Jervois Mining [ASX:JRV] has shocked investors by putting a temporary hold on final construction at Idaho Cobalt Operations (ICO).
The group has said this is necessary action it must take in response to continuing low cobalt prices and the impacts of inflation on construction costs in the US.
The miner expects cobalt prices to recover in the medium term, especially with the ongoing push to renewable energy, however, shareholders were nonetheless quite affected.
Shares for JRV crashed as much as 42% by the early afternoon, trading for as little as 6 cents.
So far in the year the miner’s stock has dropped nearly 77%, and it’s currently down 86% on the wider market average:
Source: TradingView
Jervois pauses Idaho construction efforts
The metals miner will be putting its final construction efforts at ICO on hold due to continued impacts of continuing inflation in the US as well as low cobalt prices, which may prove dangerous to the value ICO’s ore body.
Continuing high inflation in the US has meant the group has been running into higher-than-expected construction costs, which haven’t been overly sustainable to carry out at this time.
While the cobalt and other minerals miner did express it expects cobalt prices to recover over the medium term, shareholders have understandably taken a bit of a scare at the news.
Nevertheless, Jervois is convinced things will pick up, especially with ongoing push for energy transition methods such as EVs, and especially with increasing interest in companies with Western ESG credentials — like ICO.
Jervois expects construction and commissioning can recommence once cobalt prices return to normal, aligning with revised cobalt refining capacity in the US.
JRV says its mineral resource and reserve at ICO is the largest and highest-grade cobalt orebody in the US, and upon commissioning, it’ll represent the country’s only primary cobalt mine supply.
Deciding not to mine cobalt at ICO during a time of cyclical low prices has been deemed a sensible option expected to preserve value for ICO shareholders and stakeholders.
Jervois also added that choosing not to mine at ICO under the current pricing trend is in line with the US Government’s critical mineral policy objectives.
On US objectives, Jervois has been offered US$15 million of funding through a ‘Not to Exceed Technology Investment Agreement’, courtesy of the US Department of Defense, and if Jervois can meet certain conditions.
The funds would allow Jervois to accelerate drilling at ICO, boost mineral resource and reserve, and enable studies for a US cobalt refinery, all of which can go ahead despite ICO’s suspension.
Jervois has spent US$130 million on construction at ICO so far and has a cash balance of US$52 million.
Since December, the group has paid down US$45 million of its US$150 million Mercuria loan facility, decreasing its drawn balance of US$115 million down to US$70 million.
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Regards,
Mahlia Stewart,
For The Daily Reckoning Australia
