Nasdaq- and TSX-V-listed Electra Battery Materials says it will slash its convertible debt by 60% and raise $30-million in new equity financing to shore up its balance sheet and push ahead with North America’s first cobalt sulphate refinery.

The Toronto-based company has reached a support agreement with its lenders to convert about $40-million of notes and accrued interest into equity at $0.60 a share, reducing outstanding debt under the notes to about $27-million. The remainder will be rolled into a new three-year term loan.

Electra also plans to raise $30-million through the sale of units priced at $0.75 apiece, each consisting of one share and a warrant exercisable at $1.25. The company’s lenders have conditionally committed to take $10-million of the offering. Existing shareholders will have the right to participate on the same terms.

“Today marks a turning point for Electra,” CEO Trent Mell said in a statement on Thursday. “By equitising a majority of our debt and securing bridge financing, we are taking decisive action to create a sustainable capital structure and advance the steps required to complete the cobalt refinery, including arranging approximately $30-million in additional capital.”

The financing package also includes $2-million in short-term bridge notes to fund working capital, with lenders gaining the right to appoint a director to Electra’s board. After the restructuring, the board will expand from five to seven members, with lenders able to nominate up to three.

Electra CFO Marty Rendall said the deal will realign the company’s finances with its production timeline. “By significantly reducing our debt and securing new capital, we are strengthening our financial foundation and aligning our funding with a clear, executable path to production,” he said.

The cobalt refinery project in Temiskaming Shores, Ontario, has been stalled since construction was paused amid inflation and supply chain disruptions. Electra said it expected the restructuring and equity raise to provide the capital needed to finish the facility, which has received support from multiple levels of government.

“This restructuring is undeniably dilutive and difficult for existing shareholders, but it is both timely and necessary,” Mell said.

"We have rigorously explored the alternatives, including asset sales, mergers, and alternative financing structures, and none offered a preferable outcome. The lenders have provided continued support since construction of Electra’s refinery was paused due to post-Covid inflation and supply chain disruption, including through new debt funding, equity commitments, and multiple waivers or amendments to loan conditions.  

“This transaction preserves the value of our core asset and provides the foundation for future growth.”

The proposed transactions remain subject to shareholder approval, regulatory clearance and a waiver from the TSX-V, as the planned pricing falls below minimum thresholds. A special shareholder meeting is expected in October.