Electra Battery Materials (ELBM) - 2025 Q2 - Quarterly Report

Financial Statements (Consolidated) Condensed Interim Consolidated Statements of Financial Position The company's total assets decreased from $151,447 thousand at December 31, 2024, to $145,600 thousand at June 30, 2025, with total liabilities increasing and total shareholders' equity decreasing significantly, indicating a weakening financial position Financial Position Summary | Metric | June 30, 2025 (CAD '000) | December 31, 2024 (CAD '000) | Change (CAD '000) | | :-------------------------- | :----------------------- | :-------------------------- | :---------------- | | Total Assets | 145,600 | 151,447 | (5,847) | | Total Liabilities | 94,501 | 87,129 | 7,372 | | Total Shareholders' Equity | 51,099 | 64,318 | (13,219) | - Current assets decreased from $5,711 thousand at December 31, 2024, to $4,274 thousand at June 30, 2025, primarily due to a decrease in cash and cash equivalents and receivables[4] - Current liabilities increased from $71,973 thousand at December 31, 2024, to $79,592 thousand at June 30, 2025, driven by increases in accrued interest and accounts payable[4] Condensed Interim Consolidated Statements of Loss and Other Comprehensive Loss The company reported a net loss of $13,380 thousand for the six months ended June 30, 2025, an improvement from $17,941 thousand in the same period of 2024, with basic and diluted loss per share also improving despite a slight increase in operating loss Loss and Other Comprehensive Loss Summary | Metric | 6 Months Ended June 30, 2025 (CAD '000) | 6 Months Ended June 30, 2024 (CAD '000) | Change (CAD '000) | | :------------------------------------ | :------------------------------------- | :------------------------------------- | :---------------- | | Net Loss | (13,380) | (17,941) | 4,561 | | Net Loss and Other Comprehensive Loss | (17,245) | (14,933) | (2,312) | | Basic and Diluted Loss Per Share | (0.82) | (1.27) | 0.45 | - Operating loss before noted items increased slightly from $6,762 thousand in H1 2024 to $7,239 thousand in H1 2025, mainly due to higher salaries and benefits[5] - The (loss) gain on financial derivative liability – Convertible Notes improved, showing a loss of $3,985 thousand in H1 2025 compared to a loss of $7,184 thousand in H1 2024[5] Condensed Interim Consolidated Statements of Shareholder's Equity Total shareholders' equity decreased from $64,318 thousand at January 1, 2025, to $51,099 thousand at June 30, 2025, primarily due to the net loss for the period and other comprehensive losses, partially offset by new share issuances Shareholder's Equity Summary | Metric | Balance Jan 1, 2025 (CAD '000) | Balance June 30, 2025 (CAD '000) | Change (CAD '000) | | :-------------------------- | :----------------------------- | :---------------------------- | :---------------- | | Common Shares | 307,723 | 311,232 | 3,509 | | Reserves | 26,848 | 27,365 | 517 | | Accumulated Other Comp. Loss| 4,639 | 774 | (3,865) | | Deficit | (274,892) | (288,272) | (13,380) | | Total Shareholders' Equity | 64,318 | 51,099 | (13,219) | - The company issued 3,125,000 shares through a private placement, contributing $3,421 thousand to common shares[7] - Net loss for the period was $13,380 thousand, directly impacting the accumulated deficit[7] Condensed Interim Consolidated Statements of Cash Flows Cash used in operating activities decreased significantly from $7,951 thousand in H1 2024 to $4,717 thousand in H1 2025, while investing activities shifted from providing cash to using cash, and financing activities provided cash in both periods, primarily from a private placement Cash Flow Summary | Activity | 6 Months Ended June 30, 2025 (CAD '000) | 6 Months Ended June 30, 2024 (CAD '000) | Change (CAD '000) | | :---------------------- | :------------------------------------- | :------------------------------------- | :---------------- | | Operating Activities | (4,717) | (7,951) | 3,234 | | Investing Activities | (689) | 940 | (1,629) | | Financing Activities | 4,596 | 4,229 | 367 | | Cash, End of Period | 2,927 | 4,801 | (1,874) | - Proceeds from a non-brokered private placement, net of transaction costs, contributed $4,679 thousand in H1 2025, compared to $Nil in H1 2024[10] - Additions to property, plant and equipment increased to $702 thousand in H1 2025 from $265 thousand in H1 2024, indicating increased capital expenditure[10] Notes to the Condensed Interim Consolidated Financial Statements 1. Significant Nature of Operations Electra Battery Materials Corporation is focused on producing battery materials for the EV supply chain, including constructing a cobalt refinery in Ontario, Canada, but faces significant financial challenges with recurring net operating losses and negative cash flows, raising substantial doubt about its ability to continue as a going concern, prompting management to actively seek additional financing - Electra is focused on building a North American integrated battery materials facility for the electric vehicle supply chain, including a hydrometallurgical cobalt refinery and a recycled battery material program[11][14] - The company has recurring net operating losses and negative cash flows, with an accumulated deficit of $288,272 thousand as of June 30, 2025, which raises substantial doubt about its ability to continue as a going concern[16] - Management is actively pursuing various alternatives, including government grants and loans (e.g., US$20,000 from the U.S. Department of Defense), strategic partnerships, and equity/debt financing to increase liquidity[17][18] 2. Material Accounting Policies and Basis of Preparation The condensed interim consolidated financial statements are prepared in accordance with IFRS Accounting Standards (IAS 34) and maintain consistency with the most recent annual financial statements' accounting policies, estimates, and methods, with all financial figures presented in thousands of Canadian dollars - The financial statements are prepared in accordance with IAS 34, Interim Financial Reporting, and should be read in conjunction with the most recent annual financial statements[20] - All amounts, except for share and per share information, are presented in thousands of Canadian dollars[21] 3. New Accounting Standards Issued IFRS 18, 'Presentation and Disclosure in Financial Statements,' issued in April 2024, becomes mandatory for annual reporting periods starting on or after January 1, 2027, and the company is currently evaluating its potential impact without early adoption of any new standards - IFRS 18 Presentation and Disclosure in Financial Statements was issued in April 2024, with mandatory application from January 1, 2027[23] - The company is currently assessing the impact of IFRS 18 on its condensed interim consolidated financial statements and has not early adopted any standards[23] 4. Receivables Total receivables significantly decreased from $1,310 thousand at December 31, 2024, to $453 thousand at June 30, 2025, primarily driven by reductions in grant receivables and GST receivables Receivables Summary | Receivable Type | June 30, 2025 (CAD '000) | December 31, 2024 (CAD '000) | Change (CAD '000) | | :-------------- | :----------------------- | :-------------------------- | :---------------- | | GST receivables | 301 | 494 | (193) | | Grant receivables | 84 | 570 | (486) | | Other | 68 | 246 | (178) | | Total | 453 | 1,310 | (857) | - Grant receivables as of June 30, 2025, include $403 thousand submitted to Natural Resources Canada (NRCan) and $Nil submitted to the U.S. Department of Defense (DoD)[24] 5. Property, Plant and Equipment and Capital Long-Term Prepayments The net book value of property, plant, and equipment increased slightly to $51,611 thousand at June 30, 2025, from $51,189 thousand at December 31, 2024, with most of these assets related to the Refinery, which is not yet operational and pledged as security for convertible notes Property, Plant and Equipment and Capital Long-Term Prepayments Summary | Metric | June 30, 2025 (CAD '000) | December 31, 2024 (CAD '000) | Change (CAD '000) | | :-------------------------- | :----------------------- | :-------------------------- | :---------------- | | Net Book Value | 51,611 | 51,189 | 422 | | Additions during the period | 702 | 519 | 183 | - The majority of the company's property, plant, and equipment assets are related to the Refinery located near Temiskaming Shores, Ontario, Canada[25] - No depreciation has been recorded for the Refinery during the six months ended June 30, 2025, as the asset is not yet in service[26] 6. Exploration and Evaluation Assets Exploration and evaluation assets, primarily located in Idaho, USA, decreased to $88,368 thousand at June 30, 2025, from $93,200 thousand at December 31, 2024, mainly due to foreign exchange impacts, and these assets are pledged as security for convertible notes, to be released upon the Refinery's successful commissioning Exploration and Evaluation Assets Summary | Metric | June 30, 2025 (CAD '000) | December 31, 2024 (CAD '000) | Change (CAD '000) | | :-------------------------- | :----------------------- | :-------------------------- | :---------------- | | Exploration and Evaluation Assets | 88,368 | 93,200 | (4,832) | - All Iron Creek mineral properties are pledged as security for Convertible Notes and will be released from the security package upon successful commissioning of the Refinery[27] 7. Marketable Securities The company held no marketable securities at June 30, 2025, a decrease from $12 thousand at December 31, 2024, with sales generating $17 thousand in proceeds for the six months ended June 30, 2025, resulting in a realized gain of $1 thousand - There were no marketable securities at June 30, 2025, compared to $12 thousand at December 31, 2024[29] - For the six months ended June 30, 2025, the company sold marketable securities for proceeds of $17 thousand, realizing a gain of $1 thousand[29] 8. Asset Retirement Obligations The estimated asset retirement obligation decreased to $2,685 thousand at June 30, 2025, from $2,842 thousand at December 31, 2024, primarily due to a change in estimate from discounting and costs, and the company maintains a surety bond of $3,450 thousand as financial assurance Asset Retirement Obligations Summary | Metric | June 30, 2025 (CAD '000) | December 31, 2024 (CAD '000) | Change (CAD '000) | | :-------------------------- | :----------------------- | :-------------------------- | :---------------- | | Balance at January 1 | 2,842 | 3,126 | (284) | | Change in estimate | (251) | (384) | 133 | | Accretion | 94 | 100 | (6) | | Balance at June 30/Dec 31 | 2,685 | 2,842 | (157) | - The estimated cost of closure is $3,323 thousand, and the company maintains a surety bond for $3,450 thousand as financial assurance[30] 9. Long-Term Government Loan payable, Grants and Awards The government loan payable decreased to $6,000 thousand at June 30, 2025, from $7,824 thousand at December 31, 2024, while government grants increased to $5,105 thousand, and an extension of the FedNor loan repayment date to June 2028 resulted in a $158 thousand gain, with the company also receiving a non-binding letter of intent for an additional $20,000 thousand from the Canadian Federal government Government Loan and Grants Summary | Metric | June 30, 2025 (CAD '000) | December 31, 2024 (CAD '000) | Change (CAD '000) | | :-------------------------- | :----------------------- | :-------------------------- | :---------------- | | Government Loan | 6,000 | 7,824 | (1,824) | | Government Grant | 5,105 | 3,124 | 1,981 | | Total | 11,105 | 10,948 | 157 | - An extension of the FedNor loan repayment commencement date to June 2028 was granted, resulting in a gain of $158 thousand from the extinguishment and recognition of new loans[37] - On March 21, 2025, the company received a non-binding letter of intent for $20,000 thousand from the Canadian Federal government, though funding is not guaranteed[35] 10. Convertible Note Arrangement Total convertible notes payable increased to $64,552 thousand at June 30, 2025, from $63,963 thousand at December 31, 2024, with the company issuing additional 2028 Notes for accrued interest and closing a financing transaction for 2027 Notes, and an interest deferral until February 2027 was agreed upon for both 2028 and 2027 Notes, with additional interest rates Convertible Note Arrangement Summary | Metric | June 30, 2025 (CAD '000) | December 31, 2024 (CAD '000) | Change (CAD '000) | | :-------------------------- | :----------------------- | :-------------------------- | :---------------- | | Convertible Notes Payable | 64,552 | 63,963 | 589 | | Warrants | 504 | 1,582 | (1,078) | | Royalty | 1,064 | 1,283 | (219) | | Total | 66,120 | 66,828 | (708) | - Accrued interest as at June 30, 2025, was $8,529 thousand, a significant increase from $2,799 thousand at December 31, 2024[44] - An agreement was made to defer interest on 2028 and 2027 Notes until February 15, 2027, with additional interest of 2.25% and 2.5% per annum, respectively[51] 11. Shareholder's Equity The company's authorized share capital allows for an unlimited number of common shares, with 17,962,173 common shares outstanding as of June 30, 2025, an increase from 14,809,197 at December 31, 2024, primarily due to a non-brokered private placement in April 2025, which raised US$3,500 and issued 3,125,000 units, following a share consolidation on December 31, 2024, on a 1-for-4 basis a) Authorized Share Capital - The company is authorized to issue an unlimited number of common shares without par value[53] Common Shares Outstanding | Metric | June 30, 2025 | December 31, 2024 | Change | | :-------------------------- | :------------ | :---------------- | :----- | | Common Shares Outstanding | 17,962,173 | 14,809,197 | 3,152,976 | b) Issued Share Capital - A non-brokered private placement in April 2025 raised aggregate gross proceeds of US$3,500 ($5,016 CAD) by issuing 3,125,000 units, each consisting of one common share and one transferable common share purchase warrant[56] - On December 31, 2024, the company completed a share consolidation on the basis of one new post-consolidation common share for every four pre-consolidation common shares[54] 12. Share Based Payments The company operates a Long-Term Incentive Plan (LTIP) and an Employee Share Purchase Plan (ESPP), with share-based payment expense for the six months ended June 30, 2025, at $555 thousand, a decrease from $979 thousand in H1 2024, covering stock options, DSUs, and RSUs - The company adopted a Long-Term Incentive Plan (LTIP) in December 2024, reserving 3,150,000 shares for issuance of stock options, RSUs, DSUs, and PSUs[59] - Share-based payment expense for the six months ended June 30, 2025, was $555 thousand, a decrease from $979 thousand in the same period of 2024[5] a) Stock Options Stock Options Summary | Metric | June 30, 2025 | December 31, 2024 | Change | | :-------------------------- | :------------ | :---------------- | :----- | | Balance of Options Outstanding | 1,291,196 | 1,170,363 | 120,833 | | Granted (H1 2025) | 125,000 | N/A | N/A | - On January 1, 2025, the company granted 125,000 stock options at an exercise price of $2.60, with a fair value of $190 thousand[62] (b) DSUs, RSUs and PSUs - For the six months ended June 30, 2025, the company expensed $48 thousand for DSUs and $10 thousand for RSUs[67] DSUs, RSUs and PSUs Outstanding | Unit Type | June 30, 2025 | December 31, 2024 | | :---------------- | :------------ | :---------------- | | DSUs Outstanding | 157,085 | 157,085 | | RSUs Outstanding | - | 26,975 | | PSUs Outstanding | - | - | c) Warrants Warrants Outstanding | Warrant Type | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Canadian dollar denominated | 7,810,378 | 7,810,378 | | US dollar denominated | 3,929,121 | 620,788 | - 3,308,333 2026 Warrants were issued in April 2025 as part of a non-brokered private placement, with a total value of $1,258 thousand recorded as a derivative liability[73] 13. Other Non-Operating Income (Expense) For the six months ended June 30, 2025, the company reported a total other non-operating loss of $2,322 thousand, an improvement from a loss of $4,127 thousand in H1 2024, mainly influenced by a significant foreign exchange gain and an increase in interest expense Other Non-Operating Income (Expense) Summary | Metric | 6 Months Ended June 30, 2025 (CAD '000) | 6 Months Ended June 30, 2024 (CAD '000) | Change (CAD '000) | | :------------------------------------ | :------------------------------------- | :------------------------------------- | :---------------- | | Foreign exchange gain (loss) | 3,904 | (1,771) | 5,675 | | Interest income (expense) | (6,414) | (2,403) | (4,011) | | Extinguishment of debt gain | 158 | - | 158 | | Total Other Non-Operating (Loss) Income | (2,322) | (4,127) | 1,805 | - A significant foreign exchange gain of $3,904 thousand was recorded in H1 2025, contrasting with a loss of $1,771 thousand in H1 2024[74] 14. Loss Per Share Basic and diluted loss per share for the six months ended June 30, 2025, was $(0.82), an improvement from $(1.27) in the same period of 2024, with common share equivalents being anti-dilutive and thus excluded from the diluted EPS calculation Loss Per Share Summary | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change | | :------------------------------------ | :--------------------------- | :--------------------------- | :----- | | Net Loss for the period | $(13,380) | $(17,941) | $4,561 | | Weighted average number of shares outstanding | 16,317,480 | 14,159,298 | 2,158,182 | | Loss Per Share – Basic and Diluted | $(0.82) | $(1.27) | $0.45 | - Conversion options, share purchase warrants, and stock options were excluded from the calculation of diluted weighted average number of common shares outstanding as they were anti-dilutive[76] 15. Management of Capital The company's capital management objectives are to ensure sufficient cash for Refinery expansion and exploration activities and to comply with debt covenants, with management continuously reviewing its capital approach and not being subject to external quantitative ratio covenants, other than a minimum liquidity balance under convertible note arrangements - The company's objectives when managing capital are to ensure sufficient cash for future Refinery expansion and exploration activities and to ensure compliance with debt covenants[77] - The company is not subject to externally imposed capital requirements, other than the reportable minimum liquidity balance covenant under the convertible note arrangement[79] 16. Fair Value Measurements The company categorizes its financial assets and liabilities measured at fair value into a hierarchy (Level 1, 2, 3) based on input observability, with convertible notes, warrants, and royalty classified as Level 3 due to significant unobservable inputs, and management performing quarterly reviews and validations of these measurements - The fair value hierarchy categorizes inputs into Level 1 (unadjusted quoted prices in active markets), Level 2 (observable inputs not active market prices), and Level 3 (significant unobservable inputs)[80] Assets and Liabilities Measured at Fair Value Financial Assets and Liabilities Fair Value | Item | Classification | June 30, 2025 (CAD '000) | December 31, 2024 (CAD '000) | | :------------------------------------ | :------------- | :----------------------- | :-------------------------- | | Cash and cash equivalents | Amortized cost | 2,927 | 3,717 | | Convertible Notes payable | FVTPL | 64,552 | 63,963 | | Warrants - Convertible Notes payable | FVTPL | 504 | 1,582 | | US Warrants | FVTPL | 1,097 | - | Valuation techniques - Convertible notes, warrants, and royalty are included in Level 3 fair value measurements due to the use of significant unobservable inputs such as equity volatility and credit spread[83][88][90] - A 10% higher or lower equity volatility for the 2028 Notes could result in an increase of $361 thousand or a decrease of $237 thousand to its fair value[86] 17. Commitments and Contingencies The company faces legal actions and has significant commitments totaling $130,391 thousand as of June 30, 2025, primarily related to convertible notes payments, government loan payments, and Refinery expansion work programs - The company intends to vigorously defend itself against legal claims and has settled one claim for approximately $140 thousand[94] Commitments Summary | Commitment Type | 2025 (CAD '000) | 2026 (CAD '000) | 2027 (CAD '000) | 2028 (CAD '000) | Thereafter (CAD '000) | Total (CAD '000) | | :---------------------- | :-------------- | :-------------- | :-------------- | :-------------- | :-------------------- | :--------------- | | Purchase commitments | 836 | - | - | - | - | 836 | | Convertible notes payments | - | 19,860 | 12,798 | 81,005 | - | 113,663 | | Government loan payments | 18 | 36 | 36 | 1,615 | 8,484 | 10,189 | | Lease payments | 74 | 118 | 43 | - | - | 235 | | Royalty payments | - | - | - | 464 | 2,617 | 3,081 | | Other | 273 | 68 | - | - | 2,046 | 2,387 | | Total | 1,201 | 20,082 | 12,877 | 83,084 | 13,147 | 130,391 | 18. Segmented Information The company's Chief Operating Decision Maker (CODM) reviews the Refinery and Exploration and Evaluation activities as discrete business units, with the Refinery segment reporting an operating loss of $2,217 thousand and Exploration and Evaluation reporting $91 thousand for the six months ended June 30, 2025, and total assets primarily concentrated in the Exploration and Evaluation segment - The Chief Operating Decision Maker (CODM) reviews the company's refinery business and exploration and evaluation activities as discrete business units[98] (a) Segmented operating results Segmented Operating Results Summary | Segment | 6 Months Ended June 30, 2025 (CAD '000) | 6 Months Ended June 30, 2024 (CAD '000) | | :-------------------------- | :------------------------------------- | :------------------------------------- | | Refinery Operating Loss | (2,217) | (1,117) | | Exploration & Evaluation Operating Loss | (91) | (144) | | Corporate and Other Operating Loss | (4,931) | (5,501) | | Total Operating Loss | (7,239) | (6,762) | (b) Segmented assets and liabilities Segmented Assets and Liabilities Summary | Segment | Total Assets June 30, 2025 (CAD '000) | Total Assets Dec 31, 2024 (CAD '000) | Total Liabilities June 30, 2025 (CAD '000) | Total Liabilities Dec 31, 2024 (CAD '000) | | :-------------------------- | :------------------------------------ | :----------------------------------- | :---------------------------------------- | :--------------------------------------- | | Refinery | 52,027 | 52,434 | 3,181 | 3,707 | | Exploration and Evaluation | 88,456 | 93,276 | 64 | 87 | | Corporate and Other | 5,117 | 5,737 | 91,256 | 83,335 | | Total | 145,600 | 151,447 | 94,501 | 87,129 | 19. Related Party Transactions The company incurred $1,431 thousand in fees to management personnel and directors for the six months ended June 30, 2025, an increase from $922 thousand in H1 2024, with share-based payments to related parties totaling $382 thousand for H1 2025, and accrued liabilities for related parties significantly increasing to $1,022 thousand Related Party Fees | Metric | 6 Months Ended June 30, 2025 (CAD '000) | 6 Months Ended June 30, 2024 (CAD '000) | Change (CAD '000) | | :-------------------------- | :------------------------------------- | :------------------------------------- | :---------------- | | Management fees | 1,330 | 837 | 493 | | Directors' fees | 101 | 85 | 16 | | Total Fees | 1,431 | 922 | 509 | - Share-based payments made to management and directors totaled $382 thousand for the six months ended June 30, 2025[104] - Accrued liabilities for related parties increased significantly from $161 thousand at December 31, 2024, to $1,022 thousand at June 30, 2025, mainly due to compensation accruals[105] 20. Subsequent Events Subsequent to June 30, 2025, the company received a waiver from noteholders to reduce the minimum liquidity balance to US$1,000 until August 31, 2025, and discussions are ongoing with noteholders regarding potential restructuring of outstanding notes, including equitization, to provide additional liquidity - Subsequent to June 30, 2025, the company received a waiver from noteholders to reduce the reportable minimum liquidity balance to US$1,000 (from US$2,000) until August 31, 2025[106] - Discussions are underway with noteholders regarding the potential restructuring of outstanding notes, including the equitization of a portion of the notes, to provide additional liquidity to the company[106]