JRV:CC - Jervois Global Limited Quarterly Activities Report to 31 March 2024

(TheNewswire)

30 April 2024 (Australia) - TheNewswire - ASX/TSX-V:JRV/ OTCQB: JRVMF

Advancing on priorities

Jervois Global Limited (“ Jervois ” or the “ Company ”) continued to focus oninitiatives to ensure its business remains financially sustainable athistorically low cobalt prices caused by the People’s Republic ofChina (“ PRC ”)oversupply from the Democratic Republic of the Congo (“ DRC ”) and Indonesia.

Priorities and key milestones delivered in thequarter:

• Maximise margin at Jervois Finland and deliveroperational improvements:

• US$0.7 million Adjusted EBITDA in Q1 2024. Costreductions and delivery of improvement initiatives continuing toprogress resilience to cobalt price weakness.

• Corporate level organisational restructure, with aneffective 30% reduction of senior management positions due toredundancy and transition to part time; Non-Executive Directors’fees reduced by 30%.

• Execute U.S. DoD funded US$15.0 million ICO drillingprogramme and U.S. cobalt refinery studies 3

• Surface drilling completed at the Sunshine deposit withan updated MRE published.

• Underground drilling at the RAM deposit commenced,initial three holes completed, assays pending.

• Two sites shortlisted for U.S. based cobalt refinery inLouisiana and Pennsylvania.

• Advance debt and partner financing process atSMP:

  • Engagement with parties for project-level funding forthe SMP restart continued.

• Review partnership opportunities to crystalise anddemonstrate value:

  • Initiatives across all assets are continuing –objective is to strengthen balance sheet and support strategicdelivery.

  • Lenders are actively engaged in asset based partneringinitiatives.

Jervois Finland

• Quarterly revenue: US$ 39.9 million       (Q4 2023: US$38.7 million)

• Cash flow from operations:        -US$3.6 million       (Q4 2023: US$4.7 million)

• Adjusted EBITDA 4 US$0.7 million               (Q4 2023: US$0.5 million)

• Sales volume:                        1,239mt                (Q4 2023: 1,098 mt)

• Production volume:               1,300 mt (Q4 2023: 1,102 mt)

Sales and marketing

Jervois Finland produced 1,300 mt and sold 1,239 mt ofcobalt in the quarter.

Figure 1: Jervois Finland sales volume by quarter(mt)

Click Image To View Full Size

Sales volumes to 31 March 2024 were 1,239 mt, 13%higher than previous quarter volumes of 1,098 mt. The increase insales volumes on the prior quarter reflected an uptick in demand inend-use segments, particularly catalysts, along with additional cobaltsulphate sales into the nascent, but rising, battery market.Production volumes and product mix remains subject to continuousreview and adjustment based on an assessment of end-use demand andconsidering target inventory levels. Jervois Finland’s salesperformance and outlook for key market segments under which JervoisFinland operates are summarised below.

Batteries:

• Current demand in this sector has improved from 2023and looks to stabilise and meet expectations for the balance of 2024.

• Interest continues from both European and U.S. basedelectric vehicle ( EV ”)OEMs (automakers) for long-term cobalt supply, with volumes startingin 2025 and rising significantly thereafter.

• The U.S. Inflation Reduction Act (particularly theassociated Foreign Entity of Concern restrictions on Chinese links tosecure U.S. EV tax credits) continues to drive interest in U.S. andother Western supply of battery raw materials, providing a keyadvantage to Kokkola as the leading global cobalt refinery outside ofChina.

Chemicals, Catalysts, and Ceramics:

• Chemicals: Demand continues to be stable in mainchemical applications (copper electrowinning, coatings, and rubberadhesion).

• Catalysts: There are signs of a slowdown in demand fromthe oil and gas segment (processing / refining) as catalystchemistries change.

• Ceramics: Continued reduced demand and risingcompetition (especially ex-PRC) in this sector, linked to lowerend-use demand in the housing and construction sector. In particular,weak construction markets in China are causing Chinese cobaltsuppliers to aggressively access export markets,driving down prices. Demand is volatile, and consumers often wait forfavourable market pricing. Prices in ceramics look to remain underpressure though the coming months, with limited ESG considerationsimpacting buyer behaviour.

Powder Metallurgy:

• Competition in downstream markets (especially from PRC)continues to impact demand in all powder metallurgyapplications.

• Automotive, oil and gas production (drilling), generalengineering, and construction have not improved.

• Aerospace continues to be a bright spot, with theforecast remaining positive.

Financial performance

Jervois Finland achieved revenue of US$39.9 million inthe quarter, a 3% increase compared to the prior quarter. The increasewas principally due to higher sales volumes, although partially offsetby lower realised pricing. The business improvement programme,introduced in Q4 2023, started to deliver positive impact, withoperating costs trending lower in the quarter.

The cyclical weakness in cobalt prices persisted in thequarter due, in part, to continued market oversupply conditionsinstigated by the PRC, as outlined earlier. March 2024 sales wereaffected by strikes, including at the Port of Kokkola, which wasclosed from early March to early April 2024.

Adjusted EBITDA

Jervois Finland achieved Adjusted EBITDA in the firstquarter of US$0.7 million, continuing a turnaround that commenced inthe second quarter of 2023. Q1 2024 was the fourth consecutive quarterof positive Adjusted EBITDA, and the result is consistent with JervoisFinland’s historical performance where the business model supportsgeneration of a positive margin in an environment of cyclically weak,but stable, cobalt prices.

Figure 2: Jervois Finland Adjusted EBITDA by quarter(US, unaudited)

Both the cobalt chemicals and powder plants continuedto perform well in the quarter, despite the port strikes, withinternal targets for safety, production efficiency and product qualityall met. Near-term focus for Jervois Finland remains on operationalperformance, cash generation, and risk management.

Mitigating measures were implemented in response to theport strikes during the quarter that offset much of the impact ofinterruptions associated with the strike. This included usingalternative logistics routes for shipment of finished goods. Thestrikes have, however, resulted in temporary constraints in theavailability of cobalt raw materials feed that are adversely impactingplant production levels in April 2024. Accordingly, lower than averageproduction levels in April 2024, together with the annual maintenanceshutdown in May 2024, will lead to lower-than-average volumes acrossthe second quarter. Organisation optimisation atJervois Finland continued to advance, with a 5% reduction in workforceand ~US$1.1 million (~€1.0 million) in annual payroll cost savingsexpected across the first half of 2024.

A reconciliation between Adjusted EBITDA, EBITDA, andNet Profit after Tax (“ NPAT ”) for Jervois and Jervois Finland is included on page 11.

Cash flow performance

Cash flow from operations (before interest payments)was -US$3.6 million in the quarter.
This was primarily driven by working capital movements in early Q12024 and further exacerbated by the Finnish ports strikes whichresulted in lower than budgeted sales in the quarter. Physical cobaltinventories reduced slightly by US$1.4 million from US$40.7 million at31 December 2023 to US$39.3 million at 31 March 2024. This representeda reduction from 1,297 mt and ~78 days at 31 December 2023 to 1,281 mtand ~77 days at 31 March 2024 (based on a normalised 6,000 mt annualproduction rate). Jervois is continuing to execute an inventorymanagement strategy aligned to a near-term target range of 90 days orless, in a manner that balances liquidity and risk managementobjectives.

Jervois USA

Idaho Cobalt Operations (“ICO”), U.S.

Jervois successfully delivered an inauguralJORC-compliant Mineral Resource Estimate (“ MRE ”) for the Sunshine historicresource during the quarter, following 1,100 metres of initial surfacedrilling. The Sunshine deposit is a historic resource, located a shortdistance from the mill and concentrator facilities at ICO. ICO alsohosts the main RAM deposit upon which initial mine development wasbased.

Sunshine’s MRE was completed in accordance with theAustralian JORC Code 2012, the Canadian Institute of Mining,Metallurgy and Petroleum (“ CIM ”) definition standards and best practice guidelines (2014,2018), and is reported in accordance with the Canadian SecuritiesAdministration’s National Instrument (“ NI ”) 43-101.

The Sunshine MRE was fully funded by the U.S. DoD underthe DPA Title III US$15.0 million award (“ Agreement Funding ”) 5 , signed in June2023. The Agreement Funding is under the Manufacturing CapabilityExpansion and Investment Prioritization office of the AssistantSecretary of Defense for Industrial Base Policy using the U.S. DPATitle III authorities and utilises funds from the Additional UkraineSupplemental Appropriations Act.

The Sunshine MRE represents the first completedobjective of the programme under the DoD Agreement Funding to advanceU.S. cobalt supply chain security.

Table 1 : Sunshine Inferred MineralResource

Notes:

1. Mr. Andrew Turner, P.Geol. of APEX Geoscience Ltd., aQualified Person as defined by NI 43-101 and a Competent Person asdefined by JORC, is responsible for the completion of the inauguralSunshine mineral resource estimation, with an effective date of 31March 2024.

2. Mineral Resources that are not Mineral Reserves do nothave demonstrated economic viability.

3. The estimate of Mineral Resources may be materiallyaffected by environmental, permitting, legal, title, taxation,sociopolitical, marketing, or other relevant issues.

4. The Inferred Mineral Resource in this estimate has alower level of confidence than that applied to an Indicated MineralResource and must not be converted to a Mineral Reserve. It isreasonably expected that the majority of the Inferred Mineral Resourcecould potentially be upgraded to an Indicated Mineral Resource withcontinued exploration.

5. The Mineral Resources were estimated in accordance withthe Canadian Institute of Mining, Metallurgy and Petroleum, CIMStandards on Mineral Resources and Reserves, Definitions (2014) andBest Practices Guidelines (2019) prepared by the CIM StandingCommittee on Reserve Definitions and adopted by the CIMCouncil.

6. The Sunshine cut-off grade of 0.25% Co is based on anestimated process cost and GA cost of US$154.00/t, due to narrowmineralised horizons, and metal prices of US$25.00/lb Co, US$3.00/lbCu, and US$1,750/troy oz Au, with process recoveries of 91.0% Co,95.4% Cu, and 84.9% Au. An average contribution of 21% to Co payablevalues from Cu and Au has been assumed based upon the relativeconcentrations of the payable metals within the reportedresources.

7. The reported mineral resources are constrained bymanually created wireframe solids (mineable shapes) that encapsulatecontiguous blocks demonstrating reasonable prospects for eventualeconomic extraction within the mineable shapes.

More details on the Sunshine MRE can be found in theASX announcement dated 11 April 2024 6 .

With the successful completion of its Sunshine resourceverification drilling and MRE, Jervois’ DPA Title III efforts duringthe quarter switched to a focus on expanding the Indicated andInferred depth continuity of the RAM MRE down-dip of the deposit’scentral zone and along strike to the north.

Underground development of exploration drill stationshas progressed, with multiple stations now available. Undergrounddrilling rigs and crews successfully mobilised to ICO in March 2024 tocommence the extensional drilling initiatives 7 , with three drillholes complete, and assays pending.

After the quarter end, on Friday 26 April 2024, Jervoisreceived a request from the DoD to stop work under the AgreementFunding pending resolution of unspecified environmental regulatoryconcerns. Jervois is complying and is engaging with the DoD to seekclarification.

U.S. cobalt refinery study

During the quarter, progress continued on siteselection, basic engineering, and a bankable feasibility study(“ BFS ”) for a U.S.domestic cobalt refinery, with works fully reimbursed under thepreviously outlined DoD Agreement Funding. During the quarter, Jervoisshortlisted two locations – in Pennsylvania and Louisiana – withnegotiations to host a U.S. cobalt refinery. Jervois also advanced engineering, environmental, and economicevaluations as part of the BFS which is led by AFRY USA LLC.

Jervois’ proposed U.S. cobalt refinery will producecobalt sulphate, for use primarily in EV batteries, which is notproduced in the U.S. today. Based on projected U.S. lithium-ionbattery chemistries, the refinery, once operational, is expected to becapable of supplying sufficient cobalt for about 1.2 million EVs eachyear.

Based on cobalt volume requirement guidance fromexisting and future battery customers within the auto supply chain,Jervois expects that U.S. cobalt sulphate demand will rise sharplywith increased uptake of EVs across the latter part of this decade.Based on Jervois’ ongoing negotiations with OEM (automaker)customers, including those in the U.S., OEM projected cobaltorderbooks are expected to expand rapidly from 2025.

São Miguel Paulista (“SMP”)nickel and cobalt refinery, Brazil

Partner financing opportunities at SMP continued toprogress, with parties continuing to engage on project-level fundingfor the SMP restart project.

Nico Young nickel-cobalt project, New South Wales,Australia

In light of recent volatility affecting nickel markets,particularly producers in Australia subject to PRC competition fromIndonesia, Jervois has ended the formal divestment process for NicoYoung. Jervois has historically invested >A$20 million in NicoYoung. It is a strategic future source of Western nickel and cobaltshould differential ESG and pricing standards be applied by eithercustomers or governments in the future.

Corporate activities

Liquidity and balance sheet

Cash flow utilisation in Q1 2024 included thesemi-annual interest payment on the ICO Senior Secured Bonds, paid inJanuary 2024, working capital movements at Jervois Finland, andholding costs across ICO and SMP. Jervois ended the March 2024 quarterwith US$26.6 million in cash, US$39.3 million in physical cobaltinventories in Jervois Finland, and total drawn senior debt ofUS$144.1 million .

Asset partnering initiatives to strengthen balancesheet are being reviewed in conjunction with lenders. Significant work has been completed with high-qualitypotential counterparties on asset-levelinvestment opportunities since mid-2023. Several third parties havebeen advanced.

A key objective of the review is to better balanceownership across the portfolio, alleviating pressure on Jervois’balance sheet, and to provide liquidity that supports progressiontoward Jervois’ goal of achieving a portfolio with three cashgenerating assets over the medium term, underpinned by a durablecapital structure.

Organisational restructure

Jervois announced an organisational restructure inearly March 2024, which included reduced senior corporate managementroles, with 30% of full-time positions removed via either redundanciesor executives transitioning to part-time. Jervois’ Non-ExecutiveDirectors also reduced their fees by 30%, effective 1 February 2024.No awards under the Company’s Short Term Incentive Plan were made tothe Chief Executive Officer, executive, and corporate management team.Jervois has also frozen annual salary increases (generally linked toinflation) for 2024 across the corporate group, and at its sites,where legally permissible.

Environmental, social, governance (“ESG”)

Dr. Jennifer Hinton (Group Manager – ESG) was invitedby the EU to represent Jervois on the "Clean Transition Dialogueon Critical Raw Materials" held at Berlaymont in Brussels on 23February 2024. The dialogue, chaired by Mr. Maros S?efc?ovic?(Executive Vice President of the European Commission), broughttogether 25 high-level representatives from the private sector,financial institutions, and social partners to discuss how to create aconducive, competitive business environment across the entire valuechain required for the European Green Deal.

In conjunction with Jervois’ responsible supply chaindue diligence programme, Dr. Hinton also visited selected industrial,large-scale operations in the DRC during April 2024.

Engagement with the Cobalt Institute, including itsResponsible Sourcing and Sustainability Committee (“ RESSCOM ”) and Government AffairsCommittee continues.

Exploration and development expenditure

In relation to the DoD funded surface drilling campaignat ICO, US$0.1 million was incurred during the quarter (funded by theDoD). No other material cash expenditure on exploration anddevelopment was spent during the quarter.

Insider compensation reporting

During the quarter, US$0.1 million was paid toNon-Executive Directors and US$0.1 million was paid to the CEO(Executive Director).

By order of the Board

Bryce Crocker

Chief Executive Officer

For further information, please contact:

Forward-Looking Statements

This news release may contain certain“Forward-Looking Statements” within the meaning of the UnitedStates Private Securities Litigation Reform Act of 1995 and applicableCanadian securities laws. When used in this news release, the words“anticipate”, “believe”, “estimate”, “expect”,“target, “plan”, “forecast”, “may”, “schedule” andother similar words or expressions identify forward-looking statementsor information. These forward-looking statements or information mayrelate to partnership for group operations, operations at JervoisFinland, drilling to be undertaken at ICO, U.S. refinery studies,reimbursement of funds to Jervois Mining USA Limited by the DoD,timing of restart of SMP refinery, and the reliability of third-partyinformation, and certain other factors or information. Such statementsrepresent the Company’s current views with respect to future eventsand are necessarily based upon a number of assumptions and estimatesthat, while considered reasonable by the Company, are inherentlysubject to significant business, economic, competitive, political andsocial risks, contingencies and uncertainties. Many factors, bothknown and unknown, could cause results, performance, or achievementsto be materially different from the results, performance orachievements that are or may be expressed or implied by suchforward-looking statements. The Company does not intend, and does notassume any obligation, to update these forward-looking statements orinformation to reflect changes in assumptions or changes incircumstances or any other events affections such statements andinformation other than as required by applicable laws, rules, andregulations.

Neither TSX Venture Exchange nor its RegulationServices Provider (as that term is defined in policies of the TSXVenture Exchange) accepts responsibility for the adequacy or accuracyof this release.

Basis of preparation of financial information

Historical and forecast financial information

Financial information is prepared under Jervois GlobalGroup accounting policies, which conform with Australian AccountingStandards and International Financial Reporting Standards(“ IFRS ”). The JervoisFinland financial results for the period post-acquisition areconsolidated into the Jervois Global Group consolidated financialstatements. All information presented is unaudited.

EBITDA for historical periods is presented as netincome after adding back tax, interest, depreciation, andextraordinary items and is a non-IFRS/non-GAAP measure.

Reconciliation of NPAT to EBITDA and AdjustedEBITDA

EBITDA is a non-IFRS financial measure. EBITDA ispresented as net income after adding back interest, tax, depreciationand amortisation, and extraordinary items. Adjusted EBITDA representsEBITDA adjusted to exclude items which do not reflect the underlyingperformance of the Company’s operations. Exclusions from adjustedEBITDA are items that require exclusion in order to maximise insightand consistency on the financial performance of the Company’soperations.

Exclusions include gains/losses on disposals,impairment charges (or reversals), certain derivative items, NRVadjustments to inventories, fair value adjustments on financialinstruments, and one-off costs related to post-acquisitionintegration.

Refer to the table below for a reconciliation of NPATto EBITDA and Adjusted EBITDA.

Tenements

Australian Tenements

Appendix 5B

Mining explorationentity or oil and gas exploration entity
quarterly cash flow report

Compliancestatement

1        This statement has been prepared inaccordance with accounting standards and policies which comply withListing Rule 19.11A.

2        This statement gives a true and fair viewof the matters disclosed.

Date:        30 April 2024

Authorised by:        Disclosure Committee

(Name of body or officer authorising release – seenote 4)

Notes

1.        This quarterly cash flow report and theaccompanying activity report provide a basis for informing the marketabout the entity’s activities for the past quarter, how they havebeen financed and the effect this has had on its cash position. Anentity that wishes to disclose additional information over and abovethe minimum required under the Listing Rules is encouraged to doso.

2.        If this quarterly cash flow report hasbeen prepared in accordance with Australian Accounting Standards, thedefinitions in, and provisions of, AASB 6:Exploration for and Evaluation of Mineral Resources and AASB 107: Statement of Cash Flows apply to this report. If this quarterly cashflow report has been prepared in accordance with other accountingstandards agreed by ASX pursuant to Listing Rule 19.11A, thecorresponding equivalent standards apply to this report.

3.        Dividends received may be classifiedeither as cash flows from operating activities or cash flows frominvesting activities, depending on the accounting policy of theentity.

4.        If this report has been authorised forrelease to the market by your board of directors, you can insert here:“By the board”. If it has been authorised for release to themarket by a committee of your board of directors, you can insert here:“By the [ name of board committee – e.g., Audit and RiskCommittee ]”. If it has been authorised forrelease to the market by a disclosure committee, you can insert here:“By the Disclosure Committee”.

5.        If this report has been authorised forrelease to the market by your board of directors and you wish to holdyourself out as complying with recommendation 4.2 of the ASXCorporate Governance Council’s CorporateGovernance Principles and Recommendations , theboard should have received a declaration from its CEO and CFO that, intheir opinion, the financial records of the entity have been properlymaintained, that this report complies with the appropriate accountingstandards and gives a true and fair view of the cash flows of theentity, and that their opinion has been formed on the basis of a soundsystem of risk management and internal control which is operatingeffectively.

1 See page 11 for the definition of Adjusted EBITDA and basisof preparation.

2 Drawn senior debt represents the aggregate of amounts drawnunder the Company’s senior debt facilities (excludes UnsecuredConvertible Notes that mature in July/August 2028). Amounts representthe nominal loan amounts; balances recorded in Jervois’ financialstatements under International Financial Reporting Standards willdiffer.

3 After the quarter end, onFriday 26 April 2024, Jervois received a request from the DoD to stopwork under the Agreement Funding pending resolution of unspecifiedenvironmental regulatory concerns. Jervois is complying and isengaging with the DoD to seek clarification.

4 Information on the basis of preparation for the financialinformation included in this Quarterly Activities Report is set out onpage 11.

5 See ASX announcement “Jervois to begin work funded byU.S. Department of Defense to advance U.S. cobalt supply chainsecurity”, 16 June 2023. After the quarterend, on Friday 26 April 2024, Jervois received a request from the DoDto stop work under the Agreement Funding pending resolution ofunspecified environmental regulatory concerns. Jervois is complyingand is engaging with the DoD to seek clarification.

6 See ASX announcementtitled “Jervois completes maiden JORC Resource for Sunshine(updated)” dated 11 April 2024. In accordance with ASX listing rule5.23.2, Jervois confirms it is not aware of any new information ordata that materially affects the information included in the relevantmarket announcements referred to above and that the assumptionscontained therein continue to apply and have not materiallychanged.

7 See ASX announcement “Updated RAM resource offersopportunity to extend ICO mine life” dated 19 April 2023(Australia).

8 Excludes Jervois Finlandstaff costs which are included in 1.2(b) production.

9 Relates to the refinerystudy currently being undertaken in the United States.

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