Jervois Mining calls First Cobalt’s opposition to eCobalt merger ‘self-serving’ and ‘misleading’

Jervois Mining ASX JRV First Cobalt opposition eCobalt merger
Jervois Mining and eCobalt’s boards have both urged shareholders to vote unanimously in favour of the merger.

In support of eCobalt’s recent rebuke of First Cobalt Corp, Jervois Mining (ASX: JRV) has joined in with its own scathing criticism against First Cobalt’s publicised opposition to Jervois’ and eCobalt’s upcoming merger – calling First Cobalt’s claims “self-serving”, outright “false” and “misleading”.

Late last month, First Cobalt, which owns a 5.8% interest in eCobalt, issued an open letter to eCobalt shareholders containing what both eCobalt and Jervois have described as “false” and “misleading” statements regarding the upcoming merger.

In the letter, First Cobalt urged eCobalt shareholders to vote against the upcoming merger claiming they would “get nothing of value in return” for giving up 53% of the company.

Recently de-listed from the ASX, First Cobalt also told eCobalt holders the merger would not advance its primary asset the Idaho cobalt project, as well as introducing new risks.

Jervois refutes First Cobalt’s ‘self-serving’ agenda

Jervois has joined eCobalt in refuting First Cobalt’s statements, pointing out First Cobalt’s management team “are junior mining company promotors”.

In comparison, Jervois noted its board comprised “a seasoned executive team” with a proven track record in developing complex international projects.

Jervois’ board is made up executives who were founding members of Xstrata, Reliance Mining and Silver Lake resources which, combined, went on to be worth billions.

Jervois’ chairman Peter Johnston previously headed up Glencore’s global nickel assets and sat on the global mining giant’s executive management committee.

Meanwhile, Jervois chief executive officer Bryce Crocker has many years’ experience with Xstrata, while non-executive directors Brian Kennedy and Michael Rodriguez also worked for Glencore.

“The Jervois team is highly experienced in base metal mining, processing and refining businesses from project development and construction, commissioning and operations,” Jervois stated.

“Many of Jervois’ executives have developed and run the largest mining and mineral processing sites in the sector.”

“We see the Idaho cobalt project as an important part of the future of the company resulting from the merger as a major international company focused on battery metals – a company, which current eCobalt shareholders will own a significant part of should they approve the merger.”

The all scrip merger values TSX-listed eCobalt at a 5.9% premium to the 29 March closing price or C$0.36 per share – equating to C$59.9 million.

On completion of the merger, eCobalt will appoint two directors to the combined entity’s board, with eCobalt shareholders owning 47% of the new entity.

Dilution allegations

In response to First Cobalt’s dilution allegations, Jervois explained eCobalt holders would gain exposure to numerous high-quality battery metal projects including Jervois’ “transformational” foothold in East Africa.

Additionally, Jervois said eCobalt holders would be exposed to the Nico Young nickel-cobalt project in New South Wales, which, once developed, will be one of Australia’s largest nickel and cobalt suppliers to the surging global lithium-ion battery market.

As part of the East Africa strategy, Jervois is in advanced negotiations with the Government of Tanzania regarding acquisition of the renowned Kabanga nickel-cobalt project, which is believed to be one of the most attractive undeveloped nickel sulphide deposits globally.

The project was subject to a retention licence that the Tanzanian Government cancelled last year.

Former project owners, Glencore and Barrick Gold previously spent more than U$250 million on exploration and pre-development activities at the project before canning it in the mid-2000s due to the plunging nickel prices.

According to both eCobalt and Jervois, the possibility that Jervois will secure a prospecting licence for the asset is primarily because of Jervois’ experienced board, which has intimate knowledge of the asset.

Jervois is also in discussions with the Ugandan Government regarding the Kilembe copper-cobalt mine and the Kasese cobalt refinery.

Uganda has had three decades of political stability, and has “enormous potential” given its similar geology to the unstable Democratic Republic of Congo where 60% of the world’s cobalt comes from.

Exploration is already underway at the existing Uganda projects, with numerous high-quality anomalies prospective for copper, nickel, gold and cobalt to be tested this year.

Rationale behind merger

Following First Cobalt’s letter, eCobalt’s board reiterated its support of the merger and again urged shareholders to vote in favour of the transaction.

eCobalt said the merger would result in one entity “with the strongest development-stage assets” to create a premier global cobalt investment vehicle.

Additionally, under the agreement between eCobalt and Jervois, Jervois will spend C$10 million on advancing the Idaho cobalt towards completion of a feasibility study and into construction.

Jervois ASX JRV eCobalt merger world’s third largest cobalt miner
Via the mergers with eCobalt and M2 Cobalt, Jervois will become the third largest cobalt company in the world by market capitalisation.

This is expected to occur over the next 18 months.

“Management teams from both companies have already conducted extensive meetings on site to agree on the appropriate path forward to fast-track metallurgical work and discuss economic improvements to the mine plan,” eCobalt told its shareholders.

“First Cobalt is a company with a constantly changing business plan. Its aggressive opposition to the proposed Jervois merger is a last-resort attempt to gain access to eCobalt’s superior quality asset base,” eCobalt stated.

Underpinning eCobalt’s statements is the fact First Cobalt made a grab for eCobalt after the proposed merger with Jervois was announced in April – locking-in its 5.8% stake on 1 May.

eCobalt described this as a “desperate” move by a company lacking in “quality assets”.

“eCobalt shareholders should be highly sceptical of First Cobalt’s motivations,” the company stated.

“First Cobalt’s news release fails to disclose that eCobalt has completed multiple assessments on First Cobalt’s assets and has an intimate understanding of their quality and value.”

“eCobalt previously owned Iron Creek and abandoned the property due to lack of merit and eCobalt has a clear understanding of their refinery’s economics and potential.”

Additionally, should eCobalt remain independent, it would lack the financial resources necessary to advance the Idaho asset.

Jervois noted that First Cobalt had also failed to provide an alternative strategy or funding to bring Idaho online.

The new Jervois

eCobalt and Jervois shareholders will be given the option to vote on the deal later this month.

Once the merger is complete, the newly formed Jervois will have a market cap of around $100 million – making it one of the world’s largest cobalt companies.

The combined entity will also have more than A$16 million in cash to advance the high-quality assets after Jervois completed an oversubscribed capital raising in late June.

“With our board and our contingent being largely ex-Xstrata and Glencore, we are set up to focus on getting into production, generating cash flow and differentiating ourselves in the market as fast as we can,” Mr Crocker said.

Lorna has more than 10 years' experience as a finance journalist and editor. She has written for numerous industry publications reporting on various sectors, including: resources, energy, construction, biotech, pharma, science and technology, agriculture, and chemicals. Specialising in resources, Lorna has also covered a myriad of small and large cap ASX and dual-listed stocks.