Jervois Faces Asset Impairment Risks as It Navigates Chapter 11 Restructuring

Recapitalization Agreement and Chapter 11 Filing

Jervois Global Limited has taken a significant step to stabilize its financial footing by entering into a comprehensive recapitalization agreement with Millstreet Capital Management. This agreement includes a US$145 million injection of new equity capital, designed to strengthen the group’s balance sheet and fund key growth initiatives, notably the restart of the São Miguel Paulista (SMP) nickel-cobalt refinery in Brazil. To implement this plan efficiently, Jervois commenced a pre-packaged U.S. Chapter 11 bankruptcy process on 28 January 2025, which is expected to conclude by the end of April 2025.

The Chapter 11 filing is structured to allow Jervois to continue normal operations throughout the restructuring, with trade creditors, suppliers, customers, and employees anticipated to remain unaffected. Millstreet, as the major lender and equity investor, will convert existing debt, including senior secured bonds and convertible notes, into equity in the reorganized parent entity, effectively transitioning Jervois into a private company.

Operational Performance Amid Market Challenges

During the December 2024 quarter, Jervois Finland sold 1,308 metric tonnes of cobalt, contributing to a total of 5,064 metric tonnes sold in 2024. Production volumes were carefully managed to align with subdued but stable market demand, particularly focusing on battery end-uses in the electric vehicle sector. Despite the cyclical downturn and inflationary pressures, ongoing business improvement programs have helped mitigate adverse impacts on margins and cash flow.

In the United States, the Idaho Cobalt Operations (ICO) remain suspended with a focus on environmental compliance. The company continues to engage with the U.S. Department of Defense (DoD) for funding support and is finalizing a bankable feasibility study for a domestic cobalt refinery with a 6,000 metric tonne annual capacity. This study, funded by the DoD, is expected to be completed in the first quarter of 2025 and represents a strategic opportunity to expand Jervois’s refining capabilities.

Financial Position and Future Outlook

At the end of the quarter, Jervois reported a cash balance of US$14.8 million, physical cobalt inventories valued at US$31.9 million, and drawn debt totaling US$184.6 million. The recapitalization plan anticipates reducing net debt to approximately US$12 million upon emergence from Chapter 11. Millstreet’s equity injection and extended working capital facilities are expected to provide the liquidity necessary to support ongoing operations and growth initiatives.

Jervois is also advancing preparations for a potential final investment decision on the SMP refinery restart, with engineering and planning activities underway. The company’s strategic focus remains on optimizing margins, maintaining operational continuity, and positioning itself for medium-term growth as cobalt demand in electric vehicles and other sectors is expected to accelerate.

Risks and Asset Valuation

Alongside the recapitalization, Jervois is conducting a review of its asset carrying values in light of current cobalt prices, which are at historic lows in real terms. This review may result in impairments, the details of which will be disclosed with the annual financial results. The company’s ability to successfully navigate the Chapter 11 process, secure regulatory approvals for delisting, and execute its strategic plans will be critical to its future performance.