Electra Battery Materials Up 50% On No News – What’s Happening?

Tim Worstall
Updated: 11 May 2022

Key points:

Electra Battery Materials (NASDAQ: ELBM) stock is up 50% this morning premarket on the back of no real news. There’s been some interesting information in the past few days and weeks, but nothing overnight that would explain this pop in the stock price. So, what’s actually happening here? Is this the start of some gran revaluation of ELBM’s long term prospects? Or some sort of pop that we might expect to fade back away?

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Electra Battery has, it is true, just moved up to NASDAQ from the more speculative Canadian market it was on before. That’s a reasonable enough sign, that it can gain that promotion. It also increases the liquidity of the ELBM stock and opens the door to possible institutional investment.

There’s also a certain amusement here, as the latest news is that they’ve found more cobalt in Idaho. The company used to be First Cobalt and was based on exploring that Idaho deposit. That good drilling results come after the change in strategy does amuse – OK, can those with a dry sense of humour perhaps. We are still at early days on the Iron Creek Deposit. This isn’t a proven reserve of anything, we’re still talking about indicated resources etc. So there’s considerable uncertainty as to the actual value of the deposit still.

But there are those two recent pieces of news which we might think could be boosting the stock price. As it’s a small company, not much traded, we might imagine there’s a certain delay between the information first being known and then spreading more generally.

The other part of the company is concentrating on the recycling of battery materials. This is clearly something that on the whole economy scale is going to happen. Cobalt and lithium are simply worth too much for people not to recycle old batteries. Electra Batteries is building a processing plant in Ontario to deal with this process.

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It should be said here that the extraction from batteries down to “black mass” (a mixture of the interesting metals contained) is not something that anyone has a unique control of. There are different ways of doing it  and some are more efficient than others and so on but it’s a widely available technique. Equally, processing black mass into the constituent elements isn’t something we’ll do in a high school chemistry lab but it’s well within the capabilities of standard industrial chemistry.

That is, the base process of battery recycle is available to many. What matters – as with so much recycling – is the collection network for the material to be reprocessed. Much of the profit in any recycling system goes to those who collect the materials, not those who actually process them. So, it’s the construction of the collection system which is the significant marker of the successful company.

The jump in Electra stock this morning could be seen as a realisation of the impact of these different influences – the better cobalt results, the NASDAQ listing, consideration of the recycling program. Or it could be one of those jumps that fade back after happening in a thin market. How to trade the jump will depend upon views on what is the most important factor there.

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