IHS - Jervois Global Limited Quarterly Activities Report to 30 September 2024

(TheNewswire)

31 October 2024 (Australia) - TheNewswire

Financing update

Jervois Global Limited (“ Jervois ” or the “ Company ” and, together with itssubsidiaries, “ Jervois Global Group ”) ended the September 2024quarter with US$15.4 million in cash, US$33.0 million in physical cobalt inventories, and total drawn senior debtof US$147.9 million .

End of September 2024 cash of US$ 15.4 million was lower than the previous quarter-endbalance of US$ 21.3 million, with cashflow impacted by a rebuild of inventories in thequarter at Jervois Finland and holding costs at Jervois’ 100%-ownedICO mine site in the U.S. and the São Miguel Paulista(“ SMP ”) nickel-cobaltrefinery in São Paulo, Brazil. The Company also incurred US$2.3million in costs in the quarter, pursuing a balance sheetrestructuring transaction.

At 27 October 2024, Jervois Global Group’s currentcash balance is US$9.8 million.

During the quarter, Jervois and its “ Lender ”, being the majority holder ofthe US$100.0 million 12.5% ICO Senior Secured Bonds (the“ ICO Bonds ”) andlender under Jervois Finland’s working capital facility (the“ JFO Facility ”),amended the JFO Facility including adding a US$7.5 million term loanfacility (the “ Term Loan ”) for general corporate and working capital purposes. TheTerm Loan is fully drawn, with US$3.75 million drawn in the quarterand, subsequent to the quarter end in October 2024, the remainingUS$3.75 million drawn.

As part of the Term Loan, the Lender receivedadditional security for the JFO Facility, including an agreement toprovide a pledge over the shares of Jervois Brasil, which owns the SMPnickel-cobalt refinery, and a second lien on the assets whichcurrently pledged to secure the repayment of the ICO Bonds.

The Lender, as majority holder of the ICO Bonds, agreedon 15 October 2024 to (a) extend to 14 December 2024 the waiver of allfinancial covenants and certain potential cross-defaults under the ICOBonds (collectively the “ Waiver ”), (b) defer the semi-annual interest payments under theICO Bonds (the “ Deferral ”) 2F 3 and (c) to forbear remedies associated with ICO Bondsfinancial covenant compliance. In exchange, the Company granted asecond lien on the Jervois Finland assets pledged to secure therepayment of the JFO Facility security package, in favour of the ICOBonds.

At 31 October 2024, neither the ICO Bonds nor the JFO Facility are indefault.

Jervois Finland

• Revenue: US$ 38.2 million       (Q2 2024: US$36.9 million)

• Adjusted EBITDA                US$2.9 million               (Q2 2024: US$0.2 million)

• Cash flow from operations:        -US$1.0 million       (Q2 2024: US$4.3 million)

• Sales volume:                        1,354mt                (Q2 2024: 1,163 mt)

• Production volume:               1,389 mt (Q2 2024: 1,041 mt)

Sales and marketing

Jervois Finland produced 1,389 mt and sold 1,354 mt ofcobalt in the quarter.

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

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Sales volumes of 1,163 mt during the quarter ending 30September 2024 were 16% higher than the previous quarter volumes. Theincrease in sales volumes on the prior quarter reflected an uptick indemand from cobalt battery customers due to U.S. Foreign Entity ofConcern (“ FEOC ”)regulations. Production volumes and product mix remains subject tocontinuous review and adjustment based on Jervois assessing end-usedemand and considering target inventory levels. Production levels inthe quarter were higher than the previous quarter to achieve alignmentwith the increase in sales and current market demand.

Jervois Finland’s sales performance and outlook forkey market segments are summarised below.

Batteries:

• Jervois is commencing negotiations for 2025 supplyagreements and expects U.S. requirements to source non-FEOC cobaltsulphate to result in new customers in 2025.

• The U.S. Inflation Reduction Act, including FEOCsourcing restrictions, continues to drive interest in the U.S. andother Western supply of battery raw materials, providing a keyadvantage to Kokkola as the leading global cobalt refinery outside ofChina.

• European and U.S. based electric vehicle ( EV ”) OEMs (automakers) continue toenquire about multi-year cobalt supply contracts. However, medium-termtimelines remain uncertain and committed volume requests commencelater than previously forecast due a moderation in current EV roll outrates.

Chemicals, Catalysts, and Ceramics:

• Chemicals: Demand in general continues to showstability across key chemical applications, with coatings and rubberadhesion being particularly robust.

• Catalysts: Cobalt demand continues to track steadily inthe refinery catalyst segment, albeit at somewhat lower levels against2023.

• Ceramics: This segment continues to be impacted byreduced demand and increased competition. Cobalt producers in Chinaare aggressively targeting export markets, resulting in continued lowprices. These prices look to remain under pressure throughout thebalance of the year as pigment producers are benefiting from increasedcompetition by suppliers, together with less focus on supplier ESGcharacteristics than other customer segments.

Powder Metallurgy:

• Competition in downstream markets (especially fromChina) continues to weaken demand for Jervois product across allpowder metallurgy applications.

• There has been no improvement in automotive, oil andgas production (drilling), general engineering, and constructionmarkets. These markets are forecast to remain weak through to thebeginning of 2025.

• Continued positive outlook in aerospace, which remainssupported by expansion in both civilian and military sectors.

Financial performance

Jervois Finland achieved revenue of US$38.2 million inthe quarter, a 4% increase on the prior quarter. The increase wasprincipally due to higher sales volumes, offset by lower realisedpricing due to historically low cobalt prices during the quarter. Thebusiness improvement programme, introduced in Q4 2023, continues todeliver a positive impact, with operating costs trending lower in thequarter, partially offsetting lower cobalt prices.

Adjusted EBITDA

Jervois Finland achieved Adjusted EBITDA in the thirdquarter of US$2.9 million, continuing a turnaround that commenced inthe second quarter of 2023. Q3 2024 was the sixth consecutive quarterof positive Adjusted EBITDA, and the result is consistent with JervoisFinland’s historical performance of its business model supporting apositive margin in an environment of cyclically weak, but stable,cobalt prices.

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

Cash flow performance

Cash flow from operations (before interest payments)was -US$1.0 million in the quarter. Higher sales volumes and thefinancial benefits of sustained delivery of the business improvementprogramme at Jervois Finland continued to deliver a positive impact,with operating costs trending lower during the quarter. Higher workingcapital inventory offset the positive underlying financial result inthe quarter. Physical cobalt inventories increased by US$1.1 millionfrom US$31.9 million at 30 June 2024 to US$33.0 million at 30September 2024. This represented an increase from 1,158 mt and ~69days at 30 June 2024 to 1,305 mt and ~78 days at 30 September 2024,based on a normalised 6,000 mt annual production rate. Jervois iscontinuing to execute an inventory management strategy aligned to anear-term target range of 90 days or less, in a manner that balancescommercial, liquidity, and risk management objectives.

Jervois USA

Idaho Cobalt Operations, U.S.

During the quarter, Jervois reported results fromextensional drillholes as part of its U.S. DoD DPA Title IIIfully refundable (“ DoD AgreementFunding ”) programme at ICO.

Results from the initial four drillholes of Jervois’RAM extensional drilling campaign under its DoD Agreement Fundingyielded positive indication of resource extension both along strikeand at depth. Drillhole JU24-097 provides an especially positiveindication of the potential for extension of the RAM deposit, with itssignificant mineralisation and width representing the deepestintersection of the main mineralised horizon (“ MMH ”) to date at ICO. Additionally,the development of significant hangingwall (“ HW ”) intercepts across 2024extensional drilling provides further strategic opportunity for cobaltresource growth.

Extensional drilling was conducted from a singleunderground drilling platform positioned within existing undergroundmine workings at ICO, with collar coordinates found in Table 1included in the ASX announcement dated 31 July 2024 3F 4 .

Underground drilling at RAM highlighted appreciablegrades, widths, and mineralisation continuity. The deepest interceptto date indicated strong upside potential of further resourceextension at depth, which Jervois anticipates will be tested withfuture drilling.

Importantly, drilling demonstrated down-dip gradecontinuity along an interpreted orientation favourable to continuedexploration by Jervois within its contiguous claim boundaries. Thisupdated interpretation of the MMH in the southern extents of the RAMprovides additional pathways to resource growth, previously believedto be limited to deep exploratory drilling, with additionalmoderate-depth extensional drilling at ICO. Greater continuity of HWmineralisation is also observed along this mineralised orientationbased upon the 2024 drilling programme, indicating further resourcegrowth opportunity.

Table 1 : RAM DoD Agreement Fundingextensional drilling results

* Calculated true widths determined for the compositedintercept mid-point, perpendicular to the down-dip projection of theRAM deposit.

Jervois completed 2,500 metres of targeted resourceexpansion drilling across both its RAM and Sunshine deposits under theDoD Agreement Funding, as well as more than 350 metres of undergroundmine development in support of DoD Agreement Funding extensionaldrilling.

Amendments to the DoD Agreement Funding during thequarter allow about half of the ~US$1.0 million monthly ICO siteholding costs to be reimbursed under the DoD Agreement Funding,utilising residual unallocated funds from the US$15.0 million budgetfor an expected six-month period, commencing 1 October 2024. Jervoisis engaged with the DoD seeking an extension and expansion of DPATitle III support of ICO.

U.S. cobalt refinery study

During the quarter, work continued on the U.S. cobaltrefinery BFS being conducted with AFRY USA LLC, with a design capacityof 6,000 mt per annum of cobalt in sulphate form, suitable for EVs.The facility design would be able to supply sufficient cobalt forapproximately 1.2 million EVs per annum. The cobalt refinery BFS isfully refundable through the existing DoD Agreement Funding. The BFScontinues to be expected to be completed in the fourth quarter2024.

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

SMP continues to deliver a cost-effective care andmaintenance programme, and advance work focussed on maximisingoptionality for a restart of the refinery.

Corporate activities

In October 2024, the Company’s Chief ExecutiveOfficer, Mr. Bryce Crocker, attended the Minerals Security PartnershipFinance Network forum in New York.

Exploration and development expenditure

No 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” and other similar words or expressionsidentify forward-looking statements or information. Theseforward-looking statements or information may relate to restructure ofthe balance sheet, operations at Jervois Finland, future resourcepotential at ICO, U.S. refinery studies, reimbursement of funds toJervois Mining USA Limited by the DoD, possible restart of the SMPrefinery, and the reliability of third-party information, and certainother factors or information. Such statements represent theCompany’s current views with respect to future events and arenecessarily based upon a number of assumptions and estimates that,while considered reasonable by the Company, are inherently subject tosignificant business, economic, competitive, political and socialrisks, contingencies and uncertainties. Many factors, both known andunknown, could cause results, performance, or achievements to bematerially different from the results, performance or achievementsthat are or may be expressed or implied by such forward-lookingstatements. The Company does not intend, and does not assume anyobligation, to update these forward-looking statements or informationto reflect changes in assumptions or changes in circumstances or anyother events affections such statements and information other than asrequired by applicable laws, rules, and regulations.

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 net profit after tax (“NPAT”) toEBITDA and Adjusted EBITDA

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 project-related costs.

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

Click Image To View Full Size

Tenements

Australian Tenements

1 EBITDA is a non-IFRS financial measure. EBITDA is presentedas net income after adding back interest, tax, depreciation andamortisation, 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, impairmentcharges (or reversals), certain derivative items, NRV adjustments toinventories (or reversals), fair value adjustments on financialinstruments, and one-off project-related costs. Refer to the “Basisof preparation of financial information” section for areconciliation of NPAT to EBITDA and Adjusted EBITDA.

2 Drawn senior debt represents the aggregate of amounts drawnunder Jervois’ 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 See JRV ASX Announcements dated 9 May 2024, 22 July 2024,21 August 2024, 2 September 2024, 16 October 2024.

4 In accordance with ASX listing rule 5.23.2, Jervoisconfirms it is not aware of any new information or data thatmaterially affects the information included in the relevant marketannouncements referred to above and that the assumptions containedtherein continue to apply and have not materially changed.

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