Ground Breakers: This beaten down cobalt stock wants to get cozy with the US Govt; Core storms on lithium upgrade

Jervois Mining eyes support of US Government for planned cobalt refinery
Core Lithium lifts on massive 62% resource upgrade at Finniss
Battery metals stocks lead materials sector in 0.45% gain

Jervois Global (ASX:JRV) has had a stinker this year, down almost 90% over the past 12 months as cooked cobalt prices drove the firm to negative earnings through the second half of 2022 and forced it to hit pause on the commissioning of its Idaho cobalt mine in the USA.

It doesn’t take a genius to work out the battery metal — which is produced as a by-product of copper and nickel production and is dominated by Chinese companies operating in the Democratic Republic of the Congo — has been under pressure.

Prices for cobalt metal on the LME have fallen from over US$80,000/t early last year to US$34,930/t yesterday.

But the short-term headwinds mask the long-term tailwinds from a) the growth of the electric vehicle industry and b) the US Government’s desire to take it right up to China in a battle where it is sorely outmatched.

That means it’s throwing money left, right and centre at miners to deliver raw materials and onshore manufacturing it gleefully shifted to the cheaper climes of South East Asia over the past half a century.

An opportunity emerges for Jervois to get cozy with the Biden Administration. It is developing plans to pivot a planned 6000tpa refinery expansion in Finland to the US in a bid for Whitehouse backing.

BFS off the balance sheet

Pleasingly for Jervois, which is probably keen to spend as little of its own cash as possible right now, it working through the final documentary steps to formalise a US$15 million grant under the Defense Production Act Title III program the DoD intends to award.

That is expected to fully fund a BFS on a US cobalt refinery and proposed drilling programme at the Idaho operations.

Jervois is planning to take work already done on a proposed 6000tpa expansion of its Kokkola plant in Finland and move it to the US, where the benefits on offer are just too good to ignore.

It is a taste of the each-to-their-own arms race over critical minerals supply, taking place not only between the West, China and Russia, but between Western nations themselves.

A key piece of legislation, the oft-remarked on Inflation Reduction Act, is at the centre of the US’ bid to become a major hub for EV production and critical mineral supply.

“The IRA is designed to stimulate U.S. domestic cobalt refining and recycling activities,” JRV said in a statement to the ASX.

“Jervois’ future U.S. cobalt refinery is expected to benefit from, inter alia, a 10 percent operating cost credit for the duration of its operating life.

“Despite initial steps by Europe through its recent 2023 European Union Critical Raw Materials Act and Net Zero Industry Act, this represents a material competitive advantage over facilities not located in the U.S.

“In addition, Jervois is encouraged by discussions with the U.S. Department of Energy (“DOE”) regarding various loan and grant programmes that are expected to be available to support refinery construction.”

The product would exclusively be in the form of cobalt sulphate sold directly to the EV battery market, with JRV saying discussions with automakers in the US and Europe are advancing. It is planning to move from short term contracts to long term supply deals in this year.

“Negotiations with automakers in both the U.S. and Europe continue to advance, and Jervois expects to finalise initial long-term cobalt sulphate contracts from Jervois Finland existing production capacity in both jurisdictions during 2023,” the company said.

“Current Jervois Finland cobalt sulphate sales into the battery sector, primarily long standing relationships in Japan, are sold on either annual or short term contracts.

“Jervois expects refinery expansions in either the U.S. or Europe will be funded by third parties, via a combination of government and or customer support.”

Jervois Mining (ASX:JRV) share price today:

Core rides high on resource upgrade

Australia’s next spodumene producer Core Lithium (ASX:CXO) shot out of the blocks today with a more than 8% gain after announcing a massive 62% increase in the resource at its Finniss project in the Northern Territory.

If there were knocks on the lithium miner compared to its higher priced West Australian peers (like Albemarle takeover target Liontown Resources (ASX:LTR)), scale is key among investor concerns.

But the new resource, which ramps up total mineral resources to 30.6Mt at 1.31% Li2O alongside a 46% lift in measured and indicated resources to 19.4Mt at 1.37% Li2O, shows there is plenty of room to grow the project once it’s fully commissioned.

Around $25 million is planned around Finniss this year, where a maiden spodumene shipment is due for export to offtaker Yahua.

“This significant increase to the Finniss Mineral Resource is a fantastic outcome for Core and our shareholders. The 2022 drilling campaign was the largest in Core’s history, and these outstanding results are a credit to the exploration team,” CEO Gareth Manderson said.

“Through the targeted and systematic drilling of known and emerging deposits, the Company has further highlighted the prospectivity of our landholding in the Bynoe Pegmatite field and the strong potential for life of mine extensions at the Finniss Lithium Operation.

“Our exploration team returns to Finniss in 2023 with a pipeline of new and existing deposits. The success of the 2022 exploration program is a strong endorsement of our near-doubled 2023 exploration budget as we target growth at the Finniss Lithium Operation.”

Down over 20% over the past six months, $1.85 billion capped Core has enjoyed the mini-resurgence in lithium stocks in the past month, up over 23% since March 20.

Its lift today followed a broader trend across lithium players, who were all up big today. Led by a 5.66% gain for Pilbara Minerals (ASX:PLS), battery metals stocks powered the materials sector to a 0.45% gain.