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)
December 31, 2023 | |||||
March 31, 2024 | 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.
Page 2 of 28
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 | ||||
Three months | 31, 2023 | |||
ended March | Restated (Note | |||
31, 2024 | 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.
Page 3 of 28
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 | |||||||||||
Number of | Other | ||||||||||
Amount | Reserves | Comprehensive | Deficit | Total | |||||||
shares | |||||||||||
Income | |||||||||||
(Loss) | |||||||||||
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: | 959 | (959) | - | - | - | ||||||
Exercise of restricted and performance share units (Note 10) | 338,845 | ||||||||||
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.
Page 4 of 28
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 | ||||
Three months | ended March | |||
ended March 31, | 31, 2023 | |||
2024 | 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.
Page 5 of 28
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.
Page 6 of 28
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.
-
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. - 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.
Page 7 of 28
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
Property, | Construction | Right-of- | ||||||
Cost | Plant and | in Progress | use Assets | Total | ||||
Equipment | ||||||||
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 | (268) | (268) | ||||||
estimate from discounting | ||||||||
Balance March 31, 2024 | $ | 5,989 | $ | 45,371 | $ | 301 | $ | 51,661 |
Property, | Construction | Right-of- | ||||||
Accumulated Depreciation | Plant and | in Progress | use Assets | Total | ||||
Equipment | ||||||||
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
Page 8 of 28
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)
2028 Notes (Note 9). As at March 31, 2024 capital long-term prepayments are $Nil (December 31, 2023 - $Nil).
5. Exploration and Evaluation Assets
Balance | Foreign | Balance | Foreign | Balance | ||||||
January 1, | Exchange | December 31, | Exchange | March 31, | ||||||
2023 | 2023 | 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.
6. Marketable Securities
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
Page 9 of 28
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)
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.
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-freediscount rate of 3.45% (December 31, 2023 - 3.98%)
- Long-terminflation 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, | December 31, | |||
2024 | 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
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Electra Battery Materials Corp. published this content on 21 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 22 May 2024 14:10:03 UTC.