Company’s discretion. The investors also received a royalty of (i) 0.6%
on “Operating Revenue” from the sale of all cobalt produced from the Refinery payable in the first twelve months following
a defined threshold of commercial production, where “Operating Revenue” consists of revenue from the Refinery less certain
permitted deductions; and (ii) 0.6% on all revenue from sales of cobalt generated from the Refinery in the second to fifth years
following the commencement of commercial production. Royalty payments under the royalty agreements are subject to a cumulative cap of
US$6,000.
ELECTRA BATTERY MATERIALS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31,
2024 AND 2023
(expressed
in thousands of Canadian dollars)
The Company used a portion of the proceeds
of the 2028 Notes offering to purchase all of the outstanding convertible notes consisting of US$36,000 of existing 6.95% senior secured
notes due December 2026 for cancellation at par, as well as to pay accrued and unpaid interest on the 2026 Notes through the closing
date of the 2028 Notes offering for US$51,000 ($68,049). The net proceeds were $20,013, before interest payment of $1,656 and transaction
costs of $2,340. As the terms of the 2028 Notes are substantially different from the 2026 Notes, the Company accounted for the 2026 Notes
as an extinguishment of the original financial
liability and recognized a new financial
liability for the 2028 Notes. The extinguishment of 2026 Notes and recognition of 2028 Notes resulted in a loss of $18,727 as determined
below.
On February 27, 2024, the Company
and the holders of US$51,000 principal amount of 8.99% senior secured convertible notes entered into an agreement (the “Waiver”)
whereby the Noteholders agreed, subject to certain conditions, to a postponement in the unpaid payment of interest on the Notes payable
on the August 15, 2023 and February 15, 2024 interest payment dates under the convertible note indenture dated as of February 13,
2023 (the “Indenture”) that governs the Notes. Pursuant to the Waiver, the Company is required to make payment of accrued
Interest on August 15, 2024, other than the Interest to be paid through the Share Issuance (as defined below). In the event of a
default by the Company under the Indenture, the Company is required to pay the Interest immediately. Pending repayment, the Interest
will be treated as additional principal amounts of Notes entitled to the same rights as the Notes under the Indenture, including the
accrual of additional interest under the Indenture and the right to convert into common shares in the capital of the Company. The unpaid
interest as at March 31, 2024 is $6,358 (December 31, 2023 - $5,730).
The Company satisfied US$401 of the
Interest through the issuance of 843,039 Common Shares to certain Noteholders (the “Share Issuance”). The Share Issuance
occurred at a value of $0.6439 for a total value of $543. The Share Issuance was approved by the TSX Venture Exchange (the “TSXV”).
| |
Convertible
Notes Payable | | |
Financial
Derivative Liability | | |
Total (Restated) | |
Balance at January 1, 2023 | |
$ | 25,662 | | |
$ | 6,674 | | |
$ | 32,336 | |
Effective interest | |
| 914 | | |
| - | | |
| 914 | |
Foreign exchange loss | |
| (22 | ) | |
| - | | |
| (22 | ) |
Loss on fair value derivative re-valuation | |
| - | | |
| 5,076 | | |
| 5,076 | |
Less: Accrued interest | |
| (356 | ) | |
| - | | |
| (356 | ) |
Balance at February 13, 2023 | |
$ | 26,198 | | |
$ | 11,750 | | |
$ | 37,948 | |
Proceeds from 2028 Notes | |
| | | |
| | | |
| 20,013 | |
Fair value used to settle 2026 Notes | |
| | | |
| | | |
| 57,961 | |
Fair value of 2028 Notes | |
| | | |
| | | |
| 74,348 | |
Loss before transaction costs | |
| | | |
| | | |
| (16,387 | ) |
Transaction costs | |
| | | |
| | | |
| (2,340 | ) |
Loss on extinguishment of 2026 and
recognition of 2028 Notes | |
| | | |
| | | |
$ | (18,727 | ) |
The 2028 Notes contain components of
Convertible Notes, Warrants, and a Royalty. Based on the 2028 Notes agreements, these components are separately exercisable hence the
Company has accounted for each as a freestanding financial instrument and initially recorded these components at fair value. They have
been recorded as derivative liabilities until they are elected to conversion to common shares.
ELECTRA BATTERY MATERIALS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31,
2024 AND 2023
(expressed
in thousands of Canadian dollars)
As at initial recognition on February 13,
2023, the embedded derivatives were fair valued using the finite difference valuation method with the following key assumptions:
| ● | Risk
free rate at February of 3.96% based on the US dollar zero curve; |
| ● | Equity
volatility at February 13, 2023 of 56% based on an assessment of the Company’s
historical volatility and the estimated maximum a third-party investor would be willing to
pay for; |
| ● | An
Electra share price at February 13, 2023 of $2.23 reflecting the quoted market prices;
and |
| ● | A
credit spread at February 13, 2023 of 28.9%. |
In addition, subject to certain conditions,
the Noteholders have agreed to waive the requirement set out in the Indenture for the Company to file a registration statement to provide
for the resale of the Common Shares underlying the Notes and the common share purchase warrants issued on February 13, 2023.
For the period ended March 31,
2024, the embedded derivatives were fair valued using the finite difference valuation method with the following key assumptions:
| ● | Risk
free rate at March 31, 2024 of 4.38% (December 31, 2023 – 3.85%) based on
the US dollar zero curve; |
| ● | Equity
volatility at March 31, 2024 of 63% (December 31, 2023 – 62%) based on an
assessment of the Company’s historical volatility and the estimated maximum a third-party
investor would be willing to pay for; |
| ● | An
Electra share price at March 31, 2024 of $0.454 (December 31, 2023 - $0.365) reflecting
the quoted market prices; and |
| ● | A
credit spread at March 31, 2024 of 27.4% (December 31, 2023 – 27.8%). |
The following table sets out the details
of the Company’s financial derivative liability related to embedded derivatives in the 2028 Notes as of March 31, 2024 and
December 31, 2023:
| |
Convertible
Notes Payable | | |
Warrants | | |
Royalty (Restated
– Note 19) | | |
Total | |
Balance at January 1, 2023 | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | |
Initial recognition at fair
value | |
| 60,108 | | |
| 13,519 | | |
| 721 | | |
| 74,348 | |
Balance at February 13, 2023 | |
| 60,108 | | |
| 13,519 | | |
| 721 | | |
| 74,348 | |
Portion de-recognized due to conversions | |
| (840 | ) | |
| - | | |
| - | | |
| (840 | ) |
Revaluation to fair value | |
| (18,685 | ) | |
| (12,073 | ) | |
| - | | |
| (30,758 | ) |
Foreign exchange gain | |
| (482 | ) | |
| (25 | ) | |
| (9 | ) | |
| (516 | ) |
Accretion | |
| - | | |
| - | | |
| 146 | | |
| 146 | |
Balance at December 31, 2023 | |
$ | 40,101 | | |
$ | 1,421 | | |
$ | 858 | | |
$ | 42,380 | |
Revaluation to fair value | |
| 6,296 | | |
| 515 | | |
| - | | |
| 6,811 | |
Foreign exchange loss | |
| 985 | | |
| 36 | | |
| 67 | | |
| 1,088 | |
Accretion | |
| - | | |
| - | | |
| 49 | | |
| 49 | |
| |
| | | |
| | | |
| | | |
| | |
Balance at March 31, 2024 | |
$ | 47,382 | | |
$ | 1,972 | | |
$ | 974 | | |
$ | 50,328 | |
For the three months ended March 31,
2024, and 2023, the Company incurred the following finance costs relating to 2026 Notes and 2028 Notes.
ELECTRA BATTERY MATERIALS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31,
2024 AND 2023
(expressed
in thousands of Canadian dollars)
| |
Three months
ended March 31, | |
| |
2024 | | |
2023 (Restated) | |
Loss on financial derivative liability –
2026 Notes | |
$ | - | | |
$ | (5,076 | ) |
Loss on extinguishment of 2026 Notes and recognition of 2028
Notes | |
| - | | |
| (18,727 | ) |
Fair value (loss) gain on convertible
notes payable and warrants | |
| (6,811 | ) | |
| 8.941 | |
Total | |
$ | (6,811 | ) | |
$ | (14,862 | ) |
The 2028 Notes are secured by a first
priority security interest (subject to customary permitted liens) in substantially all of the Company’s assets, and the assets
and/or equity of the secured guarantors. The 2028 Notes are subject to customary events of default and basic positive and negative covenants.
The Company is required to maintain a minimum liquidity balance of US$2,000 under the terms of the 2028 Notes. The 2028 Notes are convertible
at the discretion of the lenders and as such have been classified as a current liability.
The comparative numbers have been
adjusted to reflect the amendment to IAS1. There is no impact on the balance sheet at January 1, 2023 as the Convertible Notes were
already reflected as a current liability.
| a) | Authorized Share Capital |
The Company is authorized to issue
an unlimited number of common shares without par value. As at March 31, 2024, the Company had 57,198,468 December 31, 2023:
55,851,327) common shares outstanding.
During the three months ended March 31,
2024, the Company issued common shares as follows:
| ● | On
February 27, 2024, the Company has settled a total of $134 of earned performance-based
incentive cash payments to certain non-officer employees by issuing a total of 165,257 Common
Shares at a market price of $0.81 per share to these individuals (the “Share Settlement”).
The expense was recorded in salaries and benefits. |
| ● | On
March 21, 2024, the Company issued an aggregate of 843,039 Shares at a market issue
price of $0.6439 per Share in satisfaction of a portion of the interest payable to certain
of the holders of US$51,000 principal amount of 8.99% senior secured convertible notes. |
During the year ended December 31,
2023, the Company issued common shares as follows:
| ● | On
August 11, 2023, the Company completed a private placement for gross proceeds of $21,500
(net proceeds of $19,960), consisting of a brokered placement for $16,500 and a non-brokered
placement for $5,000 (the “Offering”). Under the terms of the Offering, the Company
issued 19,545,454 units, at a price of $1.10 per unit. Each unit consists of one common share
of the Company and one common share purchase warrant. Each warrant entitles the holder thereof
to purchase one common share at a price of $1.74 at any time on or before August 11,
2025. As consideration for services under the brokered Offering, the Company paid to the
agents a cash commission of $445 equivalent to 6% of gross proceed of brokered placement
and issued to the agents 900,000 non-transferable broker warrants of the Company entitling
the holder to acquire one common share at a price of $1.10 at any time on or before August 11,
2025. The broker warrants were measured based on the fair value of the warrants issued as
the fair value of the consideration for the services cannot be estimated reliably. |
ELECTRA BATTERY MATERIALS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31,
2024 AND 2023
(expressed
in thousands of Canadian dollars) |
| · | The Company made an interest payment of $795
(US$591) to a convertible noteholder, which was settled by issuing 660,800 common shares at an average price of $1.20 (US$0.89). There
were no significant transaction costs incurred in relation to this transaction. |
| · | $840 (US$626) of convertible notes were converted
by noteholders which resulted in the Company issuing a total of 302,411 common shares. The Company also made interest make-whole payments
to the noteholders upon conversion totaling $158 (US$135) which was settled by issuing 66,132 common shares. There were no significant
transaction costs incurred in relation to the conversions. |
| · | The Company issued 77,500 common shares at a
market price of $2.32 to the placement agent for 2028 Notes to settle $240 of transaction costs. |
| · | The Company issued 3,053 common shares for the
exercise of restricted share units. |
| · | The Company issued 10,000 common shares (at issue
price of $0.74) for an easement obtained on lands adjacent to the Company’s refinery facilities for the purpose of installing, operating
and maintaining certain electrical works servicing water pumping facilities at the refinery. |
Long-term incentive plan
The Company adopted a long-term incentive
plan on December 2, 2021 (the “Plan”) whereby it can grant stock options, restricted share units (“RSUs”),
Deferred Share Units (“DSUs”), and Performance Share Units (“PSUs”) to directors, officers, employees, and consultants
of the Company.
Stock options generally vest in equal
tranches over three years. The grant date fair value is determined using the Black-Scholes Option Pricing Model and this value is recognized
as an expense over the vesting period. DSUs vest immediately but cannot be exercised until the holder ceases to be a Director or Officer
of Electra. DSUs are valued based on the market price of the Company’s common shares on the grant date, with the full value expensed
immediately. PSUs generally vest over an 18–24-month period if certain performance metrics have been achieved. They are valued based
on the market price of the Company’s shares on the grant date and this value is expensed over the vesting period. RSUs generally
vest over a 12–36-month period. They are valued based on the market price of the Company’s shares on the grant date and this
value is expensed over the vesting period.
The maximum number of shares that may
be reserved for issuance under the Plan is limited to 4,100,000 shares.
ELECTRA BATTERY MATERIALS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(expressed
in thousands of Canadian dollars) |
The changes in incentive stock options
outstanding are summarized as follows:
| |
Exercise price | | |
Number of shares issued or
issuable on exercise | |
Balance at January 1, 2023 | |
$ | 4.95 | | |
| 991,960 | |
Granted | |
| 2.24 | | |
| 416,319 | |
Expired | |
| 6.98 | | |
| (296,852 | ) |
Forfeited / Cancelled | |
| 3.59 | | |
| (338,859 | ) |
Balance at December 31, 2023 | |
$ | 3.50 | | |
| 772,568 | |
Granted | |
$ | 0.78 | | |
| 3,115,695 | |
Expired | |
| 3.24 | | |
| (55,556 | ) |
Forfeited / Cancelled | |
| 3.23 | | |
| (66,996 | ) |
Balance at March 31, 2024 | |
$ | 0.80 | | |
| 3,765,711 | |
During the three months ended March 31,
2024:
| · | On January 15, 2024, the Company issued
100,000 stock options at an exercise price of $0.50 that will vest in three equal tranches on the first, second and third anniversaries
of the grant date over a four year period. The fair value of the options at the date of the grant was $28,813 using the Black-Scholes
Option Pricing Model, assuming a risk-free rate of 4.15% per year, an expected life of 3 years, expected volatility based on historical
prices in the range of 86.97%, no expected dividends and a share price range of $0.50. |
| · | On February 12, 2024, the Company issued
3,015,695 incentive stock options and 104,938 restricted share units (RSUs) to certain directors, officers, employees and contractors
of the Company. The RSUs will vest on the first anniversary of the grant date and will be settled in cash or common shares at the discretion
of the Company. The stock options are exercisable for four years at $0.81 and will vest in two equal tranches, on the first and second
anniversary of the grant date. The fair value of the options at the date of the grant was $1,640,534 using the Black-Scholes Option Pricing
Model, assuming a risk-free rate of 4.15% per year, an expected life of 4 years, expected volatility based on historical prices in the
range of 92.07%, no expected dividends and a share price of $0.81. |
During the year ended December 31,
2023:
| · | The Company granted 416,319 stock options to
employees under its long-term incentive plan. The options may be exercised within 5 years from the date of the grant at a price of $2.24
per share. The fair value of the options at the date of the grant was $577 using the Black-Scholes Option Pricing Model, assuming a risk-free
rate of 3.37% to 4.15% per year, an expected life of 4 to 5 years, expected volatility based on historical prices in the range of 82.51%
to 85.41%, no expected dividends and a share price range of $0.98 to $2.40. |
ELECTRA BATTERY MATERIALS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(expressed
in thousands of Canadian dollars) |
Incentive stock options outstanding and exercisable (vested) at March 31, 2024 are summarized as follows:
| | |
Options Outstanding | | |
Options Exercisable | |
Exercise price | | |
Number of
shares issuable on
exercise | | |
Weighted
average
remaining life
(Years) | | |
Weighted
average
exercise
price | | |
Number of shares
issuable on
exercise | | |
Weighted
average
exercise price | |
$ | 0.50 | | |
| 100,000 | | |
| 3.79 | | |
$ | 0.50 | | |
| - | | |
$ | 0.50 | |
| 0.81 | | |
| 3,015,695 | | |
| 3.87 | | |
| 0.81 | | |
| - | | |
| 0.81 | |
| 2.40 | | |
| 225,694 | | |
| 2.94 | | |
| 2.40 | | |
| 75,232 | | |
| 2.40 | |
| 2.52 | | |
| 108,334 | | |
| 0.43 | | |
| 2.52 | | |
| 108,334 | | |
| 2.52 | |
| 2.61 | | |
| 27,778 | | |
| 1.41 | | |
| 2.61 | | |
| 27,778 | | |
| 2.61 | |
| 2.88 | | |
| 16,666 | | |
| 0.50 | | |
| 2.88 | | |
| 16,666 | | |
| 2.88 | |
| 3.21 | | |
| 60,000 | | |
| 3.62 | | |
| 3.21 | | |
| 20,000 | | |
| 3.21 | |
| 5.40 | | |
| 176,822 | | |
| 3.05 | | |
| 5.40 | | |
| 117,881 | | |
| 5.40 | |
| 6.21 | | |
| 29,166 | | |
| 2.29 | | |
| 6.21 | | |
| 19,444 | | |
| 6.21 | |
| 7.29 | | |
| 5,556 | | |
| 1.13 | | |
| 7.29 | | |
| 5,556 | | |
| 7,29 | |
| Total | | |
| 3,765,711 | | |
| 3.62 | | |
$ | 1.27 | | |
| 390,891 | | |
$ | 3.67 | |
During the three months ended March 31, 2024, the Company
expensed $218 (three months ended March 31, 2023 - $135) for options valued at share prices $0.50 to $6.21, as shared-based payment
expense.
ELECTRA BATTERY MATERIALS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(expressed
in thousands of Canadian dollars) |
During the three months ended March 31,
2024, the Company has expensed $145 (three months ended March 31, 2023 - $885) for DSUs, $nil (three months ended March 31,
2023 - $45) for PSUs, and $207 (three months ended March 31, 2023 - $38) for RSUs as shared-based payment expense.
Deferred Shares Units
The Company’s DSUs outstanding
at March 31, 2024 and December 31, 2023 were as follows:
Number of Units | |
March 31, 2024 | | |
December 31, 2023 | |
Balance at January 1, | |
| 616,163 | | |
| 235,312 | |
Granted | |
| - | | |
| 418,177 | |
Expired | |
| (16,832 | ) | |
| (37,326 | ) |
Balance | |
| 599,331 | | |
| 616,163 | |
Restricted Share Units
The Company’s RSUs outstanding
at March 31, 2024 and December 31, 2023 were as follows:
Number of Units | |
March 31, 2024 | | |
December 31, 2023 | |
Balance at January 1, | |
| 533,153 | | |
| 78,289 | |
Granted | |
| 104,938 | | |
| 499,872 | |
Exercised | |
| (330,510 | ) | |
| (3,053 | ) |
Expired | |
| - | | |
| (19,000 | ) |
Forfeited / Cancelled | |
| (9,429 | ) | |
| (22,955 | ) |
Balance | |
| 298,152 | | |
| 533,153 | |
Performance Share Units
The Company’s PSUs outstanding
at March 31, 2024 and December 31, 2023 were as follows:
Number of Units | |
March 31, 2024 | | |
December 31, 2023 | |
Balance at January 1, | |
| 34,029 | | |
| 63,889 | |
Exercised | |
| (8,334 | ) | |
| - | |
Expired | |
| (25,695 | ) | |
| (29,860 | ) |
Balance | |
| - | | |
| 34,029 | |
ELECTRA BATTERY MATERIALS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(expressed
in thousands of Canadian dollars) |
Details regarding warrants issued and
outstanding are summarized as follows:
Canadian dollar denominated
warrants | |
Grant date | |
Expiry date | |
Weighted
average
exercise
price | | |
Number of
shares issued
or issuable on
exercise | |
Balance at January 1, 2023 | |
| |
| |
$ | 8.66 | | |
| 981,027 | |
Expired warrants | |
| |
| |
| 8.66 | | |
| (981,027 | ) |
Issuance of warrant (Note 10) | |
August 11, 2023 | |
August 11, 2025 | |
| 1.71 | | |
| 20,445,454 | |
Balance at December 31, 2023 | |
| |
| |
| 1.71 | | |
| 20,445,454 | |
Repricing of warrant (Note 10) | |
February 13, 2023 | |
February 13, 2028 | |
| 1.00 | | |
| 10,796,054 | |
Balance at March 31, 2024 | |
| |
| |
$ | 1.46 | | |
| 31,241,508 | |
United States dollar denominated
warrants (US Warrant) | |
Grant date | |
Expiry date | |
Weighted
average
exercise
price | | |
Number of
shares issued
or issuable on
exercise | |
Balance at December 31, 2022 | |
November 15, 2022 | |
November 15, 2025 | |
$ | US$3.10 | | |
| 2,483,150 | |
Issuance of warrant (Note 10) | |
February 13, 2023 | |
February 13, 2028 | |
| US$2.48 | | |
| 10,796,054 | |
Balance at December 31, 2023 | |
| |
| |
$ | US$2.60 | | |
| 13,279,204 | |
Repricing of warrant (Note 10) | |
February 13, 2023 | |
February 13, 2028 | |
| US$2.48 | | |
| (10,796,054 | ) |
Balance at March 31, 2024 | |
| |
| |
| US$3.10 | | |
| 2,483,150 | |
On August 11, 2023, 19,545,454
warrants were issued to subscribers in the Company’s private placement (Note 10). The total value of $6,321 was recorded in reserves.
The fair value of the warrants were estimated using the Black-Scholes Option Pricing Model assuming a risk-free interest rate of 4.68%,
an expected life of 2 years, an expected volatility of 66.07%, no expected dividends, and a share price of $1.19. As part of the private
placement, the Company issued 900,000 Broker Warrants as transaction costs. The Company recorded $990 in reserve, which was measured at
fair value of services received.
During the year ended December 31,
2023, the Company issued 10,796,054 warrants in conjunction with 2028 Notes (Note 9). No warrants were exercised during the year ended
December 31, 2023. Total of 981,027 warrants expired during the year ended December 31, 2023. See note 14(c) for fair value
assumptions.
On January 15, 2024, the Company
received approval from the TSXV as well as warrant holders to amend the terms of 10,796,054 outstanding common share purchase warrants
due to expire on February 13, 2028. The warrants were issued in connection with the convertible debt transaction that closed on February 13,
2023.
As consideration for eliminating the
dilutive ratchet provisions in the Company’s convertible debt, the Company and its noteholders agreed to change the terms of the
share purchase warrants. Pursuant to the amendment, the exercise price of the warrants was reduced to $1.00 per common share. In addition,
the warrants were to be amended to include an acceleration clause such that the term of the warrants will be reduced to 30-days (the “Reduced
Term”) in the event the closing price of the common shares on the TSX Venture Exchange exceeds $1.20 ten consecutive days trading
days (the “Acceleration Event”), with the Reduced term to begin upon release of a press release by the Company within seven
calendar days after such ten consecutive trading day period. Upon the occurrence of an Acceleration Event, holders of the warrants may
exercise the warrants on a cashless basis, based on the value of the warrants at the time of exercise.
ELECTRA BATTERY MATERIALS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(expressed
in thousands of Canadian dollars) |
12. | Other Non-Operating Income (Expense) |
The Company’s Other Non-Operating
Income (Expense) comprises the following for the three months ended March 31, 2024 and 2023:
| |
Three months ended March 31 | |
| |
2024 | | |
2023 | |
Foreign exchange loss | |
$ | (1,157 | ) | |
$ | (1,736 | ) |
Interest (expense) income | |
| (983 | ) | |
| 44 | |
Realized gain on marketable securities | |
| 4 | | |
| - | |
Other non-operating income | |
| 60 | | |
| - | |
| |
$ | (2,076 | ) | |
$ | (1,692 | ) |
| 13. | Income (Loss) Per Share |
The following table sets forth the computation
of basic and diluted loss per share for the three months ended March 31, 2024 and 2023:
| |
Three months ended March 31, | |
| |
2024 | | |
2023 Restated (Note19) | |
Numerator | |
| | |
| |
Net income (loss) for the year – basic and diluted | |
$ | (12,169 | ) | |
$ | (21,803 | ) |
Denominator | |
| | | |
| | |
Basic and diluted – weighted average number of shares outstanding | |
| 56,066,030 | | |
| 35,566,169 | |
Income (loss) Per Share – Basic | |
$ | (0.22 | ) | |
$ | (0.57 | ) |
Loss Per Share – Diluted | |
$ | (0.22 | ) | |
$ | (0.57 | ) |
The basic loss per share is computed
by dividing the net loss by the weighted average number of common shares outstanding during the period.
The diluted loss per share reflects
the potential dilution of common share equivalents, such as outstanding stock options, and share purchase warrants, in the weighted average
number of common shares outstanding during the year, if dilutive.
Share purchase warrants and stock options
were excluded from the calculation of diluted weighted average number of common shares outstanding for the three months ended March 31,
2024 and 2023 as the warrants and stock options were anti-dilutive.
ELECTRA BATTERY MATERIALS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(expressed
in thousands of Canadian dollars) |
14. | Fair Value Measurements |
Fair value is the price that would
be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date. All assets and liabilities for which fair value is measured or disclosed in the consolidated financial statements are categorized
within the fair value hierarchy, described, as follows, based on the lowest-level input that is significant to the fair value measurement
as a whole:
Level 1 — Unadjusted quoted prices
in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 — Quoted prices in markets
that are not active or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;
and
Level 3 — Prices or
valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by
little or no market activity). The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to
Level 3 inputs.
Assets and Liabilities Measured at
Fair Value
The Company’s fair values of financial
assets and liabilities were as follows:
| |
Carrying Value | | |
| | |
| | |
| |
March 31, 2024 | |
Fair value through
profit or loss | | |
Amortized
cost | | |
Level 1 | | |
Level 3 | | |
Total Fair
Value | |
Assets: | |
| | | |
| | | |
| | | |
| | | |
| | |
Cash and cash equivalents | |
$ | - | | |
$ | 5,648 | | |
$ | - | | |
$ | - | | |
$ | 5,648 | |
Restricted cash | |
| - | | |
| 1,625 | | |
| - | | |
| - | | |
| 1,625 | |
Receivables | |
| - | | |
| 586 | | |
| - | | |
| - | | |
| 586 | |
Marketable securities | |
| 761 | | |
| - | | |
| 761 | | |
| - | | |
| 761 | |
| |
$ | 761 | | |
$ | 7,859 | | |
$ | 761 | | |
$ | - | | |
$ | 8,620 | |
Liabilities: | |
| | | |
| | | |
| | | |
| | | |
| | |
Accounts payable and accrued liabilities | |
$ | - | | |
$ | 7,711 | | |
$ | - | | |
$ | - | | |
$ | 7,711 | |
Accrued interest | |
| - | | |
| 6,358 | | |
| - | | |
| - | | |
| 6,358 | |
Long-term government loan payable | |
| - | | |
| 7,415 | | |
| - | | |
| - | | |
| 7,415 | |
Convertible notes payable 1 | |
| | | |
| - | | |
| - | | |
| 47,382 | | |
| 47,382 | |
Lease Liability | |
| | | |
| 165 | | |
| | | |
| - | | |
| 165 | |
Warrants – Convertible Notes payable 1 | |
| 1,972 | | |
| - | | |
| - | | |
| 1,972 | | |
| 1,972 | |
Royalty | |
| - | | |
| 974 | | |
| - | | |
| - | | |
| 974 | |
Warrants derivative liability | |
| 37 | | |
| - | | |
| - | | |
| 37 | | |
| 37 | |
| |
$ | 2,009 | | |
$ | 22,623 | | |
| - | | |
$ | 49,391 | | |
$ | 72,014 | |
ELECTRA BATTERY MATERIALS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(expressed
in thousands of Canadian dollars) |
| |
Carrying Value | | |
| | |
| |
December 31, 2023 | |
Fair
value through profit
or loss | | |
Amortized
cost | | |
Level 1 | | |
Level 3 | | |
Total Fair
Value | |
Assets: | |
| | |
| | |
| | |
| | |
| |
Cash and cash equivalents | |
$ | - | | |
$ | 7,560 | | |
$ | - | | |
$ | - | | |
$ | 7,560 | |
Restricted cash | |
| - | | |
| 2,096 | | |
| - | | |
| - | | |
| 2,096 | |
Receivables | |
| - | | |
| 1,081 | | |
| - | | |
| - | | |
| 1,081 | |
Marketable securities | |
| 595 | | |
| - | | |
| 595 | | |
| - | | |
| 595 | |
| |
$ | 595 | | |
$ | 10,737 | | |
$ | 595 | | |
$ | - | | |
$ | 11,332 | |
Liabilities: | |
| | | |
| | | |
| | | |
| | | |
| | |
Accounts payable and accrued liabilities | |
$ | - | | |
$ | 8,828 | | |
$ | - | | |
$ | - | | |
$ | 8,828 | |
Accrued interest | |
| - | | |
| 5,730 | | |
| - | | |
| - | | |
| 5,730 | |
Long-term government loan payable | |
| - | | |
| 4,299 | | |
| - | | |
| - | | |
| 4,299 | |
Convertible notes payable 1 | |
| | | |
| - | | |
| - | | |
| 40,101- | | |
| 40,101 | |
Lease Liability | |
| | | |
| 175 | | |
| | | |
| | | |
| 175 | |
Warrants – Convertible Notes payable 1 | |
| 1,421 | | |
| - | | |
| - | | |
| 1,421 | | |
| 1,421 | |
Royalty | |
| - | | |
| 858 | | |
| - | | |
| - | | |
| 858 | |
Warrants derivative liability | |
| 7 | | |
| - | | |
| - | | |
| 7 | | |
| 7 | |
| |
$ | 1,428 | | |
$ | 19,890 | | |
| - | | |
$ | 41,529 | | |
$ | 61,419 | |
1 Components of 2028 Notes
payable, see Note 9.
Valuation techniques
A) Marketable securities
Marketable securities are included in
Level 1 as these assets are quoted on active markets.
B) Financial Derivative Liability –
Convertible Notes
For the convertible notes payable designated
at fair value through profit or loss, the valuation is derived by a finite difference method, whereby the convertible debt as a whole
is viewed as a hybrid instrument consisting of two components, an equity component (i.e., the conversion option) and a debt component,
each with different risk. The key inputs in the valuation include risk-free rates, share price, equity volatility, and credit spread.
As there are significant unobservable inputs used in the valuation, the convertible notes payable is included in Level 3.
Methodologies and procedures regarding
Level 3 fair value measurements are determined by the Company’s management. Calculation of Level 3 fair values is generated based
on underlying contractual data as well as observable and unobservable inputs. Development of unobservable inputs requires the use of significant
judgment. To ensure reasonability, Level 3 fair value measurements are reviewed and validated by the Company’s management. Review
occurs formally on a quarterly basis or more frequently if review and monitoring procedures identify unexpected changes to fair value.
While the Company considers its fair
value measurements to be appropriate, the use of reasonably alternative assumptions could result in different fair values. On a given
valuation date, it is possible that other market participants could measure a same financial instrument at a different fair value, with
the valuation techniques and inputs used by these market participants still meeting the definition of fair value. The fact that different
fair value measurements exist reflects the judgment, estimates and assumptions applied as well as the uncertainty involved in determining
the fair value of these financial instruments.
ELECTRA BATTERY MATERIALS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(expressed
in thousands of Canadian dollars) |
The fair value of the convertible note
payable has been estimated based on significant unobservable inputs which are equity volatility and credit spread. The Company used an
equity volatility of 63% (December 31, 2023 – 62%). If the Company had used an equity volatility that was higher or lower by
10%, the potential effect would be an increase of $714 (December 31, 2023 - $545) or a decrease of $599 (December 31, 2023 -
$425) to the fair value of the convertible note payable. The Company used a credit spread of 27.4% (December 31, 2023 – 27.8%).
If the Company had used a credit spread that was higher or lower by 5%, the potential effect would be a decrease of $3,927 (December 31,
2023 - $3,937) or an increase of $4,593 (December 31, 2023 - $4,648) to the fair value of convertible note payable.
C) Warrants – Convertible Notes
The Warrants issued in a foreign currency
and accounted for at fair value through profit or loss are valued using a Monte Carlo Simulation Model to better model the variability
in exercise date. The key inputs in the valuation include risk-free rates and equity volatility. As there are significant unobservable
inputs used in the valuation, the financial derivative liability is included in Level 3.
The fair value of the Warrants has been
estimated using a significant unobservable input which is equity volatility. The Company used an equity volatility of 63% (December 31,
2023 – 62%). If the Company had used an equity volatility that was higher or lower by 10%, the potential effect would be an increase
of $209 (December 31, 2023 - $186) or a decrease of $221 (December 31, 2023 - $327) to the fair value of the Warrants.
D) Royalty
The fair value of the Royalty has been
estimated at inception using a discounted cash flow model. The key inputs in the valuation include the effective interest rate of 21.22%
and cash flows estimates of future operating and gross revenues. As there are significant unobservable inputs used in the valuation, the
Royalty is included in Level 3. A 10% increase or decrease in the effective interest rate would be an increase of $104 (December 31,
2023 - $96) or of decrease $95 (December 31, 2023 - $109) to the fair value of the royalty.
E) Other Financial Derivative Liability
(US Warrants)
The fair value of the embedded derivative
on Warrants issued in foreign currency as at March 31, 2024 was $37 (December 31, 2023 - $7) and is accounted for at FVTPL.
The valuation of warrants where the strike price is in US dollar and the warrants can be exercised at a time prior to expiry, the Company
uses a Monte Carlo Simulation Model to better model the variability in exercise dates. The key inputs in the valuation include risk-free
rates and equity volatility. As there are significant unobservable inputs used in the valuation, the financial derivative liability is
included in Level 3.
The Company used an equity volatility
of 73,67% (December 31, 2023 – 68.22%). If the Company had used an equity volatility that was higher or lower by 10%, the potential
effect would be an increase of $20 (December 31, 2023 - $19) or a decrease of $31 (December 31, 2023 - $9) to the fair value
of the embedded derivative.
ELECTRA BATTERY MATERIALS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(expressed
in thousands of Canadian dollars) |
15. | Commitments and Contingencies |
From time to time, the Company and/or
its subsidiaries may become defendants in legal actions and the Company intends to defend itself vigorously against all legal claims.
Electra is not aware of any unrecorded claims against the Company that could reasonably be expected to have a materially adverse impact
on the Company’s consolidated financial position, results of operations or the ability to carry on any of its business activities.
Two claims related to unpaid invoices included liens on the Company’s assets. The Company has negotiated settlement on these claims.
The amounts due (approximately $2,500) have been recorded in accounts payable and accrued liabilities and the respective liens will be
discharged upon final payment. Additionally, certain legal claims against the Company were settled in 2023. Such claims also resulted
in registered liens against the assets of the Company that were released during 2023.
As at March 31, 2024, the Company’s
commitments relate to purchase and services commitments for work programs relating to Refinery expansion and payments under financing
arrangements. The Company had the following commitments as of March 31, 2024.
| |
2024 | | |
2025 | | |
2026 | | |
2027 | | |
Thereafter | | |
Total | |
Purchase commitments | |
$ | 160 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 160 | |
Convertible notes payments 1 | |
| 4,569 | | |
| 6,064 | | |
| 6,064 | | |
| 6,064 | | |
| 73,326 | | |
| 96,087 | |
Government loan payments | |
| - | | |
| - | | |
| 1,032 | | |
| 1,032 | | |
| 5,351 | | |
| 7,415 | |
Lease payments | |
| 82 | | |
| 125 | | |
| 128 | | |
| 43 | | |
| - | | |
| 378 | |
Royalty payments 2 | |
| - | | |
| - | | |
| - | | |
| 224 | | |
| 1,900 | | |
$ | 2,124 | |
| |
$ | 4,811 | | |
$ | 6,189 | | |
$ | 7,224 | | |
$ | 7,363 | | |
$ | 80,577 | | |
$ | 106,164 | |
1 Convertible notes
payment amounts are based on contractual maturities of 2028 Notes and assumption that it would remain outstanding until maturity. As
discussed in Note 9, 2026 Notes were cancelled and replaced with 2028 Notes in February 2023.
2 Royalty payments are estimated
amounts associated with the royalty agreements entered with the convertible debt holders as part of the 2028 Note offering. The estimated
amounts and timing are subject to changes in cobalt sulfate prices, timing of completion of the refinery, reaching commercial operations
and timing and amounts of sales.
The Company’s Chief Operating
Decision Maker (CODM) is its Chief Executive Officer. The CODM reviews the results of Company’s refinery business and exploration
and evaluation activities as discrete business units, separate from the rest of the Company’s activities which are reviewed on an
aggregate basis.
The Company’s exploration and
evaluation activities are located in Idaho, USA, with its head office function in Canada. All of the Company’s capital assets, including
property and equipment, and exploration and evaluation assets are located in Canada and USA.
ELECTRA BATTERY MATERIALS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(expressed
in thousands of Canadian dollars) |
| (a) | Segmented operating results for the three months ended March 31, 2024 and 2023: |
For the three months ended March 31, 2024 | |
Refinery | | |
Exploration
and
Evaluation | | |
Corporate
and Other | | |
Total | |
Operating expenses | |
| | | |
| | | |
| | | |
| | |
Consulting and professional fees | |
$ | 101 | | |
$ | - | | |
$ | 1,022 | | |
$ | 1,123 | |
Exploration and evaluation expenditures | |
| - | | |
| 63 | | |
| - | | |
| 63 | |
General and administrative and travel | |
| 75 | | |
| - | | |
| 448 | | |
| 523 | |
Investor relations and marketing | |
| - | | |
| - | | |
| 178 | | |
| 178 | |
Salaries and benefits | |
| 290 | | |
| - | | |
| 606 | | |
| 896 | |
Share-based payments | |
| - | | |
| - | | |
| 561 | | |
| 561 | |
Operating loss | |
$ | 466 | | |
$ | 63 | | |
$ | 2,815 | | |
$ | 3,344 | |
Unrealized gain on marketable securities | |
| - | | |
| - | | |
| 92 | | |
| 92 | |
Loss on financial derivative liability - Convertible Notes | |
| - | | |
| - | | |
| (6,811 | ) | |
| (6,811 | ) |
Changes in US Warrants | |
| - | | |
| - | | |
| (30 | ) | |
| (30 | ) |
Other non-operating loss | |
| - | | |
| - | | |
| (2,076 | ) | |
| (2,076 | ) |
Loss before taxes | |
$ | (466 | ) | |
$ | (63 | ) | |
$ | (11,640 | ) | |
$ | (12,169 | ) |
For the three months ended March 31, 2023 (Restated) | |
Refinery | | |
Exploration
and
Evaluation | | |
Corporate
and Other 2 | | |
Total | |
Operating expenses | |
| | | |
| | | |
| | | |
| | |
Consulting and professional fees | |
$ | - | | |
$ | - | | |
$ | 600 | | |
$ | 600 | |
Exploration and evaluation expenditures | |
| - | | |
| 77 | | |
| - | | |
| 77 | |
General and administrative and travel | |
| 217 | | |
| - | | |
| 683 | | |
| 900 | |
Investor relations and marketing | |
| - | | |
| - | | |
| 33 | | |
| 33 | |
Refinery, engineering and metallurgical studies | |
| 624 | | |
| - | | |
| - | | |
| 624 | |
Refinery, permitting and environmental expenses | |
| 28 | | |
| - | | |
| - | | |
| 28 | |
Salaries and benefits | |
| 404 | | |
| - | | |
| 924 | | |
| 1,328 | |
Share-based payments | |
| - | | |
| - | | |
| 218 | | |
| 218 | |
Operating loss | |
$ | 1,273 | | |
$ | 77 | | |
$ | 2,458 | | |
$ | 3,808 | |
Unrealized gain on marketable securities | |
| - | | |
| - | | |
| 110 | | |
| 110 | |
Gain on financial derivative liability - Convertible Notes | |
| - | | |
| - | | |
| (14,862 | ) | |
| (14,862 | ) |
Changes in US Warrants | |
| - | | |
| - | | |
| (94 | ) | |
| (94 | ) |
Other non-operating expenses | |
| - | | |
| - | | |
| (1,692 | ) | |
| (1,692 | ) |
Loss before taxes | |
$ | (1,273 | ) | |
$ | (77 | ) | |
$ | (18,996 | ) | |
$ | (20,346 | ) |
| (b) | Segmented assets and liabilities as at March 31, 2024 and December 31, 2023: |
| |
Total Assets | | |
Total Liabilities | |
| |
March 31, 2024 | | |
December 31, 2023 | | |
March 31, 2024 | | |
December 31, 2023 | |
Refinery | |
$ | 52,369 | | |
$ | 59,701 | | |
$ | 7,867 | | |
$ | 8,935 | |
Exploration and Evaluation 1 | |
| 87,822 | | |
| 85,741 | | |
| 77 | | |
| 75 | |
Corporate and Other | |
| 9,144 | | |
| 3,250 | | |
| 66,928 | | |
| 56,384 | |
| |
$ | 149,335 | | |
$ | 148,692 | | |
$ | 74,872 | | |
$ | 65,394 | |
1 Total
non-current assets comprising of exploration and evaluation assets in the amount of $87,822 (December 31, 2023 - $85,741) are located
in Idaho, USA.
2 Amounts
have been restated from previously reported to segregate Refinery and Exploration and Evaluation amounts from Corporate and Other amounts
to which they relate. There was no effect to total amounts as a result of the restatement.
ELECTRA BATTERY MATERIALS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(expressed
in thousands of Canadian dollars) |
17. | Related Party Transactions |
The Company’s related parties
include key management personnel and companies related by way of directors or shareholders in common.
The Company paid and/or accrued during
the three months ended March 31, 2024 and 2023, the following fees to management personnel and directors were $363 and $70, respectively
(three months ended March 31, 2023 - $463 and $64, respectively). During the three months ended March 31, 2024, the Company
had share-based payments made to management and directors of $320 (March 31, 2023 - $527).
As at March 31, 2024, the accrued
liabilities balance for related parties was $185 (December 31, 2023 - $78), which relates mainly to compensation accruals.
| a) | Subsequent to March 31, 2024, the Company received an additional $2,000 from FedNor. The investment
was provided in the form of a grant from the Federal Economic Development for Northern Ontario. |
19. | Restatement of comparative information |
The purpose of this note is to identify the changes
between what was originally reported for the quarter ended March 31, 2023 and year-ended December 31, 2023 and the corrections
made.
| a) | The Company has retrospectively adopted IAS 1 amendments – Non-current liabilities and Covenants,
and determined a reclassification of the convertible notes from non-current to current liabilities applies in the current period. As a
result, as at March 31, 2023 and as at December 31, 2023, the convertible debt (2028 notes) comparative figures on the statement
of financial position are reclassified to current liabilities. There is no impact to the opening balance as at January 1, 2023, as
the balance related to the previous convertible notes (2026 notes) were already classified as a current liability as at that date. |
| b) | The Company re-evaluated the functional currency of its US subsidiaries and determined that a change in
their functional currency from Canadian dollars to US Dollars was appropriate effective January 1, 2023. The change in functional
currency for these subsidiaries was applied prospectively, but was not previously reflected in its financial statements for the period
ended March 31, 2023, resulting in adjustments to Exploration and Evaluation assets, and accumulated other comprehensive income as
at March 31, 2023, and to other comprehensive income for the period then ended. |
| c) | The Company adjusted its estimate of the Royalty payable to the lenders of the 2028 Notes, at initial
recognition (see Note 9). Such adjustment was not previously reflected in its financial statements for the period ended March 31,
2023, resulting in adjustments to the Royalty liability as at March 31, 2023, and to the loss on extinguishment for the period then
ended. |
ELECTRA BATTERY MATERIALS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(expressed
in thousands of Canadian dollars) |
Consolidated Statement of Financial Position as at March 31, 2023 | |
As
Previously
Reported | | |
Restatement | | |
As Restated | |
ASSETS | |
| | | |
| | | |
| | |
Current Assets | |
| | | |
| | | |
| | |
Cash and cash equivalents | |
$ | 11,229 | | |
$ | - | | |
$ | 11,229 | |
Restricted cash | |
| - | | |
| - | | |
| - | |
Marketable securities (Note 6) | |
| 1,658 | | |
| - | | |
| 1,658 | |
Prepaid expenses and deposits | |
| 352 | | |
| - | | |
| 352 | |
Receivables | |
| 1,282 | | |
| - | | |
| 1,282 | |
| |
| 14,521 | | |
| - | | |
| 14,521 | |
Non-Current Assets | |
| | | |
| | | |
| | |
Exploration and evaluation assets (Note 5) | |
| 87,693 | | |
| (71 | ) | |
| 87,622 | |
Property, plant and equipment (Note 4) | |
| 93,190 | | |
| - | | |
| 93,190 | |
Capital long-term prepayments (Note 4) | |
| 2,424 | | |
| - | | |
| 2,424 | |
Long-term restricted cash | |
| 938 | | |
| - | | |
| 938 | |
Total Assets | |
$ | 198,766 | | |
$ | (71 | ) | |
$ | 198,695 | |
| |
| | | |
| | | |
| | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | |
| | | |
| | | |
| | |
Current Liabilities | |
| | | |
| | | |
| | |
Accounts payable and accrued liabilities | |
$ | 16,206 | | |
$ | - | | |
$ | 16,206 | |
Convertible notes payable (Note 9) | |
| - | | |
| 54,391 | | |
| 54,391 | |
Other financial derivative liability (Note 9) | |
| 1,365 | | |
| - | | |
| 1,365 | |
Warrants (Note 10 (c)) | |
| 10,985 | | |
| - | | |
| 10,985 | |
| |
| 28,556 | | |
| 54,391 | | |
| 82,947 | |
Non-Current Liabilities | |
| | | |
| | | |
| | |
Government loan payable (Note 8) | |
| 4,081 | | |
| - | | |
| 4,081 | |
Government grants (Note 8) | |
| 1,055 | | |
| - | | |
| 1,055 | |
Convertible notes payable (Note 9) | |
| 54,391 | | |
| (54,391 | ) | |
| - | |
Royalty liability | |
| 2,308 | | |
| (1,627 | ) | |
| 681 | |
Lease liability | |
| 208 | | |
| - | | |
| 208 | |
Asset retirement obligations (Note 7) | |
| 1,696 | | |
| - | | |
| 1,696 | |
Total Liabilities | |
$ | 92,295 | | |
$ | (1,627 | ) | |
$ | 90,668 | |
Shareholders’ Equity | |
| | | |
| | | |
| | |
Common shares (Note 10) | |
| 289,533 | | |
| - | | |
| 289,533 | |
Reserve (Note 10) | |
| 18,995 | | |
| - | | |
| 18,995 | |
Accumulated other comprehensive income | |
| 525 | | |
| (71 | ) | |
| 454 | |
Deficit | |
| (202,582 | ) | |
| 1,627 | | |
| (200,955 | ) |
Total Shareholders’ Equity | |
$ | 106,471 | | |
$ | 1,556 | | |
$ | 108,027 | |
Total Liabilities and Shareholders’ Equity | |
$ | 198,766 | | |
$ | (71 | ) | |
$ | 198,695 | |
ELECTRA BATTERY MATERIALS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(expressed
in thousands of Canadian dollars) |
Consolidated Statement of Income (Loss) and Other Comprehensive Income (Loss) for the period ended March 31, 2023 | |
As
previously
reported | | |
Restatement | | |
As restated | |
Loss on financial derivative – Convertible notes (Note 9) | |
$ | (16,319 | ) | |
$ | 1,457 | | |
| (14,862 | ) |
Net loss | |
$ | (21,803 | ) | |
$ | 1,457 | | |
| (20,346 | ) |
Other comprehensive loss | |
$ | - | | |
$ | (71 | ) | |
| (71 | ) |
Loss per share – basic and fully diluted | |
$ | (0.61 | ) | |
$ | 0.04 | | |
$ | (0.57 | ) |
Consolidated Statement of Shareholder’s Equity for the period ended March 31, 2023 | |
As previously
reported | | |
Restatement | | |
As restated | |
Net loss | |
$ | (21,803 | ) | |
$ | 1,457 | | |
$ | (20,346 | ) |
Accumulated other comprehensive income (loss) | |
$ | 525 | | |
$ | (71 | ) | |
$ | 454 | |
Consolidated Statement of Cash Flows for the period ended March 31, 2023 | |
As previously
reported | | |
Restatement | | |
As restated | |
Loss on Extinguishment of 2026 Notes and recognition of 2028 Notes (note 10) | |
$ | 19,944 | | |
$ | (1,457 | ) | |
$ | 18,487 | |
Net loss | |
$ | (21,803 | ) | |
$ | 1,457 | | |
$ | (20,346 | ) |
The above adjustments comprised only items not
affecting cash, and there were no changes to cash flows from operating, investing and financing activities for the period ended March 31,
2023.
Exhibit 99.2
ELECTRA
BATTERY MATERIALS CORPORATION
MANAGEMENT’S
DISCUSSION AND ANALYSIS
FOR THE THREE
MONTHS ENDED MARCH 31, 2024
(EXPRESSED
IN THOUSANDS OF CANADIAN DOLLARS)
|
ELECTRA
BATTERY MATERIALS CORPORATION
MANAGEMENT’S
DISCUSSION AND ANALYSIS
FOR
THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(expressed
in thousands of Canadian dollars)
General
This
Management’s Discussion and Analysis (“MD&A”) of Electra Battery Materials Corporation (“Electra”
or the “Company”) was prepared on May 21, 2024, and provides analysis of the Company’s financial results
for the quarter ended March 31, 2024. The following information should be read in conjunction with the condensed interim consolidated
financial statements for the three months ended March 31, 2024, and 2023 with accompanying notes which have been prepared in accordance
with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board
(“IASB”). All dollar figures, excluding share prices, are expressed in thousands of Canadian dollars unless otherwise
stated. Financial Statements are available at www.sedarplus.com and the Company’s website www.electrabmc.com.
Company
Information
Electra
was incorporated on July 13, 2011, under the Business Corporations Act (British Columbia) and on September 4, 2018,
the Company filed a Certificate of Continuance into Canada and adopted Articles of Continuance as a Federal Company under the Canada
Business Corporations Act (the “CBCA”). On December 6, 2021, the Company changed its name from First Cobalt Corp.
to Electra Battery Materials Corporation to better align with its strategic vision. The Company is in the business of battery materials
refining, including refining material from mining operations and from the recycling of battery scrap and end of life batteries. Electra
is focused on building a diversified portfolio of assets that are highly leveraged to the battery supply chain with assets located primarily
in North America, with the intent of providing a North American supply of battery materials. The Company has two significant North American
assets:
| (i) | a
hydrometallurgical refinery located in Ontario, Canada (the “Refinery”);
and |
| (ii) | the
Iron Creek Project in Idaho, the Company’s flagship mineral project (the “Iron
Creek Project”). |
Electra
is a public company whose common shares are listed on the TSX Venture Exchange (“TSXV”) and NASDAQ and trades under
the symbol ELBM in both cases. The Company began trading on the NASDAQ on April 27, 2022.
The
Company’s registered and records office is Suite 2400, Bay-Adelaide Centre, 333 Bay Street, Toronto, Ontario, M5H 2T6. The
Company’s head office is located at 133 Richmond Street W, Suite 602, Toronto, Ontario, M5H 2L3.
Q1
2024 Highlights and Recent Events
Refinery
Project Updates
The
Company has been progressing plans to recommission and expand the Refinery with a view to becoming the first refiner of battery grade
cobalt sulfate in North America. For more on the Refinery, see Refinery section below.
On
April 2, 2024, the Company and Eurasian Resources Group S.A.R.L (“ERG”) announced that they have signed a binding
letter of intent for long-term supply of ERG’s cobalt hydroxide to Electra’s cobalt sulfate Refinery. This transaction supports
efforts to onshore the battery supply chain and reduce reliance on foreign refiners. Starting from 2026, under the three-year supply
agreement, ERG will deliver 3,000 tonnes per annum of IRA-compliant cobalt to Electra’s refinery north of Toronto. With this agreement,
Electra has sufficient cobalt hydroxide feed material to meet all of the refinery’s annual capacity.
Battery
Recycling
The
Company launched a black mass trial late in 2022 at the Refinery to recover critical minerals from black mass in shredded lithium-ion
batteries and successfully operated this demonstration process throughout 2023 on a semi-continuous basis to maximize product recoveries.
The battery recycling strategy is part of a multipronged development plan to supply battery-grade material to third-party cathode precursor
manufacturers.
ELECTRA
BATTERY MATERIALS CORPORATION
MANAGEMENT’S
DISCUSSION AND ANALYSIS
FOR
THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(expressed
in thousands of Canadian dollars)
On
February 5, 2024, the Company provided an update on the battery materials recycling trial taking place at the Ontario refinery complex.
Recent optimizations have resulted in additional improved recoveries of lithium, nickel, cobalt, and other critical minerals, further
bolstering the quality of saleable products. At that time, the plant-scale black mass recycling trial was largely complete, and the Company
was compiling an internal report detailing the proprietary methodologies used, as well as various optimizations and modular growth scenarios.
Government
Financing
On
February 9, 2024, the Company announced that it has received a $5,000 funding commitment from the Government of Canada towards the
construction of North America’s first cobalt sulfate refinery. Located in Temiskaming Shores, Ontario, the facility will produce
approximately five percent of the global supply of battery grade cobalt needed for electric vehicles. The investment will be provided
in the form of a grant from the Federal Economic Development Initiative for Northern Ontario (FedNor).
Convertible
Notes
Interest
On
February 27, 2024, the Company announced that the Company and the holders of US$51,000 principal amount of 8.99% senior secured
convertible notes had entered into an agreement whereby the noteholders had agreed, subject to certain conditions, to a postponement
of the unpaid August 15, 2023, and February 15, 2024 interest payment dates under the convertible note indenture dated as of
February 13, 2023, that governs the notes. Pursuant to the waiver, the Company is required to make payment of accrued Interest on
August 15, 2024, other than the interest to be paid through the share issuance. In the event of a default by the Company under the
indenture, the Company is required to pay the interest immediately. Pending repayment, the interest will be treated as additional principal
amounts of notes entitled to the same rights as the notes under the indenture, including the accrual of additional interest under the
indenture and the right to convert into common shares in the capital of the Company.
The
Company agreed to satisfy US$401 of the interest payable through the issuance of common shares to certain noteholders.
On
March 13, 2024, the Company announced that the Company had received the approval of the TSXV to issue common shares in the capital
of the Company in satisfaction of US$401 of interest payable.
On
March 21, 2024, the Company issued an aggregate of 843,039 Shares at a market price of $0.6439 per share in satisfaction of a portion
of the interest payable to certain of the holders of US$51,000 principal amount of 8.99% senior secured convertible notes. The market
price was calculated at 95% of the simple average of the volume weighted average trading price of the Shares for each of the five trading
days ending on, and including, March 20, 2024.
Warrants
On
December 1, 2023, the Company announced that it intends to amend the terms of an aggregate of 10,796,054 outstanding common share
purchase warrants due to expire on February 13, 2028.
The
warrants were issued in connection with a private placement transaction that closed on February 13, 2023. They were exercisable
at US$2.48 per common share.
ELECTRA
BATTERY MATERIALS CORPORATION
MANAGEMENT’S
DISCUSSION AND ANALYSIS
FOR
THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(expressed
in thousands of Canadian dollars)
Under
the proposed amendments to the warrants, the exercise price will be reduced to $1.00 per common share. In addition, the warrants will
be amended to include an acceleration clause such that the term of the warrants will be reduced to 30 days in the event the closing price
of the common shares on the TSX Venture Exchange exceeds $1.00 by 20% or more for ten (10) consecutive trading dates, with the reduced
term beginning seven (7) calendar days after such ten (10) consecutive trading day period. Upon the occurrence of an acceleration
event, holders of the warrants may exercise the warrants on a cashless basis, based on the value of the warrants at the time of exercise,
subject to compliance with the policies of the TSXV.
The
proposed amendments were agreed upon with the holders of such warrants following constructive negotiations and more closely align the
terms of the warrants with current market conditions. As partial consideration for the proposed amendments, the holders of the warrants
have agreed not to exercise certain adjustment provisions they hold in connection with the convertible notes due February 2028.
As a result, the notes have not been re-priced at a lower exchange rate and no amendments have been made in respect of the debt conversion
ratio. The proposed amendments also serve to reduce potential dilution in Company capitalization in the event the notes are converted
into equity, while the cashless exercise feature will serve to concurrently reduce the dilutive effect of future exercises of warrants
upon the occurrence of an acceleration event. The proposed amendments were subject to the approval of the TSXV.
On
January 15, 2024, the Company announced that it received the approval of the TSXV as well as warrant holders, to amend the terms.
The Company has entered into a supplemental indenture to affect the amendment with TSX Trust Company, as warrant agent, to the warrant
indenture governing the warrants dated February 13, 2023, between the Company and the warrant agent.
Nasdaq
Delisting Notification
On
September 22, 2023, the Company announced that it received notice from The Nasdaq Stock Market LLC on September 21, 2023, stating
that the Company is not in compliance with the minimum bid price requirement of US$1.00 per share under Nasdaq’s Listing Rule 5550(a)(2) based
upon the closing bid price of the Company's common shares for the 30 consecutive business days prior to the date of the Notice. The Corporation
had 180 calendar days from the date of the Notice, or until March 19, 2024, to regain compliance with the minimum bid requirement,
during which time the Company’s common shares will continue to trade on Nasdaq.
On
February 27, 2024, the Company announced that it intends to apply pursuant to the Nasdaq Listing Rules for an additional 180-day
extension to the notice period under Nasdaq Rule 5810(c)(3)(A)(ii), at which point the Company may be required to take steps to
resolve the non-compliance.
On
March 21, 2024, the Company announced it had received an additional 180-days notice from The Nasdaq Stock Market LLC to regain compliance
with the minimum bid price requirement of US$1.00 per share under Nasdaq’s Listing Rule 5550(a)(2). If at any time before
September 16, 2024, the bid price of the Shares closes at or above US$1.00 per Share for a minimum of 10 consecutive business days,
the Company will regain compliance with the Minimum Bid Requirement.
Long-Term
Incentive Plan
On
January 15, 2024 the Company issued 100,00 stock options at an exercise price of $0.50 that will vest in three equal tranches on
the first, second and third anniversary of the grant date over a four year period.
ELECTRA
BATTERY MATERIALS CORPORATION
MANAGEMENT’S
DISCUSSION AND ANALYSIS
FOR
THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(expressed
in thousands of Canadian dollars)
On
February 12, 2024, the Company announced that in accordance with its Long-Term Incentive Plan approved by shareholders at its October 24,
2023 annual general meeting, the Company has issued 3,015,695 incentive stock options and 104,938 restricted share units to certain directors,
officers, employees, and contractors of the Company.
The
RSUs will vest on the first anniversary of the grant date and will be settled in cash or shares at the discretion of the Company. The
Options will be exercisable for four years at the February 12, 2024 closing price of C$0.81 and will vest in two equal tranches,
on the first and second anniversary of the grant date.
Employee
Share Settlement
On
February 27, 2024, the Company announced it had settled a total of $134 of earned performance-based incentive cash payments to certain
non-officer employees by issuing a total of 165,257 common shares at a deemed price of C$0.81 per share to these individuals.
Detailed
Outlook and Overview of Current Programs
The
Company’s vision is to provide sustainable battery materials to the EV industry in North America. The Company’s primary asset
is the Refinery located in Ontario, Canada, The Company also owns the Iron Creek cobalt-copper project located in Idaho, United States
and has a royalty over several silver and cobalt properties in Ontario known as the Cobalt Camp.
The
Company has been progressing plans to recommission and expand the Refinery with a view to becoming the first refiner of battery grade
cobalt sulfate in North America. Electra’s primary focus for the quarter was to advance the expansion and recommissioning of the
Refinery, as the first phase of a multiphase plan:
| · | Phase
1 entails an expansion and recommissioning of the Company’s Refinery. The Company anticipates
the Refinery will produce at an initial rate of 5,000 tonnes per annum of battery cobalt
contained in cobalt sulfate from cobalt hydroxide intermediate product supplied from leading
and certified mining operations in the Democratic Republic of Congo. |
| · | Phase
2 entails a permit amendment and an expansion of certain circuits to increase cobalt production
to 6,500 tonnes per annum of battery cobalt contained in cobalt sulfate, which aligns with
the nameplate capacity of the Company’s crystallization circuit. The Company purchased
larger equipment such that a step up in production to 6,500 tonnes per annum in the future
is possible. |
| · | Phase
3 entails the recycling of black mass from spent lithium-ion batteries supplied by various
black mass producers (battery shredders) in the United States and elsewhere. |
| · | Phase
4 entails the construction of a nickel sulfate plant, thereby providing all of the necessary
components (other than manganese) to attract a precursor manufacturer to establish a facility
adjacent to these refining operations. |
The
Refinery
The
Company is working towards restarting its wholly-owned Refinery in Ontario, Canada as the first phase in a multi-phase strategy. In 2020,
the Company announced the results of an engineering study on the expansion of the Refinery that demonstrated that the facility could
become a significant, globally competitive producer of cobalt sulfate for the electric vehicle market. The engineering study determined
the Refinery could produce 25,000 tonnes of battery-grade cobalt sulfate annually (equating to approximately 5,000 tonnes of cobalt contained
in sulfate), which would represent approximately 5% of the total refined cobalt market and 100% of the North American cobalt sulfate
supply. The study indicated strong operating margins at the asset level.
ELECTRA
BATTERY MATERIALS CORPORATION
MANAGEMENT’S
DISCUSSION AND ANALYSIS
FOR
THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(expressed
in thousands of Canadian dollars)
The
Company initiated construction to recommission the facility in 2022, however paused construction in 2023 due to impacts of inflation
on project costs. The estimated replacement cost of the refinery complex is US$200 million and that approximately US$60 million will
be required to complete the construction. All long-lead, custom-fabricated equipment is on site, and the facility was operational throughout
2023 as a plant scale demonstration plant, processing battery black mass. At this time, the Company will require additional financing
in 2024 and 2025 to continue operations, complete the construction of the Refinery, advance its battery recycling strategy, purchase
required materials as the Refinery enters its operating phase and remain in compliance with the minimum liquidity covenant under the
2028 Notes.
Black
Mass Recycling
Black
mass is the industry term used to describe the material remaining once expired lithium-ion batteries are shredded and all casings removed.
Black mass contains high-value elements, including nickel, cobalt, manganese, copper, lithium, and graphite, that once recovered, can
be recycled to produce new lithium-ion batteries. Recycling black mass will increasingly become a key feature of the EV battery supply
chain given the strong demand for critical minerals and the looming supply deficit of metals such as nickel and cobalt. According to
data from McKinsey & Company, available battery material for recycling is expected to grow by 20% per year through 2040.
Black
Mass recycling is planned as the Company’s 3rd phase of its strategy. In February 2023, the Company completed the first plant-scale
recycling of black mass material in North America and recovered critical metals, including nickel, cobalt, and manganese using its proprietary
hydrometallurgical process. In March 2023, the Company announced that it progressed the demonstration plant to recover lithium,
a critical mineral needed for the electric vehicle (EV) battery supply chain, and successfully produced mixed hydroxide precipitate (MHP)
at contained metal grades for nickel and cobalt above the quoted market specifications and more recently began producing lithium carbonate
product. The black mass recycling trial also recovered copper, graphite, and manganese.
Recoveries
within the MHP circuit, the highest value product in the process, are achieving equivalent to and at times above bench scale results.
The Company attributes its success to the refinery team continuously optimizing circuit performance as more black mass is processed.
Recovery rates for all targeted metals have improved since the start of the trial in late December 2022, and the recovery rates
for manganese have improved by more than 50% from results achieved in a lab setting. Metal content contained in the MHP produced from
the recycling process has increased in the range of 5 to 10% since the start of the trial. An increase in metal content results in a
higher value saleable product, thereby improving the potential economics of continuous recycling operations. Approximately 28 tonnes
of MHP product have been shipped to customers to date.
The
results from the black mass trial are extremely encouraging and validate that The Company’s proprietary hydrometallurgical process
can recover high-value elements from shredded lithium-ion batteries effectively. The early success of the plant processing facility has
generated interest from downstream battery supply chain companies who are looking for North American battery black mass refining solutions.
EXPLORATION
AND EVALUATION ASSETS
The
Company is focused on building a North American battery materials supply chain. The Company’s Iron Creek Project in Idaho, U.S.
is its flagship mineral property and a new, upgraded resource estimate was published in March 2023. The Iron Creek property includes
patented and unpatented claims totaling approximately 3,260 hectares as well as 600 metres of underground drifting from three adits.
Other cobalt-copper targets exist on the Company’s property away from the Iron Creek resource.
ELECTRA
BATTERY MATERIALS CORPORATION
MANAGEMENT’S
DISCUSSION AND ANALYSIS
FOR
THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(expressed
in thousands of Canadian dollars)
The
Iron Creek Project
Following
the acquisition of US Cobalt in June of 2018, the Company commenced an extensive drill program at Iron Creek. In October 2018,
the Company filed a technical report supporting the maiden resource estimate for the Iron Creek Project in Idaho. A second phase drill
campaign was initiated to conduct infill drilling to upgrade a portion of the inferred resources to the indicated category for mine planning
and to improve the confidence for future engineering studies. As a secondary priority, this campaign increased the resource along strike
and at depth. An updated mineral resources estimate (MRE) was completed in November 2019 by the company by Ristorcelli and Schlitt.
The
unpatented mining claims included within the Iron Creek Project have no expiration date if the annual claim maintenance fees are paid
by August 31 of each year. The patents are not subject to annual claim-maintenance fees, but applicable real and immovable property
taxes are payable to Lemhi County annually. Certain claims within the land package are governed by underlying agreements (Redcastle JV,
CAS Option Agreement) which require milestone payments and/or earn in obligations for The Company to maintain their exploration rights
on those claims. On January 23, 2023, the Company updated mineral resource for the Iron Creek Project (the “2023 MRE”)
as prepared by Qualified Persons (QPs) Martin Perron, P.Eng. and Marc R. Beauvais, P.Eng. of InnovExplo, using all available information.
The 2023 MRE includes a new mineral resource estimate based on all drilling conducted through the end of 2022. The new resource was calculated
using a net smelter return calculation (NSR) model with assumptions shown in section 14.13 of the technical report. The resulting model
calculated an indicated mineral resource of 4.45 million tonnes at 0.19% Co and 0.73% Cu and an inferred mineral resource of 1.23 million
tonnes at 0.08% Co and 1.34% Cu. The mineralization remains open along strike and downdip. The resource does not include the Ruby target
which has insufficient drilling to effectively calculate a volume and grade of mineralization. Management believes that there is potential
to continue to expand the size of the Iron Creek resource and continue drilling at the Ruby target to evaluate the viability of that
target. In 2022, the Company commenced drilling with Titan Drilling out of Elko, Nevada using a track mounted LF-70 operating on two
10 hour shifts each day. The Company completed six holes for 1,674 m. One hole was completed on the east side of the Iron Creek Project
to infill between the edge of the resource boundary and the drill intercepts in the 2021 step-out program. The remaining three collars
with two wedges were completed on the Ruby target to evaluate the depth extent of Ruby zone. All holes were collared with HQ diameter
core and three were reduced to NQ diameter for core recovery and extensions. All holes intercepted significant cobalt mineralization
confirming the depth extent and continuity of the Ruby zone.
ELECTRA
BATTERY MATERIALS CORPORATION
MANAGEMENT’S
DISCUSSION AND ANALYSIS
FOR
THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(expressed
in thousands of Canadian dollars)
Figure
1. Schematic cross-section of the Iron Creek and Ruby properties using a 100m cutting envelope. Drillholes projected up to 200m
into the plain of the section to show relative locations of targeting in 2021 and 2022. IC21-04 and IC21-05 are labeled as reported on
May 9, 2022. IC22-02 and IC22-03/3A are labeled as reported on October 5, 2022. IC22-01 and IC22-04 are labeled as reported
on December 14th, 2022. Resource outline is based on Ristorcelli and Schmitt (2019) and includes both the indicated and inferred
categories. Section has not been updated with the 2023 resource outline.
On
December 14, 2022, the Company announced the acquisition of a cobalt property (the “CAS Property”) in proximity to the
Company’s projects in Idaho. The new cobalt property was acquired for US$1,500, payable over 10 years upon completion of specific
milestones. The underlying claim owner will retain a 1.5% NSR which can be purchased by The Company for US$500 within one year of commercial
production from the CAS Property.
| |
Balance
January 1,
2023 | | |
Foreign
Exchange | | |
Balance
December 31,
2023 | | |
Foreign
Exchange | | |
Balance
March 31,
2024 | |
Iron Creek, USA | |
$ | 87,693 | | |
$ | (2,059 | ) | |
$ | 85,634 | | |
$ | 2,098 | | |
$ | 87,732 | |
Total | |
$ | 87,693 | | |
$ | (2,059 | ) | |
$ | 85,634 | | |
$ | 2,098 | | |
$ | 87,732 | |
ELECTRA
BATTERY MATERIALS CORPORATION
MANAGEMENT’S
DISCUSSION AND ANALYSIS
FOR
THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(expressed
in thousands of Canadian dollars)
SUMMARY
OF QUARTERLY RESULTS
| |
Three
months ended March 31,
2024 ($) | | |
Three
months ended March
31, 2023 ($) | |
Financial Position | |
| | | |
| | |
Current Assets | |
| 8,854 | | |
| 14,521 | |
Exploration and Evaluation Assets | |
| 87,732 | | |
| 87,622 | |
Property, plant and equipment | |
| 51,541 | | |
| 93,190 | |
Total Assets | |
| 149,335 | | |
| 198,695 | |
Current Liabilities | |
| 63,460 | | |
| 68,657 | |
Long-term Liabilities | |
| 11,412 | | |
| 22,082 | |
| |
| | | |
| | |
Operations | |
| | | |
| | |
General and administrative | |
| 523 | | |
| 900 | |
Consulting and professional fees | |
| 1,123 | | |
| 600 | |
Exploration and evaluation expenditures | |
| 63 | | |
| 77 | |
Investor relations and marketing | |
| 178 | | |
| 33 | |
Refinery, engineering and metallurgical
studies | |
| - | | |
| 624 | |
Refinery, permitting and environmental
expenses | |
| - | | |
| 28 | |
Salary and benefits | |
| 896 | | |
| 1,328 | |
Share-based payments | |
| 561 | | |
| 218 | |
Total Operating Expenses | |
| 3,344 | | |
| 3,808 | |
| |
| | | |
| | |
Change in fair value of marketable
securities | |
| 92 | | |
| 110 | |
Loss on financial derivative liability
– Convertible Notes | |
| (6,811 | ) | |
| (14,862 | ) |
Changes in fair value of US Warrant | |
| (30 | ) | |
| (94 | ) |
Other non-operating income | |
| (2,076 | ) | |
| (1,692 | ) |
| |
| | | |
| | |
Net Loss | |
| (12,169 | ) | |
| (20,346 | ) |
Loss per Share – basic and diluted | |
| (0.22 | ) | |
| (0.57 | ) |
The
Company has retrospectively adopted IAS 1 amendments – Non-current liabilities and Covenants, and determined a reclassification
of the convertible notes from non-current to current liabilities applies in the current period. As a result, as at March 31, 2023
and as at December 31, 2023, the convertible debt (2028 notes) comparative figures on the statement of financial position are reclassified
to current liabilities. There is no impact to the opening balance as at January 1, 2023, as the balance related to the previous
convertible notes (2026 notes) were already classified as a current liability as at that date.
ELECTRA
BATTERY MATERIALS CORPORATION
MANAGEMENT’S
DISCUSSION AND ANALYSIS
FOR
THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(expressed
in thousands of Canadian dollars)
RESULTS
OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2024 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2023
During
the three months ended March 31, 2024, the Company recorded a net loss of $12,169 (net loss of $20,346 in the three months ended
March 31, 2023), a loss per share of $0.22 (loss of $0.57 in the three months ended March 31, 2023).
| · | Included
in the net loss for the three months ended March 31, 2024, is $6,811 of fair value adjustments
related to the 2028 Notes (gain of $8,941 in the three months ended March 31, 2023). |
| · | Lower
staffing levels reduced general and administrative and salary and benefit expenses, and reduced
drilling and exploration work at Iron Creek, offset by an increase in consulting and professional
fees and share-based payments, all contributed to the $464 reduction in operating expenses,
compared to the three months ended March 31, 2023. |
| · | Refinery,
engineering and metallurgical studies and environmental expenses are lower compared to the
three months ended March 31, 2023, due to higher costs in 2023 associated with nickel
sulfate studies and the readying of the black mass demonstration plant. |
SELECTED
QUARTERLY FINANCIAL INFORMATION
| |
Q1
2024 | | |
Q4
2023 | | |
Q3
2023 1 | | |
Q2
2023 1 | | |
Q1
2023 1 | | |
Q4
2022 | | |
Q3
2022 | | |
Q2
2022 | |
Net income (loss) | |
$ | (12,169 | ) | |
$ | (46,749 | ) | |
$ | (9,223 | ) | |
$ | 11,652 | | |
$ | (20,346 | ) | |
$ | 10,315 | | |
$ | (7,628 | ) | |
$ | 7,534 | |
Income (loss) per share | |
| (0.22 | ) | |
| (0.84 | ) | |
| (0.20 | ) | |
| 0.33 | | |
| (0.57 | ) | |
| 0.31 | | |
| (0.24 | ) | |
| 0.23 | |
Total assets | |
$ | 149,335 | | |
$ | 148,692 | | |
$ | 210,152 | | |
$ | 197,009 | | |
$ | 198,695 | | |
$ | 187,524 | | |
$ | 170,919 | | |
$ | 176,355 | |
1
Quarters have been restated to reflect current presentation including adoption of the US dollars as the functional currency for
its US-based subsidiaries and the change in the royalty liability as described below.
The
royalty liability measured upon initial recognition of the fair value on the extinguishment of the 2026 notes and recognition of the
2028 notes has been reduced from $2,178 to $721. There is a corresponding $1,457 reduction in the loss on extinguishment of 2026 notes
and recognition of the 2028 notes.
The
royalty liability is reduced for the quarter ended: March 31, 2023 from $2,308 to $752; June 30, 2023 from $2,363 to $774;
and, September 30, 2023 from $2,432 to $832.
Change
in Functional Currency
During
2023, the Company considered primary and secondary indicators in determining functional currency including the currency in which funds
from financing activities were generated, the Company re-evaluated the functional currency of its US subsidiaries and determined that
a change in their functional currency from Canadian dollars to US dollars was appropriate. The Company translated its US subsidiaries’
assets and liabilities into the new functional currency of US dollars at the opening spot rate for the year and recorded a translation
adjustment from January 1, 2023 onwards to reflect the impact of translating the Company’s US dollar assets and liabilities
to the presentation currency. The change in functional currency for these subsidiaries has been applied prospectively.
ELECTRA
BATTERY MATERIALS CORPORATION
MANAGEMENT’S
DISCUSSION AND ANALYSIS
FOR
THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(expressed
in thousands of Canadian dollars)
The
adoption of the change effective January 1, 2023, has an impact on the quarterly financial statements previously issued for 2023.
The impact on each of the quarters and the full year amounts are detailed below:
Amounts
in CAD$000’s 2023 | |
Other
comprehensive income – Foreign currency translation gain (loss) | | |
Increase
(decrease) in
Exploration & evaluation and
accumulated other
comprehensive income | |
First quarter | |
$ | (71 | ) | |
$ | (71 | ) |
Second quarter | |
| (1,897 | ) | |
| (1,897 | ) |
Third quarter | |
| 1,813 | | |
| 1,813 | |
Fourth quarter | |
| (1,904 | ) | |
| (1,904 | ) |
Year ended December 31, 2023 | |
$ | (2,059 | ) | |
$ | (2,059 | ) |
There
were no changes to the Consolidated Statements of Cash Flow.
CAPITAL
STRUCTURE
As
of the date of this MD&A, the Company has 57,198,468 common shares issued and outstanding. In addition, there are outstanding share
purchase warrants and stock options for a further 33,724,658 and 3,765,711 common shares, respectively. The Company currently has 599,331
Deferred Share Units (DSUs), 298,152 Restricted Share Units (RSUs) and Nil Performance Share Units (PSUs) issued under its Long-Term
Incentive Plan.
The
following warrants were outstanding at the date of this MD&A:
Grant
date | |
Expiry
date | |
Number
of warrants
outstanding | | |
Weighted
average exercise
price | |
November 15, 2022 | |
November 15, 2025 | |
| 2,483,150 | | |
US$ | 3.10 | |
February 13, 2023 | |
February 13, 2028 | |
| 10,796,054 | | |
$ | 1.00 | |
August 11, 2023 | |
August 11, 2025 | |
| 20,445,454 | | |
$ | 1.71 | |
| |
| |
| 33,724,658 | | |
| | |
CAPITAL
STRUCTURE, RESOURCES &
LIQUIDITY
Capital
Structure
The
Company manages its capital structure to maximize its financial flexibility, adjusting it in response to changes in economic conditions
and the risk characteristics of the underlying assets and business opportunities. The Company does not presently utilize any quantitative
measures to monitor its capital but rather relies on the expertise of the Company’s management to sustain the future development
of the business. Management reviews its capital management approach on an ongoing basis and believes that this, given the relative size
of the Company, is appropriate.
ELECTRA
BATTERY MATERIALS CORPORATION
MANAGEMENT’S
DISCUSSION AND ANALYSIS
FOR
THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(expressed
in thousands of Canadian dollars)
The
Company will continue to adjust its capital structure based on Management’s assessment of the best capital mix to effectively advance
its assets. With the settlement of the 2026 Notes and issuances of the 2028 Notes in February 2023, the Company has increased the
debt component of its capital structure with a par value of $67,938 (US$50,250) outstanding after an early conversion of $664 (US$500)
of notes in February 2023 and $334 (US$250) in April 2023. As of March 31, 2024, the Company had $68,088 (US$50,250) of
convertible notes.
On
August 11, 2023, the Company completed a private placement for gross proceeds of $21,500 (net proceeds of $19,960), consisting of
a brokered placement for $16,500 and a non-brokered placement for $5,000 (the “Offering”). Under the terms of the Offering,
the Company has issued 19,545,454 units, at a price of $1.10 per unit. Each unit consists of one common share of the Company and one
common share purchase warrant. Each warrant entitles the holder thereof to purchase one common share at a price of $1.74 at any time
on or before August 11, 2025. As consideration for services under the brokered Offering, the Company paid to the agents a cash commission
of $445 equivalent to 6% of gross proceed of brokered placement and issued to the agents 900,000 non-transferable broker warrants of
the Company entitling the holder to acquire one common share at a price of $1.10 at any time on or before August 11, 2025.
In
addition to its cash on hand, the Company has previously executed contribution agreements with the Government of Ontario and the Government
of Canada for aggregate funding of $10,000, of which $4,733 has been received to December 31, 2023. On February 9, 2024, the
Company received a grant from the Federal Economic Development Initiative for Northern Ontario (FedNor) for an additional $5,000 towards
the refinery construction, of which $4,000 has been received. The Company continues to be in active discussions with both Government
of Canada and Province of Ontario for the remaining balance, as well as pursuing additional opportunities under various government programs
for funding towards both refinery and battery recycling.
The
Company is also actively pursuing various alternatives including equity and debt financing to increase its liquidity and capital resources
to fund the projected Refinery expenditures. The Company will also need working capital funding for the purchase of other consumables
before the startup of operations.
Liquidity
In
February 2023, the Company closed on the 2028 Notes with a principal balance of US$51,000 and settled the previous 2026 Notes with
a principal balance of US$36,000 for a net proceed of US$15,000 ($20,013), before interest payment of $1,656 and transaction costs of
$2,340. The 2028 Notes reduced the minimum liquidity balance requirement under the 2026 Notes from US$7,500 to US$2,000. On January 15,
2024, the Company received approval from TSXV as well as warrant holders to amend the terms of 10,796,054 outstanding common share purchase
warrants due to expire on February 13, 2028.
As
consideration for eliminating the dilutive ratchet provisions in the Company’s convertible debt, the Company and its noteholders
agreed to change the terms of the share purchase warrants. Pursuant to the amendment, the exercise price of the warrants was reduced
to $1.00 per common share. In addition, the warrants were to be amended to include an acceleration clause such that the term of the warrants
will be reduced to 30-day (the “Reduced Term”) in the event the closing price of the common shares on the TSX Venture Exchange
exceeds $1.20 ten consecutive days trading days (the “Acceleration Event”), with the Reduced Term to begin upon release of
a press release by the Company within seven calendar days after such ten consecutive trading day period. Upon the occurrence of an Acceleration
Event, holders of the warrants may exercise the warrants on a cashless basis, based on the value of the warrants at the time of exercise.
ELECTRA
BATTERY MATERIALS CORPORATION
MANAGEMENT’S
DISCUSSION AND ANALYSIS
FOR
THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(expressed
in thousands of Canadian dollars)
On
March 13, 2024, the Company announced approval of the TSXV to issue common shares in the capital of the Company in satisfaction
of US$401 of interest payable.
On
March 21, 2024, the Company issued an aggregate of 843,039 Shares at a deemed issue price of $0.6439 per share in satisfaction of
a portion of the interest payable to certain of the holders of US$51,000 principal amount of 8.99% senior secured convertible notes.
The market issue price was calculated at 95% of the simple average of the volume weighted average trading price of the Shares for each
of the five trading days ending on, and including, March 20, 2024 for a total of $543.
The
Company’s objective in managing liquidity risk is to maintain sufficient liquidity to meet operational and asset advancement requirements
as well as ensuring compliance with minimum liquidity balance covenant of US$2,000.
At
March 31, 2024, the Company had cash of $5,648 (December 31, 2023 - $7,560) and marketable securities of $761 (December 31,
2023 - $595), compared to accounts payable and accrued liabilities of $7,711 (December 31, 2023 - $8,828).
Cash
requirements for the Refinery expansion from March 31, 2024, through to the expected completed commissioning are estimated to be
significantly higher than the previously estimated. At this time, the Company does not have sufficient financial resources necessary
to complete the construction and final commissioning of the Refinery and will require additional financing in 2024 and 2025 to continue
operations, complete the construction of the Refinery, advance its battery recycling strategy, and remain in compliance with the minimum
liquidity covenant under the 2028 Notes. Failure to remain in compliance with the liquidity terms, in addition to the Company being unable
to provide a United States registration statement or obtain suitable waivers, may result in the instrument becoming due before the contractual
maturity.
The
Company had the following summarized cash flows:
| |
Three
months ended March 31, 2024 | | |
Three
months ended March 31, 2023 | |
Cash used in operation activities | |
| (4,101 | ) | |
| (965 | ) |
Cash used in investing activities | |
| (66 | ) | |
| (12,247 | ) |
Cash provided by financing activities | |
| 2,257 | | |
| 16,486 | |
Change in cash during the period | |
| (1,910 | ) | |
| 3,274 | |
Effect of exchange rates on cash | |
| (2 | ) | |
| 3 | |
Cash, beginning of period | |
| 7,560 | | |
| 7,952 | |
Cash, end of year | |
$ | 5,648 | | |
$ | 11,229 | |
Cash
used in operating activities was $4,101 during the three months ended March 31, 2024, compared to $965 used in operating activities
during the three months ended March 31, 2023. The increase in cash used in operating activities was driven primarily by changes
in working capital.
Cash
used in investing activities was $66 during the three months ended March 31, 2024, compared to cash used in investing activities
of $12,247 during the three months ended March 31, 2023. The decrease in cash used in investing activities relates to reduced capitalized
spending at the Refinery.
ELECTRA
BATTERY MATERIALS CORPORATION
MANAGEMENT’S
DISCUSSION AND ANALYSIS
FOR
THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(expressed
in thousands of Canadian dollars)
Cash
flows provided by financing activities were $2,257 during the three months ended March 31, 2024, compared to the $16,486 from financing
activities during the three months ended March 31, 2023. The change was primarily driven by net proceeds from 2028 notes, which
was completed on February 13, 2023.
COMMITMENTS
From
time to time, the Company and/or its subsidiaries may become defendants in legal actions and the Company intends to defend itself vigorously
against all legal claims. Electra is not aware of any claims against the Company that could reasonably be expected to have a materially
adverse impact on the Company’s consolidated financial position, results of operations or the ability to carry on any of its business
activities.
The
Company’s commitments relate to purchase and services commitments for work programs relating to refinery expansion and payments
under financing arrangements. The Company had the following commitments as of March 31, 2024:
| |
2024 | | |
2025 | | |
2026 | | |
2027 | | |
Thereafter | | |
Total | |
Purchase commitments | |
$ | 160 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 160 | |
Convertible
notes payments 1 | |
| 4,569 | | |
| 6,064 | | |
| 6,064 | | |
| 6,064 | | |
| 73,326 | | |
| 96,087 | |
Government loan payments | |
| - | | |
| - | | |
| 1,032 | | |
| 1,032 | | |
| 5,351 | | |
| 7,415 | |
Lease payments | |
| 82 | | |
| 125 | | |
| 128 | | |
| 43 | | |
| - | | |
| 378 | |
Royalty
payments 2 | |
| - | | |
| - | | |
| - | | |
| 224 | | |
| 1,900 | | |
$ | 2,124 | |
| |
$ | 4,811 | | |
$ | 6,189 | | |
$ | 7,224 | | |
$ | 7,363 | | |
$ | 80,577 | | |
$ | 106,164 | |
1
Convertible notes payment amounts are based on contractual maturities of 2028 Notes and assumption that it would remain outstanding
until maturity. The 2026 Notes were cancelled and replaced with the 2028 Notes in February 2023.
2
Royalty payments are estimated amounts associated with the royalty agreements entered with the convertible debt holders as part
of the 2028 Note offering. The estimated amounts and timing are subject to changes in cobalt sulfate prices, timing of completion of
the refinery, reaching commercial operations and timing and amounts of sales.
The
Company has recorded a provision for environmental remediation, reclamation and decommissioning for its Ontario assets. For the Refinery,
a liability of $2,858 has been recorded, linked to the closure plan filed and accepted in March 2022 and updated in November 2022.
In relation to the refinery closure plan, an amount of $3,450 has been posted via a surety bond with the Ministry of Northern Development,
Mines, Natural Resources and Forestry (NDMNRF) as financial assurance.
RELATED
PARTY TRANSACTIONS
The
Company’s related parties include key management personnel and companies related by way of directors or shareholders in common.
The
Company paid and/or accrued during the three months ended March 31, 2024 and 2023, the following fees to management personnel and
directors were $363 and $70, respectively (three months ended March 31, 2023 - $463 and $64, respectively). During the three months
ended March 31, 2024, the Company had share-based payments made to management and directors of $320 (March 31, 2023 - $527).
As
at March 31, 2024, the accrued liabilities balance for related parties was $185 (December 31, 2023 - $78), which relates mainly
to compensation accruals.
ELECTRA
BATTERY MATERIALS CORPORATION
MANAGEMENT’S
DISCUSSION AND ANALYSIS
FOR
THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(expressed
in thousands of Canadian dollars)
OFF
BALANCE SHEET ARRANGEMENTS
The
Company currently has no off-balance sheet arrangements.
FINANCIAL
INSTRUMENTS
Refer
to Note 14 of the Company’s Condensed Interim consolidated financial statements for the three months ended March 31, 2024
and 2023.
SUBSEQUENT
EVENTS
| a) | Subsequent
to March 31, 2024, the Company received an additional $2,000 from FedNor. The
investment was provided in the form of a grant from the Federal Economic Development for
Northern Ontario. |
RISK
AND RISK MANAGEMENT
Financial
Risk Factors
The
Company’s risk exposure and the impact on the Company’s financial instruments are summarized below:
Liquidity
Risk
Liquidity
risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company does not have sufficient
financial resources necessary to complete the construction and final commissioning of the Refinery and the Company is going through a
planning and budgeting process to update the capital estimates and completion schedule associated with the Refinery. The Company attempts
to ensure there is sufficient access to funds to meet ongoing business requirements, considering its current cash position and potential
funding sources. Although the Company has historically been successful in obtaining financing in the past, there can be no assurances
that the Company will be able to obtain adequate financing in the future. The Company has future obligations to pay semi-annual interest
payments and the principal upon maturity related to the convertible debt. Starting in 2026 repayment of the interest-free Government
loan will begin in 19 equal installments. Upon the issuance of the 2028 Notes and retirement of the 2026 Notes in February 2023,
the Company is subject to a minimum cash balance requirement of US$2,000. Additionally, the Company was required to have a United States
registration statement providing for the resale of the Common Stock deliverable on conversions of the debenture and warrants by May 15,
2023. Failure to have such a statement by the date is considered an event of default which provides the indenture holders the right to
demand repayment of the instrument. Effective February 27, 2024, subject to certain conditions, the noteholders agreed to waive
the requirement set out in the indenture for the Company to file a registration statement to provide for the resale of the common shares
underlying the notes and the common share purchase warrants issued on February 13, 2023.
Credit
Risk
Credit
risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial
loss. The Company’s primary exposure to credit risk is on its cash and cash equivalents and restricted cash which are being held
with major Canadian banks that are high-credit quality financial institutions as determined by rating agencies.
ELECTRA
BATTERY MATERIALS CORPORATION
MANAGEMENT’S
DISCUSSION AND ANALYSIS
FOR
THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(expressed
in thousands of Canadian dollars)
Interest
Rate Risk
Interest
rate risk is the risk that the fair value of future cash flow of a financial instrument will fluctuate because of changes in market interest
rate. Company currently does not have any financial instruments that are linked to LIBOR, SOFR, or any form of a floating market interest
rate. Therefore, changes in the market interest rate does not have an impact on the Company as at March 31, 2024.
Foreign
Currency Risk
Foreign
currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because they are denominated
in currencies that differ from the Company’s functional currency, Canadian Dollars. The Company is exposed to foreign currency
risk on fluctuations related to cash, receivables, and accrued liabilities that are denominated in US Dollars. In addition, the Company’s
2028 Notes are denominated in US dollars and fluctuations in foreign exchange rates will impact the Canadian dollar amounts required
to settle interest and principal payments for these convertible notes. The Company has not used derivative instruments to reduce its
exposure to foreign currency risk nor has it entered foreign exchange contracts to hedge against gains or losses from foreign exchange.
BUSINESS
RISKS AND UNCERTAINTIES
There
are many risk factors facing companies involved in the mineral exploration industry. Risk Management is an ongoing exercise upon which
the Company spends a substantial amount of time. While it is not possible to eliminate all the risks inherent to the industry, the Company
strives to manage these risks, to the greatest extent possible. The following risks are most applicable to the Company.
Going
Concern
As
discussed above, the Company will require additional financing in 2024 and 2025 to continue operations, complete the construction of
the Refinery, advance its battery recycling strategy and remain in compliance with minimum liquidity covenant under the 2028 notes. The
Company is actively pursuing various alternatives including equity and debt financing to increase its liquidity and capital resources.
The Company is also in discussion with various parties on alternatives to finance the funding of feedstock purchases. Although the Company
has historically been successful in obtaining financing in the past, there can be no assurances that the Company will be able to obtain
adequate financing in the future. This represents a material uncertainty that casts substantial doubt on the Company’s ability
to continue as a going concern. The financial information presented does not include the adjustments to the amounts and classifications
of assets and liabilities that would be necessary should the Company be unable to continue as a going concern. These adjustments may
be material.
Financing
The
Company has raised funds through grants, equity financing and debt arrangements to fund its operations and the advancement of the Refinery.
The market price of natural resources, specifically cobalt prices, is highly speculative and volatile. Instability in prices may affect
the interest in resource assets and the development of and production from such properties. This may adversely affect the Company’s
ability to raise capital or obtain debt to fund corporate activities and growth initiatives. The completion of the Refinery project is
dependent on additional financing.
Technical
Capabilities of the Refinery
The
Company’s strategic priority is the advancement of the Refinery, with significant engineering studies and metallurgical testing
conducted to date. There is no assurance that the final refining process will have the capabilities to produce specific end products.
The Company manages this risk by employing and contracting technical experts in metallurgy and engineering to support refinery process
decisions.
ELECTRA
BATTERY MATERIALS CORPORATION
MANAGEMENT’S
DISCUSSION AND ANALYSIS
FOR
THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(expressed
in thousands of Canadian dollars)
Ability
to Meet Debt Service Obligations
The
Company has debt obligations under the Notes, which include ongoing coupon payments and payment of principal at maturity. In the event,
that the refinery construction is not completed as planned or sufficient cash flow from refinery operations is not generated, there is
a risk that the Company may not have sufficient available capital to meet its debt obligations. Additionally, the Company is subject
to certain covenants related to the Notes, which include minimum liquidity of US$2,000 and having a United States registration statement
providing for the resale of the underlying Common Stock deliverable on the conversion of the debenture and warrant indenture. Should
the Company breach a covenant or be unable to service the debt, the assets pledged may be transferred to the lenders.
Macroeconomic
Risks
Political
and economic instability (including Russia’s invasion of Ukraine and war in Israel), global or regional adverse conditions, such
as pandemics or other disease outbreaks (including the COVID-19 global outbreak) or natural disasters, currency exchange rates, trade
tariff developments, transport availability and cost, including import-related taxes, transport security, inflation and other factors
are beyond the Company’s control. The macroeconomic environment remains challenging, and the Company’s results of operations
could be materially affected by such macroeconomic conditions.
Industry
and Mineral Exploration Risk
Mineral
exploration is highly speculative, involves many risks and frequently is non-productive. There is no assurance that the Company’s
exploration efforts will be successful. At present, the Company’s projects do not contain any proven or probable reserves. Success
in establishing reserves is a result of several factors, including the quality of the project itself. Substantial expenditures are required
to establish reserves or resources through drilling, to develop metallurgical processes, and to develop the mining and processing facilities
and infrastructure at any site chosen for mining. Because of these uncertainties, no assurance can be given that planned exploration
programs will result in the establishment of mineral resources or reserves. The Company may be subject to risks, which could not reasonably
be predicted in advance. Events such as labour disputes, natural disasters or estimation errors are prime examples of industry-related
risks. The Company attempts to balance this risk through ongoing risk assessments conducted by its technical team.
Commodity
Prices
The
Company’s mineral exploration operations and its prospects are largely dependent on movements in the price of various minerals.
Prices fluctuate daily and are affected by several factors well beyond the control of the Company. The mineral exploration industry in
general is a competitive market and there is no assurance that, even if commercial quantities of proven and probable reserves are discovered,
a profitable market may exist. The Company has not entered any price hedging programs.
Environmental
Exploration
projects or operations are subject to the environmental laws and applicable regulations of the jurisdiction in which the Company operates.
Environmental standards continue to evolve, and the trend is to a longer, more complete and rigid process. The Company reviews environmental
matters on an ongoing basis. If and when appropriate, the Company will make appropriate provisions in its financial statements for any
potential environmental liability.
ELECTRA
BATTERY MATERIALS CORPORATION
MANAGEMENT’S
DISCUSSION AND ANALYSIS
FOR
THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(expressed
in thousands of Canadian dollars)
Title
of Assets
Although
the Company conducts title reviews in accordance with industry practice prior to any purchase of resource assets, such reviews do not
guarantee that an unforeseen defect in the chain on title will not arise and defeat our title to the purchased assets. If such a defect
were to occur, our entitlement to the production from such purchased assets could be jeopardized.
Competition
The
Company expects to compete in the burgeoning North American Critical Minerals Industry with the completion of the Cobalt Sulfate refinery.
The industry is developing in Canada with new entrants expected in the short term. Many of these competitors have substantially longer
histories in the industry as well as substantially greater financial, sales and marketing resources than the Company.
The
Company engages in the highly competitive resource exploration industry. The Company competes directly and indirectly with major and
independent resource companies in its exploration for and development of desirable resource properties. Many companies and individuals
are engaged in this business, and the industry is not dominated by any single competitor or a small number of competitors. Many of such
competitors have substantially greater financial, technical, sales, marketing, and other resources, as well as greater historical market
acceptance than does the Company. The Company will compete with numerous industry participants for the acquisition of land and rights
to prospects, and for the equipment and labour required to operate and develop such prospects.
Competition
could materially and adversely affect the Company’s business, operating results and financial condition. Such competitive disadvantages
could adversely affect the Company’s ability to participate in projects with favorable rates of return.
Cybersecurity
The
Company’s operations depend, in part, on how well it and its third-party service providers protect networks, equipment, information
technology (“IT”) systems and software against damage from a number of threats, including, but not limited to, cable cuts,
natural disasters, intentional damage and destruction, fire, power loss, hacking, computer viruses, vandalism and theft. The Company’s
operations also depend on the timely maintenance, upgrade and replacement of networks, equipment, IT systems and software, as well
as pre-emptive expenses to mitigate the risks of failures. Any of these and other events could result in information system failures,
delays and/or increase in capital expenses. The failure of information systems or a component of information systems could, depending
on the nature of any such failure, adversely impact the Company’s reputation and results of operations.
The
Company’s information technology systems and on-line activities, including its e-commerce websites, also may be subject to denial
of service, malware or other forms of cyberattacks. While the Company has taken measures to protect against those types of attacks, those
measures may not adequately protect its on-line activities from such attacks. The Company’s risk and exposure to these matters
cannot be fully mitigated because of, among other things, the evolving nature of these threats. As a result, cyber security and the continued
development and enhancement of controls, processes and practices designed to protect systems, computers, software, data and networks
from attack, damage or unauthorized access is a priority. As cyber threats continue to evolve, the Company may be required to expend
additional resources to continue to modify or enhance protective measures or to investigate and remediate any security vulnerabilities.
ELECTRA
BATTERY MATERIALS CORPORATION
MANAGEMENT’S
DISCUSSION AND ANALYSIS
FOR
THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(expressed
in thousands of Canadian dollars)
Additional
information on risks and uncertainties relating to The Company’s business is provided in The Company’s Annual Information
Form dated May 10, 2024, under the heading “Risk Factors”.
SIGNIFICANT
ACCOUNTING ESTIMATES
Refer
to Note 4 of the Company’s Audited consolidated financial statements for the year ended December 31, 2023 and 2022.
FUTURE
CHANGES IN ACCOUNTING POLICIES AND INITIAL ADOPTION
Certain
new accounting standards and interpretations have been published that are either applicable in the current year or not mandatory for
the current period. The Company has assessed these standards, including amendments to IAS 1 – Non-current liabilities and Covenants,
and determined a reclassification of the convertible notes from long-term to current liabilities applies in the current period. In addition,
Lease Liability in a Sale and Leaseback (Amendment to IFRS 16 Leases) - is effective January 1, 2024. The adoption of this amendment
did not have an impact on the Company’s consolidated financial statements.
INTERNAL
CONTROL OVER FINANCIAL REPORTING
The
President and Chief Executive Officer and Chief Financial Officer of the Company are responsible for designing internal controls over
financial reporting or causing them to be designed under their supervision to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. From the second quarter
2022, up to and including this disclosure, Management concluded that internal control over financial reporting was not designed effectively
as of March 31, 2024, due to material weaknesses in Internal Control over Financial Reporting (ICFR).
A
material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is
a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented
or detected in a timely basis. Management has identified the following material weaknesses:
| · | An
ineffective control environment resulting from the combination of an insufficient number
of trained financial reporting and accounting personnel with the appropriate skills and knowledge
about the design, implementation, and operation of ICFR and inadequate IT tools and resources
to ensure the relevance, timeliness and quality of information used in control activities. |
| · | Management
has not designed or implemented a control monitoring process necessary to identify control
weaknesses and remediations in a timely manner necessary to ensure the reliability of its
ICFR. |
| · | Control
deficiencies in the procurement, payment and receiving processes resulting from a lack of
formal processes to ensure adherence to the Company’s delegation of authority policy,
inconsistent matching of receipts to goods and services to supporting documentation and inconsistent
receiving processes affecting the timing of recognition of assets and liabilities at the
Company’s refinery project. |
As
a consequence of the above, the Company had ineffective control activities related to the design of process level and financial statement
close controls which had a pervasive impact on the Company's ICFR. In the third and fourth quarter, Management hired several qualified
staff and began to rectify segregation issues. Over the next quarter, Management intends to further these efforts and has engaged external
experts to design a process for and perform monitoring controls.
ELECTRA
BATTERY MATERIALS CORPORATION
MANAGEMENT’S
DISCUSSION AND ANALYSIS
FOR
THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(expressed
in thousands of Canadian dollars)
Other
than those listed above, there have been no changes in the Company’s internal control over financial reporting during the 3 months
ended March 31, 2024, that have materially affected or are reasonably likely to materially affect, the Company’s internal
control over financial reporting.
Disclosure
Controls and Procedures
Disclosure
Controls and Procedures (DCP) have not been designed to provide reasonable assurance that all relevant information required to be disclosed
by the Company is accumulated and communicated to senior management as appropriate to allow timely decisions regarding required disclosure.
As disclosed in the previous quarter, the Company’s President and Chief Executive Officer and Chief Financial Officer note similar
weaknesses in the disclosure controls and procedures as in the ICFR. The Company’s President and Chief Executive Officer and Chief
Financial Officer have concluded, based on their evaluation of the design of the disclosure controls and procedures that because of the
material weaknesses in our ICFR described above our DCP were not designed effectively at March 31, 2024.
Limitations
of Controls and Procedures
The
Company’s management, including the President and Chief Executive Officer and Chief Financial Officer, believes that any internal
controls over financial reporting and disclosure controls and procedures, no matter how well designed, can have inherent limitations.
Therefore, even those systems determined to be effective can provide only reasonable assurance that the objectives of the control system
are met.
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This
MD&A contains certain statements that may be deemed “forward-looking statements”, including statements regarding developments
in the Company’s operations in future periods, adequacy of financial resources and plans and objectives of the Company. All statements
in this document, other than statements of historical fact, which address events or developments that the Company expects to occur, are
forward-looking statements. Forward-looking statements are statements that are not historical facts and are generally, but not always,
identified by the words “expects”, “plans”, “anticipates”, “believes”, “intends”,
“estimates”, “projects”, “potential”, “interprets” and similar expressions, or events
or conditions that “will”, “would”, “may”, “could” or “should” occur. Forward-looking
statements in this document include statements regarding the advancement of the Refinery, future exploration programs, liquidity, and
effects of accounting policy changes.
Although
the Company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements
are not guarantees of future performance and actual results may differ materially from those in forward-looking statements. Factors that
could cause the actual results to differ materially from those in forward-looking statements include market prices, exploration success,
a successful outcome of the work in support of the recommissioning of the Refinery, continued availability of capital and financing,
inability to obtain required regulatory or governmental approvals and general economic, market or business conditions. Investors are
cautioned that any such statements are not guarantees of future performance and actual results or developments may differ materially
from those projected in the forward-looking statements. Readers are cautioned not to place undue reliance on this forward-looking information.
Forward-looking
statements are based on the beliefs, estimates and opinions of the Company’s management on the date the statements are made. The
Company undertakes no obligation to update these forward-looking statements if Management’s beliefs, estimates, opinions, or other
factors should change except as required by law.
These
statements are based on several assumptions including, among others, assumptions regarding general business and economic conditions,
the timing of the receipt of regulatory and governmental approvals for the work programs described herein, the ability of the Company
and other relevant parties to satisfy stock exchange and other regulatory requirements promptly, the availability of financing for the
Company’s proposed work programs on its assets on reasonable terms and the ability of third-party service providers to deliver
services promptly. The foregoing list of assumptions is not exhaustive. Events or circumstances could cause results to differ materially.
Exhibit 99.3
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, Trent Mell, Chief Executive Officer
of Electra Battery Materials Corporation, certify the following:
| 1. | Review: I have reviewed the interim financial report and interim MD&A (together, the
“interim filings”) of Electra Battery Materials Corporation (the “issuer”) for the interim period
ended March 31, 2024. |
| 2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the
interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that
is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered
by the interim filings. |
| 3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim
financial report together with the other financial information included in the interim filings fairly present in all material respects
the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim
filings. |
| 4. | Responsibility: The issuer’s other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as
those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings,
for the issuer. |
| 5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s
other certifying officer(s) and I have, as at the end of the period covered by the interim filings |
| (a) | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance
that |
| (i) | material information relating to the issuer is made known to us by others, particularly during the period
in which the interim filings are being prepared; and |
| (ii) | information required to be disclosed by the issuer in its annual filings, interim filings or other reports
filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified
in securities legislation; and |
| (b) | designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s
GAAP. |
| 5.1 | Control framework: The control framework the issuer’s other certifying officer(s) and
I used to design the issuer’s ICFR is Risk Management and Governance: Guidance on Control (COCO Framework), published by
The Canadian Institute of Chartered Accountants. |
| 5.2 | ICFR – material weakness relating to design: The issuer has disclosed in its interim
MD&A for each material weakness relating to design existing at the end of the interim period |
| (a) | a description of the material weakness; |
| (b) | the impact of the material weakness on the issuer’s financial reporting and its ICFR; and |
| (c) | the issuer’s current plans, if any, or any actions already undertaken, for remediating the material
weakness. |
| 5.3 | Limitation on scope of design: N/A |
| 6. | Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in
the issuer’s ICFR that occurred during the period beginning on January 1, 2024 and ended on March 31, 2024 that has materially
affected, or is reasonably likely to materially affect, the issuer’s ICFR. |
DATE: May 21, 2024
/s/ Trent Mell |
|
Trent Mell
Chief Executive Officer |
|
Exhibit 99.4
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, David Allen, Chief Financial Officer
of Electra Battery Materials Corporation, certify the following:
| 1. | Review: I have reviewed the interim financial report and interim MD&A (together, the
“interim filings”) of Electra Battery Materials Corporation (the “issuer”) for the interim period
ended March 31, 2024. |
| 2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the
interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that
is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered
by the interim filings. |
| 3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim
financial report together with the other financial information included in the interim filings fairly present in all material respects
the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim
filings. |
| 4. | Responsibility: The issuer’s other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as
those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings,
for the issuer. |
| 5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s
other certifying officer(s) and I have, as at the end of the period covered by the interim filings |
| (a) | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance
that |
| (i) | material information relating to the issuer is made known to us by others, particularly during the period
in which the interim filings are being prepared; and |
| (ii) | information required to be disclosed by the issuer in its annual filings, interim filings or other reports
filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified
in securities legislation; and |
| (b) | designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s
GAAP. |
| 5.1 | Control framework: The control framework the issuer’s other certifying officer(s) and
I used to design the issuer’s ICFR is Risk Management and Governance: Guidance on Control (COCO Framework), published by
The Canadian Institute of Chartered Accountants. |
| 5.2 | ICFR – material weakness relating to design: The issuer has disclosed in its interim
MD&A for each material weakness relating to design existing at the end of the interim period |
| (a) | a description of the material weakness; |
| (b) | the impact of the material weakness on the issuer’s financial reporting and its ICFR; and |
| (c) | the issuer’s current plans, if any, or any actions already undertaken, for remediating the material
weakness. |
| 5.3 | Limitation on scope of design: N/A |
| 6. | Reporting changes in ICFR:
The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on January 1,
2024 and ended on March 31, 2024 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR. |
DATE: May 21, 2024
/s/ David Allen |
|
David Allen
Chief Financial Officer |
|
Exhibit 99.5
ELECTRA BATTERY MATERIALS CORPORATION
Form 51-102F6
Statement of Executive Compensation
The following information, dated as of May 21,
2024, sets out the statement of executive compensation of Electra Battery Materials Corporation (“Electra” or the “Company”)
for the financial year ended December 31, 2023, prepared in accordance with Form 51-102F6 – Statement of Executive
Compensation.
Report of the Compensation, Governance,
and Nominating Committee
The Company is pleased to give you important background
information and context to the executive compensation discussion and analysis that follows and the decisions made about executive compensation
for the financial year ended December 31, 2023. The Company’s executive compensation philosophy is based on pay for performance
and prudent risk management to motivate the senior leadership to execute corporate strategy in a manner that delivers strong results for
shareholders of the Company (the “Shareholders”).
Our Approach to Compensation
The current compensation plan adopts a balanced
approach between shorter-term results and longer-term strategic objectives and is designed with the following considerations in mind:
| · | Linking compensation to the Company’s performance; |
| · | Emphasizing variable compensation that is contingent
upon achievement of key business objectives; |
| · | Compensating executives at a level and in a manner
that ensures Electra is capable of attracting, motivating and retaining superior talent; and |
| · | Aligning the interests of executive officers
with the short- and long-term interests of Shareholders. |
To strengthen the alignment between pay and performance,
a percentage of the senior executive officers’ compensation is variable in nature, in the form of cash bonuses and Options, RSUs,
PSUs and DSUs under the 2022 Amended and Restated LTIP. The 2022 Amended and Restated LTIP provides the Company flexibility in the design
of executive compensation programs, including vesting criterion contingent on future performance.
Compensation Discussion and Analysis
The compensation discussion and analysis describe
Electra’s compensation policies and practices for its Chief Executive Officer, Chief Financial Officer and its three (3) other
most highly compensated executive officers. These individuals are referred to in this compensation discussion and analysis as the “Named
Executive Officers” (“NEOs”).
The Compensation, Governance, and Nominating Committee
(the “CGN Committee”) considers the implications of the risks associated with the Company’s compensation policies
and practices and reports such implications to the board of directors of the Company (the “Board”). The Board strives
to ensure that the members of the CGN Committee have the skills and experience required to make decisions on whether the Company’s
compensation policies and practices are consistent with its risk profile. The CGN Committee believes that the executive compensation structure
addresses potential risks by tying a portion of overall compensation to the achievement of certain milestones, including: (i) criteria
relating to annual performance, in the case of bonus payments and (ii) vesting periods for Options or other Awards. No risks have
been identified arising from the Company’s compensation policies and practices that are reasonably likely to have a material adverse
effect on the Company.
The Company’s NEOs and directors are not
permitted to purchase financial instruments that are designed to hedge or offset a decrease in the market value of equity securities granted
as compensation or held, directly or indirectly, by the NEO or director. For greater certainty, but without limiting the generality of
the foregoing, such financial instruments include prepaid variable forward contracts, equity swaps, collars, or units of exchange funds.
Named Executive Officers
During the financial year ended December 31,
2023, Electra’s NEOs were Trent Mell, Craig Cunningham, the former Chief Financial Officer of the Company, Peter Park, the former
Chief Financial Officer of the Company, Mark Trevisiol, Vice-President, Project Development of the Company, Michael Insulan, Vice-President,
Commercial of the Company, and Joe Racanelli, former Vice-President, Investor Relations of the Company. David Allen, the Current
Chief Financial Officer of the Company, was appointed on January 1, 2024 following Peter Park’s resignation.
Objectives of the Executive Compensation
Program
The Company’s executive compensation practices
underpin several objectives:
| · | Attract, motivate and retain highly qualified and experienced executives; |
| · | Recognize and reward contributions to the success of the Company as measured by the accomplishment of
performance objectives; |
| · | Ensure that a significant proportion of compensation is directly linked to the success of the Company
while not encouraging excessive or inappropriate risk-taking; |
| · | Promote adherence to the high standards and values reflected in the Company’s Code of Conduct and
Sustainability Charter; |
| · | Ensure retention by setting total direct compensation targets at a level that is competitive with the
markets in which the Company competes; and |
| · | Protect long-term Shareholder interests by ensuring NEOs and other senior executives’ interests
are aligned with those of Shareholders. |
Fundamentally, the Company’s compensation
practices are intended to promote value-creation actions for the benefit of Shareholders, and to reward individual and team efforts for
meeting short-term and long-term objectives.
Executive Compensation Strategy
NEOs cannot control a number of significant factors
that impact financial results, including commodity prices, foreign exchange rates and regulatory uncertainty. Our compensation program
design thus considers factors over which the executive officers can exercise control, such as advancing the Company’s strategic
plan, meeting budget targets established by the Board at the beginning of each year, controlling costs, mitigating risks, taking successful
advantage of business opportunities and enhancing the competitive and business prospects of the Company. NEOs will participate in the
compensation process and coordinate with the Board in setting target bonuses and objectives. The Board can subsequently exercise discretion
in their award of compensation absent attainment of the relevant performance criteria or reduce or increase the size of any award or payout.
For the December 31, 2023 fiscal year, the
Company’s Board of Directors, through its CGN Committee, assessed milestones achieved in light of the difficult inflationary landscape
that resulted in the suspension of the cobalt refinery construction project. Several objectives were met in part or in whole but a significant
shortcoming related to the higher capital budget requirements for completion of the Company’s cobalt sulfate refinery.
The refinery project was impacted by many of the
same pressures affecting other North American construction projects, including supply chain delays and geopolitical issues in Europe that
caused a 75% increase in energy prices and initiated significant ripple effect in other commodities. Inflation rates worldwide hit 40-year
highs. Labour contracts in Ontario of 8-9% increases year on year. Transportation costs, iron ore, steel, nickel all had over 50% increases
in prices.
Highlights in 2023 included:
| · | 70,000 hours without any lost time injuries; |
| · | Completed erection of the solvent extraction
and crystallizer buildings; |
| · | Received all long lead, custom fabricated equipment,
including crystallizer unit, SX tanks, and structural steel; |
| · | Recommissioned the brownfields refinery building
and ran a plant-scale demonstration plant to test the Company’s black mass battery recycling refinery; |
| · | Produced the first nickel-cobalt mixed hydroxide
precipitate (MHP) in North America and sold approximately 20 tonnes to commercial clients; |
| · | Extended LG Energy Solution contract from 7,000t
over 3 years to 19,000t over 5 years; and |
| · | Increased convertible notes from US$36 million
to US$51 million and completed a $21.5 million equity financing. |
Peer Group Selection
A diverse approach was taken to develop a peer
group, with consideration for development stage companies and battery materials companies to account for Electra’s rapid growth
and the emerging industry. Due to the limited number of cobalt and lithium companies at similar stages, a broader market capitalization
range was applied to select the peer group. Some precious metals companies were included as they are similar in size and compete for the
same board and executive talent.
For the 2023 calendar year, which includes the
most recently completed financial year, the general criteria applied in selecting the comparator group were as follows:
| a. | Business Content/ Scope – Peer group companies should operate in similar industries and/or
sub-industries with comparable geographic location(s) and business/cost models. |
| b. | Size of Operations – Compensation availability and levels are typically aligned with size
of operations and financial performance. |
| c. | Financial Performance – Market capitalization is a key determinant for similar comparison.
Other indicators include: assets, number of employees and share price. |
| d. | Statistical Reliability and Validity – To ensure the compensation data is reliable and pay
decision making has validity the ideal number of peer group companies should be between 10-15. |
| e. | Talent Competitors – The availability of executive talent or lack thereof presents attraction
and retention challenges locally where a company operates and globally. Talent competitors need to be considered as they can impact compensation
element movements; sometimes significantly. |
Based on those criteria, the following group of
companies in 2023 was determined to be an appropriate comparator group:
Based on a review of the peer group noted, the
base salaries and total compensation paid to the CEO of the Company were below the average range of the peer group and other NEOs were
found to generally align with the fifty to seventy fifth percentile range of the peer group.
Elements of Compensation
Compensation is comprised of three main components:
base salary, annual bonus and Options and other long-term incentives.
| a) | Base Salary – Base salary represents approximately half of the CEO’s total compensation
and a higher percentage of the Company’s compensation program for other NEOs. The Company’s view is that a competitive base
salary is a necessary element for retaining qualified executive officers. The amount payable to an executive officer as base salary is
determined primarily by the number of years’ experience, personal performance and by comparisons to the base salaries and total
compensation paid to executives of comparable publicly-traded companies within the North American materials sector, specifically those
focused on developing the battery materials supply chain. |
| b) | Annual Bonus – Along with the establishment of competitive base salaries and long-term
incentives, one of the objectives of the executive compensation strategy is to encourage and recognize strong levels of performance by
linking the achievement of corporate and individual goals and objectives with variable cash compensation in the form of an annual bonus. |
As noted above, many but not all corporate
objectives for 2023 were achieved, yielding a score of no more than 50% of target for any of the executives. Bonuses were primarily in
the form of non-cash incentives to the executive team commensurate with that performance.
| c) | Stock Options and other long-term incentives – The award of long-term incentives is
intended to give each Option holder an interest in preserving and maximizing shareholder value in the longer term. In addition, the grant
of Awards generally is intended to align the interests of executive officers with those of Shareholders and to enable the Company to attract
and retain individuals with experience and ability. Award grants are considered when reviewing executive officer compensation packages
as a whole. Options generally have a five-year term, are subject to vesting provisions of up to three years and carry an exercise price
equal to the fair value of the common shares in the capital of the Company (the “Common Shares”) as at the granting
date. DSUs vest one year from the grant date but may not be exercised until the director ceases to serve on the Board. PSUs generally
vest in two (2) tranches over a 12-month period contingent on achieving strategic corporate objectives. There are 599,331 DSUs, nil
PSUs and 298,152 RSUs outstanding as of the date of this Statement of Executive Compensation. The periodic award of Awards under the Company’s
2022 Amended and Restated LTIP is determined by the Board based on the recommendations of the CGN Committee, is discretionary and takes
into account previous Option awards as well as typical market practices of the comparator group of companies. |
Risks Associated with Compensation
Considering the Company’s size, the Board
does not deem it necessary to consider at this time the implications of the risks associated with the Company’s compensation policies
and practices. However, the Company believes its compensation policies alleviate risk by having a balance of short term (salary) and long-term
compensation. The CGN Committee will also evaluate the risks and adjust the Company’s compensation policies as necessary. As previously
mentioned, Options and other non-Option based awards are granted to retain NEOs and motivate the NEOs by rewarding sustained, long-term
development and growth that will result in increases in stock value. There is no formal process for assessing when such awards are to
be granted. Options and/or non-Option based awards are granted at a time determined necessary by the CGN Committee and the Board in their
discretion.
Financial Instruments
The Company does not currently have a policy that
restricts NEOs or directors from purchasing financial instruments, including, for greater certainty, prepaid variable forward contracts,
equity swaps, collars, or units of exchange funds that are designed to hedge or offset a decrease in market value of equity. However,
as of the date of this Statement of Executive Compensation, no NEO or director of the Company has participated in the purchase of such
financial instruments pertaining to the Company.
Performance Chart
The following chart compares the yearly percentage
change in the cumulative total shareholder return on the Common Shares against the cumulative total shareholder return of the S&P/TSX
Venture Composite Total Return Index for the financial periods 2018 through 2023, assuming a $100 initial investment with all dividends
reinvested.
Note:
| (1) | On April 13, 2022, the Company consolidated its Common Shares on the basis of one new post-consolidation
Common Share for every 18 pre-consolidation Common Shares. |
In 2018, the Common Share price traded in tandem
with the price of cobalt, which dropped from a multi-year high of more than US$45 per pound to less than US$15 per pound. As the Company’s
strategy shifted from cobalt exploration towards a stronger focus on hydrometallurgical refining of primary and recycled critical minerals,
including cobalt, share price performance became less correlated with the price of cobalt. When the Company commenced procurement and
construction in the post-Covid period, it was exposed to supply chain disruptions and inflation levels not seen in forty years, which
adversely impacted stock price performance in 2022 and 2023.
The Company is committed to increasing shareholder
value and the CGN Committee and Board do take share price performance into consideration when making compensation determinations. The
Company is focused on building long-term value for shareholders by maximizing the potential of its projects and progressing towards development.
Compensation is paid to its executive officers for furthering these objectives.
The share price performance trend illustrated
within this chart does not necessarily reflect the trend in the Company’s compensation to executive officers over the same time
period. Alignment with shareholders is nonetheless achieved by awarding a significant portion of compensation in the form of option-based
awards, which only create value for recipients if the share price has increased over the term of the option.
Summary Compensation
The following table sets out, for the three most
recently completed financial years, the compensation paid to or earned by each of the NEOs.
Summary Compensation Table
| |
| |
| | |
| | |
| | |
Non-Equity
Incentive Plan
Compensation | | |
| | |
| |
Name and
Principal Position | |
Year | |
Salary ($) | | |
Share-
Based
Awards ($) | | |
Option-
Based
Awards (1)(2) ($) | | |
Annual
Incentive
Plan (3) ($) | | |
All Other
Compensation ($) | | |
Total
Compensation ($) | |
Trent Mell | |
2023 | |
| 390,769 | | |
| 461,628 | | |
| 256,944 | | |
| 25,000 | | |
| 1,430 | | |
| 1,135,771 | |
CEO | |
2022 | |
| 399,229 | | |
| 96,635 | | |
| 270,915 | | |
| 25,000 | | |
| - | | |
| 791,779 | |
| |
2021 | |
| 359,061 | | |
| 206,703 | | |
| - | | |
| 295,000 | | |
| - | | |
| 860,764 | |
David Allen (4) | |
2023 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
CFO | |
2022 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| |
2021 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Peter Park (5) | |
2023 | |
| 105,769 | | |
| - | | |
| 55,920 | | |
| - | | |
| 494 | | |
| 162,183 | |
Former CFO | |
2022 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| |
2021 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Craig Cunningham (6) | |
2023 | |
| 156,154 | | |
| 37,500 | | |
| 48,177 | | |
| 35,000 | | |
| 718 | | |
| 277,549 | |
Former CFO | |
2022 | |
| 154,000 | | |
| - | | |
| 137,666 | | |
| 35,000 | | |
| - | | |
| 326,666 | |
| |
2021 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Mark Trevisiol(7) | |
2023 | |
| 241,000 | | |
| 183,516 | | |
| 77,083 | | |
| - | | |
| 1,375 | | |
| 502,974 | |
VP, Project | |
2022 | |
| 258,333 | | |
| 20,907 | | |
| 80,241 | | |
| 25,000 | | |
| - | | |
| 384,481 | |
Development | |
2021 | |
| 250,000 | | |
| 36,250 | | |
| - | | |
| 20,000 | | |
| - | | |
| 306,250 | |
Michael Insulan(7) | |
2023 | |
| 240,000 | | |
| 145,001 | | |
| - | | |
| - | | |
| - | | |
| 385,001 | |
VP, Commercial | |
2022 | |
| 224,167 | | |
| 20,907 | | |
| 42,116 | | |
| 25,000 | | |
| - | | |
| 312,190 | |
| |
2021 | |
| 200,000 | | |
| 25,500 | | |
| 79,977 | | |
| - | | |
| - | | |
| 305,477 | |
Joe Racanelli (8) | |
2023 | |
| 221,673 | | |
| - | | |
| 48,177 | | |
| 30,000 | | |
| 1,186 | | |
| 301,039 | |
Former VP, Investor | |
2022 | |
| 152,423 | | |
| - | | |
| 78,572 | | |
| 35,000 | | |
| - | | |
| 265,995 | |
Relations | |
2021 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Notes:
| (1) | Fair value of incentive stock option grants calculated using the Black-Scholes model. |
| (2) | This column includes the grant date fair value of all Options granted by the Company to the NEOs during
the indicated year. All grant date fair values equal the accounting fair values determined for financial reporting purposes in accordance
with IFRS 2 Share-based Payment and were estimated using the Black-Scholes option pricing model. The Black-Scholes options pricing model
has been used to determine grant date fair value due to its wide acceptance across the industry as an option valuation model, and because
it is the same model the Company uses to value options for financial reporting purposes. |
| (3) | Management bonuses were paid based on achieving certain corporate objectives for the applicable years. |
| (4) | David Allen was appointed CFO on January 1, 2024. |
| (5) | Mr. Park was appointed CFO on July 1, 2023, he resigned as the CFO on December 31, 2023
and was replaced by David Allen, as current Chief Financial Officer of the Company on January 1, 2024. |
| (6) | Mr. Cunningham was appointed CFO on June 8, 2022, he resigned as the CFO on June 30, 2023
and was replaced by Peter Park, as Chief Financial Officer of the Company. |
| (7) | Messrs. Trevisiol and Insulan became NEOs in 2021 after Mr. Trevisiol joined the Company in
2020 and Mr. Insulan joined in 2021. |
| (8) | Mr. Racanelli became an NEO when he joined the Company in 2022. |
Senior Leadership Team
Trent Mell – Chief Executive Officer
On February 15, 2017, Trent Mell entered
into an employment agreement with the Company (the “Mell Agreement”) and was subsequently appointed as President and
Chief Executive Officer of the Company on March 2, 2017. Mr. Mell was paid an annual base salary of $400,000 in 2022. In January 2023,
the Company signed a revised contract with Mr. Mell, outlining a bonus potential of up to 100% of base salary, contingent upon achieving
corporate objectives agreed upon with the Board.
Peter Park – Former Chief Financial Officer
On July 1, 2023, Peter Park entered into
an employment agreement with the Company (the “Park Agreement”) and was appointed as Chief Financial Officer of the
Company. Mr. Park was paid an annual base salary of $220,000. Mr. Park resigned from the Company on December 31, 2023 and
was replaced by David Allen, current Chief Financial Officer of the Company.
Craig Cunningham – Former Chief Financial
Officer
On June 8, 2022, Craig Cunningham entered
into an employment agreement with the Company (the “Cunningham Agreement”) and was appointed as Chief Financial Officer
of the Company. Mr. Cunningham was paid an annual base salary of $280,000. His target bonus was 50% of base salary and a maximum
bonus potential of 75% of base salary, contingent upon achieving corporate objectives agreed upon with the Board. Mr. Cunningham
resigned from the Company on June 30, 2023 and was replaced by Peter Park, as Chief Financial Officer of the Company.
Mark Trevisiol – Vice President, Project
Development
On July 23, 2020, Mark Trevisiol entered
into an agreement with the Company (the “Trevisiol Agreement”), and was subsequently appointed as Vice-President, Projects.
Mr. Trevisiol is paid an annual base salary of $270,000 with a target bonus was 50% of base salary, contingent upon achieving corporate
objectives to be agreed upon with the Board and CEO. The Trevisiol Agreement was amended in January 2023 to include provisions for
payment upon termination following a change of control of the Company, as described below.
Michael Insulan – Vice President, Commercial
On December 23, 2020, Michael Insulan entered
into an agreement with the Company (the “Insulan Agreement”), and was subsequently appointed as Vice President, Commercial.
Mr. Insulan is paid an annual base salary of $240,000. He has a target bonus of 40% of base salary, contingent upon achieving corporate
objectives to be agreed upon with the Board. The Insulan Agreement was amended in January 2023 to include provisions for payment
upon termination following a change of control of the Company, as described below.
Joe Racanelli – Vice President, Investor
Relations
On May 24, 2022, Joe Racanelli entered into
an agreement with the Company (the “Racanelli Agreement”), and was subsequently appointed as Vice President, Investor
Relations. Mr. Racanelli was paid an annual base salary of $215,000, with a target bonus of 35% of base salary, contingent upon achieving
corporate objectives to be agreed upon with the Board and CEO. Mr. Racanelli resigned from the Company on December 15, 2023.
Incentive Plan Awards
Outstanding Share-Based Awards and Option-Based
Awards
The following table sets forth all share-based
and option-based awards outstanding for the Named Executive Officers as of December 31, 2023:
| |
Option-Based Awards | | |
| | |
Share-Based Awards | |
Name | |
Number of Securities Underlying Unexercised Options (#) | | |
Exercise Price ($) | | |
Expiry Date | |
Value of Unexercised in-the-money Options (1) ($) | | |
Number of Share- Based Awards – Unvested (#) | | |
Market Value of Share- Based Awards – Unvested (2) ($) | | |
Number of Share- Based Awards – Vested (#) | | |
Market Value of Share- Based Awards – Vested (2) ($) | |
Trent Mell | |
| 17,593 | | |
| 2.52 | | |
Sep. 4, 2024 | |
- | | |
| 193,869 | | |
| 96,935 | | |
| 54,185 | | |
| 27,092 | |
| |
| 40,741 | | |
| 2.52 | | |
Jul. 10, 2025 | |
- | | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| 81,849 | | |
| 5.40 | | |
Jan. 19, 2027 | |
- | | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| 40,000 | | |
| 3.21 | | |
Nov. 11, 2027 | |
- | | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| 173,611 | | |
| 2.40 | | |
Mar. 10, 2027 | |
- | | |
| - | | |
| - | | |
| - | | |
| - | |
David Allen | |
| - | | |
| - | | |
- | |
- | | |
| - | | |
| - | | |
| - | | |
| - | |
Peter Park | |
| 50,000 | | |
| 1.04 | | |
Aug. 21, 2028 | |
- | | |
| - | | |
| - | | |
| - | | |
| - | |
Craig Cunningham | |
| 40,000 | | |
| 4.90 | | |
June 7, 2027 | |
- | | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| 15,000 | | |
| 3.21 | | |
Nov. 11, 2027 | |
- | | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| 32,552 | | |
| 2.40 | | |
Mar. 10, 2027 | |
- | | |
| - | | |
| - | | |
| - | | |
| - | |
Mark Trevisiol | |
| 27,778 | | |
| 2.61 | | |
Aug. 27, 2025 | |
- | | |
| 101,858 | | |
| 50,929 | | |
| 23,253 | | |
| 11,627 | |
| |
| 17,708 | | |
| 5.40 | | |
Jan. 19, 2027 | |
- | | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| 20,000 | | |
| 3.21 | | |
Nov. 11, 2027 | |
- | | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| 52,083 | | |
| 2.40 | | |
Mar. 10, 2027 | |
- | | |
| - | | |
| - | | |
| - | | |
| - | |
Michael Insulan | |
| 27,778 | | |
| 6.21 | | |
Apr. 16, 2026 | |
- | | |
| 61,806 | | |
| 30,903 | | |
| 4,502 | | |
| 2,251 | |
| |
| 17,708 | | |
| 5.40 | | |
Jan. 19, 2027 | |
- | | |
| - | | |
| - | | |
| - | | |
| - | |
Joe Racanelli | |
| 19,444 | | |
| 4.63 | | |
May 24, 2027 | |
- | | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| 15,000 | | |
| 3.21 | | |
Nov. 11, 2027 | |
- | | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| 32,552 | | |
| 2.40 | | |
Mar. 10, 2027 | |
- | | |
| - | | |
| - | | |
| - | | |
| - | |
Notes:
| (1) | The “value of unexercised in-the-money options” is calculated based on the difference between
the closing price of $0.50 for the Common Shares on the TSXV on December 29, 2023 and the exercise price of the Options, multiplied
by the number of unexercised Options. |
| (2) | The “market value of share-based awards” is calculated as the number of share-based awards
multiplied by the closing price of $0.50 for the Common Shares on the TSXV on December 29, 2023. |
Value Vested or Earned During the Year
The following table sets forth the value of all
incentive plan awards vested or earned for each Named Executive Officer during the financial year ended December 31, 2023:
Name | |
Option Based Awards – Value Vested During the Year (1) ($) | | |
Share Based Awards – Value Vested During the Year (2) ($) | | |
Non-Equity Incentive Plan Compensation – Value Earned During the Year(3) ($) | |
Trent Mell | |
| - | | |
| 11,933 | | |
| 25,000 | |
David Allen | |
| - | | |
| - | | |
| - | |
Peter Park | |
| - | | |
| - | | |
| - | |
Craig Cunningham | |
| - | | |
| - | | |
| 35,000 | |
Mark Trevisiol | |
| - | | |
| 12,083 | | |
| - | |
Michael Insulan | |
| - | | |
| - | | |
| - | |
Joe Racanelli | |
| - | | |
| - | | |
| 30,000 | |
Notes:
| (1) | The “value vested during the year” is calculated based on the positive difference between
the closing price for the Common Shares on the TSXV as of the date of vesting and the exercise price of the Options, multiplied by the
number of vested Options. All Options granted to the NEOs had an exercise price equal to the closing price of the Company’s Common
Shares as of the date of grant. |
| (2) | The “Share Based Awards” encompass the PSUs, RSUs and DSUs that vested during 2023. The value
reflects the value of the Common Shares issuable to each individual on the vesting date. |
| (3) | The “Non-Equity Incentive Plan Compensation – Value Earned During the Year” represents
short term incentive bonus amounts earned in 2023 and paid in 2024. |
Pension Benefits
The Company does not have a pension plan that
provides for payments or benefits to the NEOs at, following, or in connection with retirement.
Termination and Change of Control Benefits
In accordance with the terms of the Mell Agreement,
the Company may terminate the executive at any time without further obligation by providing notice based on the length of employment of
each executive. Mr. Mell would be entitled to receive a payment equivalent to 24 months’ salary and bonus in the event the
agreement is terminated without cause. The Company has also entered into a change of control agreement with Mr. Mell, pursuant to
which Mr. Mell would be entitled to payments equivalent to the above in the event he is terminated within 12 months of a change of
control event. A change of control event is defined as another party acquiring a controlling position in the Common Shares of the Company.
Upon any of the termination or change of control payments noted above, there are no associated conditions for the terminated officers
such as non-compete clauses. Mr. Mell must continue to adhere to his confidentiality requirements under the Company’s existing
policies.
There are no change of control provisions under
the Allen Agreement. The Allen Agreement terminates on May 31, 2024, unless otherwise extended.
In January 2023, the Insulan Agreement was
amended to include a change of control agreements pursuant to which Mr. Insulan would be entitled to payments equivalent 12 months’
salary and bonus in the event the agreement is terminated without cause.
The Trevisiol Agreement was also amended in January 2023
to include a change of control agreements pursuant to which Mr. Trevisiol would be entitled to payments equivalent 18 months’
salary and bonus in the event the agreement is terminated without cause.
The following table discloses the estimated amounts
payable to those NEOs under a termination or change of control. Amounts disclosed in the table below assume that the NEOs termination
of employment and/or change of control occurred on December 31, 2023.
NEO | |
Payment due upon Termination ($) | | |
Payment due upon Change of Control ($) | |
Trent Mell | |
| 1,600,000 | | |
| 1,600,000 | |
David Allen | |
| Nil | | |
| Nil | |
Mark Trevisiol | |
| 607,500 | | |
| 607,500 | |
Michael Insulan | |
| 345,600 | | |
| 345,600 | |
The remaining NEOs, being Messrs. Park, Cunningham
and Racanelli, resigned from the Company during the year ended December 31, 2023.
Securities Authorized For Issuance Under
Equity Compensation Plans
The following table provides information regarding
the number of Common Shares to be issued upon the exercise of outstanding Options and exercise of current PSUs, RSUs and DSUs and the
weighted-average exercise price of the outstanding Options in connection with the 2022 Amended and Restated LTIP as at December 31,
2023:
Plan Category | |
Number of
Common Shares
to be issued upon
exercise of
outstanding
options, PSUs,
RSUs and DSUs | | |
Weighted-
average
exercise price
of outstanding
options | | |
Number of Common
Shares remaining
available for future
issuance under
equity
compensation plans (1) | |
Equity compensation plans approved by security holders | |
| | | |
| | | |
| | |
Options | |
| 772,568 | | |
$ | 1.97 | | |
| 2,227,432 | |
DSUs | |
| 616,163 | | |
| | | |
| -216,163 | |
RSUs | |
| 533,153 | | |
| | | |
| -183,153 | |
PSUs | |
| 34,029 | | |
| | | |
| 315,971 | |
Total | |
| 1,955,913 | | |
| | | |
| 2,144,087 | |
Equity compensation plans not approved by security holders | |
| N/A | | |
| N/A | | |
| N/A | |
Total | |
| 1,955,913 | | |
$ | 1.97 | | |
| 2,144,087 | |
Notes:
| (1) | The aggregate number of Common Shares to be reserved and set aside for issue upon the exercise or redemption
and settlement for all awards granted under the 2022 Amended and Restated LTIP, together with all other established security-based compensation
arrangements of the Company, shall not exceed 4,100,000. |
Other Compensation Matters
Proportion of Common Shares Held by Directors
and Executive Officers
Collectively, as of the date hereof, the directors
and executive officers of the Company, as a group, own directly or indirectly 671,083 Common Shares representing approximately 1.03% of
the issued and outstanding Common Shares.
DIRECTOR COMPENSATION
The following table discloses the particulars of the compensation provided
to the non-executive directors of the Company for the financial year ended December 31, 2023:
Non-Executive Director Compensation
(Financial Year Ended December 31, 2022)
Name | |
Annual Fees – Cash ($) | | |
Share-Based Awards ($) | | |
Option- Based Awards (1) ($) | | |
Non-equity incentive plan compensation ($) | | |
Pension value ($) | | |
All Other Compensation ($) | | |
Total Compensation ($) | |
John Pollesel(2) | |
| 40,000 | | |
| 109,422 | | |
| Nil | | |
| Nil | | |
| Nil | | |
| Nil | | |
| 149,422 | |
C.L. “Butch” Otter(3) | |
| 80,000 | | |
| 52,873 | | |
| Nil | | |
| Nil | | |
| Nil | | |
| Nil | | |
| 132,873 | |
Susan Uthayakumar(4) | |
| - | | |
| 73,173 | | |
| Nil | | |
| Nil | | |
| Nil | | |
| Nil | | |
| 73,173 | |
Garett Macdonald(5) | |
| 17,060 | | |
| 40,001 | | |
| Nil | | |
| Nil | | |
| Nil | | |
| Nil | | |
| 57,061 | |
Notes:
| (1) | Fair value of incentive stock option grants calculated using the Black-Scholes model. |
| (2) | John Pollesel was appointed as a director of the Company on May 17, 2017 and was granted 72,360 DSUs
in 2023. |
| (3) | C.L. “Butch” Otter was appointed as a director of the Company on February 21, 2019 and
was granted 33,742 DSUs in 2023. |
| (4) | Susan Uthayakumar was appointed as a director of the Company on October 1, 2019 and was granted 61,208
DSUs in 2023. |
| (5) | Garett Macdonald was appointed as a director of the Company on June 4, 2018 and was granted 16,667
DSUs in 2023. Mr. Macdonald resigned as a director of the Company on May 17, 2023. |
Narrative Discussion
The Company recognizes the contribution that its
directors make to the Company and seeks to compensate them accordingly. Compensation of directors of the Company is reviewed annually
and determined by the Board. The level of compensation for directors is determined after consideration of various relevant factors, including
the expected nature and quantity of duties and responsibilities, past performance, comparison with compensation paid by other issuers
of comparable size and nature, and the Company’s financial resources.
Executive Compensation-Related Fees
In 2023, the Company paid $60,000 to for compensation
consultation fees to PM Search Partners.
Incentive Plan Awards
Outstanding Share-Based Awards and Option-Based
Awards
The following table sets forth all awards outstanding
for each of the non-executive directors of the Company as of December 31, 2023:
| |
Option-Based Awards | |
| | |
Share-Based Awards | |
Name | |
Number of
Securities
Underlying
Unexercised
Options (#) | |
Exercise
Price ($) | |
Expiry Date | |
| Value of
Unexercised
in-the-
money
Options (1) ($) | | |
| Number of
Share-
Based
Awards –
Unvested (#) | | |
| Market Value
of Share-
Based Awards
– Unvested ($) | | |
| Number of
Share-Based
Awards –
Vested (#) | | |
| Market
Value of
Share-Based
Awards –
Vested (2) ($) | |
John Pollesel | |
16,667 22,222 | |
2.52 5.40 | |
Sep. 4, 2024 Jan. 19, 2027 | |
| -
- | | |
| -
- | | |
| -
- | | |
| 138,220
- | | |
| 69,110
- | |
C.L. “Butch” Otter | |
55,556 16,667 11,111 | |
3.24 2.52 5.40 | |
Feb. 21, 2024 Sep. 4, 2024 Jan. 19, 2027 | |
| - - - | | |
| - - - | | |
| - - - | | |
| 62,518
-
- | | |
| 31,259
-
- | |
Susan Uthayakumar | |
16,667 11,111 | |
2.88 5.40 | |
Oct. 1, 2024 Jan. 19, 2027 | |
| -
- | | |
| -
- | | |
| -
- | | |
| 68,264
- | | |
| 34,132
- | |
Garett Macdonald (3) | |
16,667 11,111 | |
2.52 5.40 | |
Sep. 4, 2024 Jan. 19, 2027 | |
| -
- | | |
| -
- | | |
| -
- | | |
| 45,307
- | | |
| 22,654
- | |
Notes:
| (1) | The “value of unexercised in-the-money options” is calculated based on the difference between
the closing price of $0.50 for the Common Shares on the TSXV on December 29, 2023 and the exercise price of the Options, multiplied
by the number of unexercised Options. |
| (2) | The “market value of share-based awards” is calculated as the number of share-based awards
multiplied by the closing price of $0.50 for the Common Shares on the TSXV on December 29, 2023. |
| (3) | Mr. Macdonald resigned as a director of the Company on May 17, 2023. |
Incentive Plan Awards – Value Vested
or Earned During the Year
The following table sets forth the value of all
incentive plan awards vested or earned by each non-executive director of the Company during the financial year ended December 31,
2023:
Name | |
Option Based Awards – Value Vested During the Year (1) | | |
Share Based Awards – Value Vested During the Year (2) | | |
Non-Equity Incentive Plan Compensation – Value Earned During the Year | |
John Pollesel | |
| - | | |
| 109,422 | | |
| - | |
C.L. “Butch” Otter | |
| - | | |
| 52,873 | | |
| - | |
Susan Uthayakumar | |
| - | | |
| 73,173 | | |
| - | |
Garett Macdonald(3) | |
| - | | |
| 40,001 | | |
| - | |
Notes:
| (1) | The “value vested during the year” is calculated based on the positive difference between
the closing price for the Common Shares on the TSXV as of the date of vesting and the exercise price of the Options, multiplied by the
number of vested Options. |
| (2) | The “Share Based Awards” encompass the DSUs that vested during 2023. The value reflects the
value of the Common Shares issuable to each individual on the DSU vesting date, which is the grant date. |
| (3) | Mr. Macdonald resigned as a director of the Company on May 17, 2023. |
Exhibit 99.6
 |
NEWS RELEASE |
NASDAQ: ELBM |
TSX.V: ELBM |
Electra Files First Quarter 2024 Financial
Reports
Toronto, Ontario – (May 22, 2024)
– Electra Battery Materials Corporation (NASDAQ: ELBM; TSX-V: ELBM) (“Electra” or the “Company”)
today announces the filing of their first quarter 2024 financial reports.
“Over the course of the quarter we have
remained committed to pursuing non-dilutive opportunities to resume and complete the construction of our cobalt sulfate refinery in Ontario,
and to engage with funding agencies and strategic partners in support of this goal,” said Electra CEO, Trent Mell. “At the
same time, we continue to carefully manage our financial resources.”
Mr. Mell added, “We also continue
to evaluate future growth opportunities as well. We are working with Three Fires Group on a black mass primary recycling facility, exploring
the potential of a second cobalt refinery in Quebec and assessing how to support the need for domestically sourced nickel sulfate within
North America. It is encouraging to see U.S. policy announcements designed to level the playing field and increased cooperation from
North American governments, recognizing the importance of diversifying the EV materials supply chain away from heavy reliance on China."
Electra’s current priority is recommissioning
and expanding its refinery, and its long-term vision includes additional phases to potentially provide recycled battery materials and
battery grade nickel to the North American and global electric vehicle battery market:
| 1. | Completion of the recommissioning of the
refinery to produce at an initial rate of 5,000 tonnes per annum of battery cobalt contained
in cobalt sulfate from cobalt hydroxide. |
| 2. | 12-month permit amendment process and
expansion of certain circuits to increase cobalt production to 6,500 tonnes per annum of
battery grade cobalt sulfate, reaching the nameplate capacity of the crystallization circuit. |
| 3. | Recycling of black mass, recovering lithium,
nickel, cobalt and other critical metals, supported by a planned joint venture with the Three
Fires Group to collaborate to source battery waste and produce black mass for refining at
Electra’s refinery. |
| 4. | Expansion to a second cobalt sulfate facility
in Bécancour, Quebec and a strategically located North American nickel sulfate refinery. |
According to Darton Commodities’ 2024 Cobalt
Market Review, 80% of the refined cobalt production worldwide comes from China. Electra's refinery project aims to change that by becoming
the first in North America to produce cobalt sulfate specifically for electric vehicle batteries. Once fully commissioned, Electra’s
refinery could supply enough cobalt for about 1 million electric vehicles per year.
Throughout 2023, Electra operated a plant scale
battery recycling trial at its refinery, processing more than 40 tonnes of black mass material to recover valuable elements such as lithium,
nickel, cobalt, manganese, graphite, and copper. The goal was to make high-quality nickel, cobalt, and lithium products. While the current
phase of the recycling project is now largely complete, ongoing work aims to unlock additional value from the final saleable products
and completed advanced engineering studies.
Electra’s low carbon hydrometallurgical
refinery in Canada is permitted and has an estimated current replacement value of approximately US$200 million. The Company requires
approximately US$60 million to complete construction. The cobalt refinery project continues to be derisked through the on-site receipt
of most long lead-time equipment and by the 2023 commissioning of the legacy refinery operations for the black mass demonstration plant.
www.ElectraBMC.com
The Company’s cash balance at the end of
the quarter was C$5.6M. The Company’s first quarter 2024 financial reports are available on SEDAR+ (www.sedarplus.com) and
the Company’s website (www.ElectraBMC.com).
About Electra Battery Materials
Electra is a processor of low-carbon, ethically-sourced
battery materials. Currently focused on developing North America’s only cobalt sulfate refinery, Electra is executing a phased
strategy to onshore the electric vehicle supply chain and provide a North American solution for EV battery materials refining. Keys to
its strategy are integrating black mass recycling, expanding cobalt sulfate processing into Bécancour, Quebec, and exploring nickel
sulfate production potential within North America. For more information, please visit www.ElectraBMC.com.
Contacts
Heather Smiles
Vice President, Investor Relations & Corporate Development
Electra Battery Materials
info@ElectraBMC.com
1.416.900.3891
Neither the TSX Venture Exchange nor its Regulation
Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy
of this release.
Cautionary Note Regarding Forward-Looking Statements
This news release may contain forward-looking
statements and forward-looking information (together, “forward-looking statements”) within the meaning of applicable securities
laws and the United States Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts,
are forward-looking statements. Generally, forward-looking statements can be identified by the use of terminology such as “plans”,
“expects”, “estimates”, “intends”, “anticipates”, “believes” or variations
of such words, or statements that certain actions, events or results “may”, “could”, “would”, “might”,
“occur” or “be achieved”. Such forward-looking statements include, without limitation, statements regarding the
timing and deemed value of the issuance of Shares. Forward-looking statements are based on certain assumptions, and involve risks, uncertainties
and other factors that could cause actual results, performance, and opportunities to differ materially from those implied by such forward-looking
statements. Factors that could cause actual results to differ materially from these forward-looking statements are set forth in the management
discussion and analysis and other disclosures of risk factors for Electra Battery Materials Corporation, filed on SEDAR+ at www.sedarplus.com
and with on EDGAR at www.sec.gov. Other factors that could cause actual results to differ materially include changes with
respect to government or investor expectations or actions as compared to communicated intentions, and general macroeconomic and other
trends that can affect levels of government or private investment. Although the Company believes that the information and assumptions
used in preparing the forward-looking statements are reasonable, undue reliance should not be placed on these statements, which only
apply as of the date of this news release, and no assurance can be given that such events will occur in the disclosed times frames or
at all. Except where required by applicable law, the Company disclaims any intention or obligation to update or revise any forward-looking
statement, whether as a result of new information, future events or otherwise.
www.ElectraBMC.com
Grafico Azioni Electra Battery Materials (NASDAQ:ELBM)
Storico
Da Feb 2025 a Mar 2025
Grafico Azioni Electra Battery Materials (NASDAQ:ELBM)
Storico
Da Mar 2024 a Mar 2025