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Jervois Global Enters Pre-Packaged Bankruptcy as Financial Struggles Persist

In a notable development within the mining sector, cobalt producer Jervois Global announced on Thursday that it is set to be taken private by one of its lenders as part of a pre-packaged bankruptcy arrangement. This move reflects the growing challenges faced by Western mining companies amidst increasing competition from Chinese counterparts, who are rapidly ramping up production capabilities.

The financial restructuring will be led by U.S. fund manager Millstreet Capital Management, which plans to inject $145 million into Jervois while converting more than $100 million of existing loans into equity. The implications of this arrangement will effectively erase the stakes of current shareholders in the company, which has faced significant operational losses over the past seven years.

Jervois’ difficulties have been exacerbated by external market pressures. The company temporarily halted operations at its Idaho cobalt mine in 2023, resulting in the layoffs of 250 employees just weeks before the site was slated to commence production. This mine represented the only U.S.-based source of cobalt, a crucial component used in electric vehicle batteries, consumer electronics, and military applications.

“The past years have posed considerable challenges for us,” acknowledged Jervois CEO Bryce Crocker. “A restructuring was essential.” Cobalt prices need to rebound significantly before resuming operations at the Idaho site, with estimates suggesting a requirement of nearly double the current market price.

The company’s hurdles have been compounded by the actions of China’s CMOC Group, which commenced operations of a new mine in the Democratic Republic of Congo in 2023, contributing to a record-high global cobalt production level. Simultaneously, sales in the electric vehicle sector have not met optimistic forecasts, causing cobalt prices to plummet by 72% since their peak in April 2022. Jervois has witnessed a corresponding decline in its stock value in Australia, and the price of nickel, another product offered by Jervois, has decreased by over 50% in the last two years.

Millstreet, which had previously provided Jervois with $100 million for the Idaho operation and an additional $25 million, will reconvert these loans into equity as part of the reorganization. This transformative capital influx will grant Millstreet complete control over Jervois’ assets, which include a cobalt refinery in Finland and a nickel refinery in Brazil.

Efforts to secure financing had been ongoing in conjunction with an investment bank, particularly after the infrastructure at the Idaho site was rendered inactive. Jervois engaged with Millstreet across all its operational sites, establishing a direct line of communication.

“Millstreet expressed a desire to avoid bringing in other investors, which streamlined the negotiation process,” Crocker explained. “They were open to converting debt into equity.” Representatives from Millstreet have yet to provide comments on the current situation.

Jervois’ primary shareholders include AustralianSuper, the nation’s largest pension fund, holding a 23% stake, and commodity trader Mercuria with 7.6%. AustralianSuper’s investment experienced a drastic shift, with its shareholdings increasing to around 400 million shares from June 2022 to June 2024, despite the overall value plummeting from A$170 million to A$6 million during the same timeframe.

It remains uncertain whether Millstreet plans to relocate Jervois to a U.S. domicile or retain the existing management team. Notably, a $15 million grant from the U.S. Department of Defense will not be influenced by the bankruptcy proceedings, continuing to support research into the potential establishment of a cobalt refinery in the United States.

Despite entering bankruptcy, Jervois intends to maintain regular operations as it anticipates concluding the process before the end of April. However, the Idaho mine will likely remain inactive until cobalt prices escalate to an estimated $20 per pound, which is about double the current market price.

Crocker emphasized the need for a strategic shift in U.S. policy concerning metal tariffs, advocating for a focus on fostering domestic cobalt procurement from Western miners to ensure secure supply chains. “These markets aren’t free, and it’s up to governments to create a more equitable environment,” he said, underscoring that the shift in Jervois’ ownership will not alter the company’s commitment to national security and supply chain integrity in the cobalt sector.

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