Electra Battery Materials’ Battery Materials Complex is undervalued

I get asked what a Trump Presidency means for precious & base metals, and green, high-tech battery materials. Some fear he’s anti-EVs / climate change. Yet, with Tesla’s Elon Musk playing a major role in getting him elected, I don’t think Trump will be bad for EVs. He may not be good, but not bad.

His views on trade with China and slashing interest rates are far more important. I think the outlook for battery materials mined & processed in N. America — instead of China — is quite positive. Trump talks BIGLY about tariffs, but not between the U.S. & Canada!

Since 2019 Ontario has attracted commitments for $45 billion from global automakers, parts suppliers, and manufacturers of EV batteries, and Quebec has plans valued at over $20B. The U.S. attracted > US$120B.

Where will dozens of N. American plants get critical battery metals like lithium (“Li”), cobalt (“Co”), nickel (“Ni”), copper (“Cu”), manganese & graphite? Electra Battery Materials (NASDAQ: ELBM) / (TSX-v: ELBM) is enhancing & retrofitting a Battery Materials Complex (“BMC“) that should be in production by 2H/2026.

It’s surrounded by existing & new facilities owned by major companies including; GM, Ford, Stellantis, Volkswagen, Honda, Toyota, Hyundai, POSCO, Umicore, Samsung SDI, LG Energy Solution & LG Chem.

Manufacturing plants within 1,500 km of Electra’s BMC can get critical materials from Canada or China. Although the availability of battery metals should not be a big problem in the next few years, demand for Li-ion batteries is strong, in large part due to the much lower cost of the raw materials.

There’s also a rapidly growing demand for stationary energy storage systems, robotics, drones, aerospace, defense + other transportation end uses. The demise of EV growth has been overstated, led by China year-to-date through October, Rho Motion shows global sales up +24%. See recent headlines…

Recent NEWS headlines –> EV sales

In the following VisualCapitalist infographic, China is forecast by Benchmark Minerals Intelligence to control 48% of mined Co in 2030. For geopolitical reasons, there’s a strong chance that most of that Co will never make it to N. America.

Alarmingly, many other battery materials are mined a long way from N. America. Over 90% of Ni is mined in Indonesia (heavily backed by Chinese groups), the Philippines, New Caledonia & Russia! Graphite –> China, Madagascar, Mozambique & Brazil.

The vast majority of battery materials are refined in China, with Australia (Li & Ni) a distant second. There’s an urgent need for critical battery materials sourced regionally to supply the $200 billion of facilities being built in N. America. Electra has solutions to this growing problem.

Away from Ontario, in the U.S., management announced on November 19th that it secured a 10-year exploration permit covering 91 designated drill pad locations + hundreds of potential drill targets for its Idaho copper & cobalt properties including Iron Creek in the Idaho Cobalt Belt. See the press release for a detailed update on Idaho.

CEO Trent Mell said,

“Securing this 10-year exploration permit is an important milestone for copper and cobalt mining in the U.S. and supports America’s commitment to strengthening domestic critical mineral production. This permit provides us the necessary regulatory certainty and flexibility to advance exploration at 91 designated drilling sites, and positions Electra as a potential key contributor to North America’s evolving battery supply chain.” 

The Company’s corporate presentation shows annual EBITDA of US$30M = C$42M is possible once Co sulfate production is ramped up to 6,500 tonnes/yr. I estimate Electra is valued at 3.3x its fully-ramped up EBITDA (not including EBITDA from recycling).

Electra plans to operate under a largely fixed-margin tolling business model. I estimate it could earn a 15%-20% EBITDA margin on its Co sulfate sales. Recycling margins are TBD, but anything > 10% would be well worth the effort, as that segment will be part of the overall BMC.

Future EV/EBITDA ratios vs. Electra (once ramped up, cobalt-only)

Compare that to the comps shown above averaging ~9x 2026e EBITDA. Electra’s BMC is ideally situated to serve over a dozen battery material / EV plants being built. Management has had a string of good news.

In October, Michael Green joined Electra as construction director. Michael has 30 years of experience in construction management including leadership roles with large-scale infrastructure, mining, and power generation companies such as Trans Mountain Corp., Enbridge Pipelines, K+S Potash, and Suncor.

In September, the Company achieved > 99%-purity, or technical-grade, Li carbonate via a proprietary hydrometallurgical process. These results are yet more evidence of management’s ability to produce high-quality technical & battery-grade products from its black mass recycling project.

NEWS headlines in the past several weeks…

Earlier in September, management announced a JV named Aki Battery Recycling, with Indigenous-owned Three Fires Group to produce black mass through responsible recycling of Li-ion battery scrap & waste material. Black mass will be sold to Electra’s refinery to recover Li, Ni, Co & other critical minerals.

Three Fires is an Indigenous-owned economic development agency. The JV will source & process end-of-life + off-spec LIBs from manufacturers to produce black mass (“BM“) at a state-of-the-art facility to be built in southern Ontario. This is a win-win-win for ELBM shareholders, local communities, and regional EV & battery makers.

The produced BM will be further treated using Electra’s proprietary process at its hydrometallurgical refinery to recover critical minerals that can be redeployed into battery supply chains.

Earlier in September, a non-binding term sheet for a US$20M prepayment facility from an arms-length strategic player in the battery materials sector was received. Several other financing discussions are advancing.

In August, Electra announced a US$20M non-equity investment from the U.S. Dept. of Defense with no off-take or development milestones. In June, management received $5M in contribution funding from Natural Resources Canada to develop its proprietary battery material recycling technology.

Last year Electra operated a battery materials recycling demo plant at its refinery complex, processing > 40 tonnes of end-of-life battery scrap into high-quality Ni, Co & Li products.

Last month a trading/collaboration delegation from Canada traveled to Washington D.C. (see summary below). In the coming years, there will be many conferences like this as more EV & battery makers pack into southern Canada and the northern U.S. This region could become the largest EV/battery hub on Earth.

There’s tremendous progress being made on multiple fronts at Electra’s BMC, with several non-equity funding initiatives announced and more being negotiated to fully fund major expansion, retrofitting, and working capital needs.

The replacement value of this facility, once completed, was estimated by Hatch at US$250M = C$350M, yet the Company’s pro forma enterprise value {market cap + debt – cash} at $0.66/shr., is ~$104M, ~30% of replacement value.

While there has been considerable good news, the market is eager to learn how the remaining cap-ex + working capital will be funded.

In speaking with CEO Mell, he’s optimistic about receiving grants/loans or tax incentives from Canadian and/or Ontario government entities, like those available through Canada’s Strategic Innovation Fund. E3 Lithium received a $27M grant from this fund.

In my view, funding from one or both of the Ontario provincial & Canadian federal governments is likely since the U.S. has already stepped up. In the meantime, readers are reminded that Electra’s NASDAQ listing is at risk unless management takes action to make it compliant with exchange guidelines.

A reverse split will be voted on at Electra’s December 20th AGM. With all the positive developments, readers should consider the clear benefits of remaining on NASDAQ, something the board is committed to.

A NASDAQ listing allows more investor groups to build positions and greatly helps fundraising. Once the BMC is switched on, there will be numerous opportunities to leverage it and move the Company forward.

Disclosures: The content of this article is for information only. Readers fully understand and agree that nothing contained herein, written by Peter Epstein of Epstein Research [ER], (together, [ER]) about Electra Battery Materials, including but not limited to, commentary, opinions, views, assumptions, reported facts, calculations, etc. is not to be considered implicit or explicit investment advice. Nothing contained herein is a recommendation or solicitation to buy or sell any security. [ER] is not responsible under any circumstances for investment actions taken by the reader. [ER] has never been, and is not currently, a registered or licensed financial advisor or broker/dealer, investment advisor, stockbroker, trader, money manager, compliance or legal officer, and does not perform market-making activities. [ER] is not directly employed by any company, group, organization, party, or person. The shares of Electra Battery Materials are highly speculative, and not suitable for all investors. Readers understand and agree that investments in small-cap stocks can result in a 100% loss of invested funds. It is assumed and agreed upon by readers that they will consult with their own licensed or registered financial advisors before making investment decisions.

At the time this article was posted, Electra Battery Materials was an advertiser on [ER] and Peter Epstein owned shares in the company.

Readers understand and agree that they must conduct due diligence above and beyond reading this article. While the author believes he’s diligent in screening out companies that, for any reason whatsoever, are unattractive investment opportunities, he cannot guarantee that his efforts will (or have been) successful. [ER] is not responsible for any perceived, or actual, errors including, but not limited to, commentary, opinions, views, assumptions, or reported facts.