In the first quarter of 2024, Jervois Global reported revenue of US$40 million from its Finland operations, with adjusted EBITDA at US$0.7 million. Despite the cobalt market's downturn due to oversupply from the Democratic Republic of Congo (DRC) and low prices at approximately US$12.60 per pound, the company managed to maintain a positive EBITDA for the fourth consecutive quarter.
Jervois' cash balance stood at US$26.6 million at the quarter's end. The company continued discussions on partnerships and lender engagements to share holding costs and prepare for the expected recovery in cobalt prices. Additionally, the U.S.
Department of Defense (DoD) fully funded exploration activities in Idaho and the cobalt refinery bankable feasibility study (BFS). Sales volumes increased by 13% from the previous quarter to 1,239 metric tons, although this was slightly below the historical average due to market conditions and port strikes.
Key Takeaways
- Jervois Finland's revenue reached US$40 million with an adjusted EBITDA of US$0.7 million.
- The company's cash balance was US$26.6 million at the end of Q1 2024.
- Low cobalt prices persisted due to oversupply, with an average price of US$12.60 per pound.
- Jervois continues to explore partnership transactions and engage with lenders.
- The DoD funded all quarterly exploration activities in Idaho and the cobalt refinery BFS.
- Sales volumes for the quarter were up 13% to 1,239 metric tons.
Company Outlook
- Jervois is focused on sustainable self-funding and improving business operations.
- The company is working on cost reduction and asset improvement initiatives, particularly in Finland.
- Engagement with the U.S. government and industry partners is ongoing to strengthen financial partnerships.
Bearish Highlights
- Cobalt prices remain impacted by oversupply, particularly from the DRC.
- The company recognizes the current cyclical downturn in the cobalt market.
Bullish Highlights
- Jervois is optimistic about the medium-term expansion plans in Europe and America.
- The company sees strengthening demand trends, especially from OEMs for electric vehicle materials compliant with the U.S. Inflation Reduction Act.
Misses
- Sales volumes were slightly lower than the historical average due to market weakness and impacts from port strikes.
- Production and sales volume levels for Q2 are expected to be lower than historical average volumes due to inbound shipment delays.
Q&A Highlights
- No questions were asked during the Q1 2024 earnings call.
In summary, Jervois Global (JRV ticker not provided) is working to navigate the current cobalt market challenges while preparing for an anticipated recovery in prices. The company's strategic partnerships and government engagements aim to offset the current market downturn and ensure long-term growth and stability.
InvestingPro Insights
Jervois Global (JRVMF) has been navigating a challenging market environment, as reflected in various financial metrics and market performance indicators. Here are some insights based on real-time data from InvestingPro and InvestingPro Tips:
InvestingPro Data:
- Market Capitalization: As of the latest data, Jervois Global's adjusted market cap is $29.98 million USD, which may reflect investor sentiment towards the company's size and market position.
- Price / Book Ratio: The company is trading at a low Price / Book multiple of 0.21, suggesting that the company's stock might be undervalued relative to its book value.
- Revenue Growth: Jervois Global has experienced a significant decline in revenue growth, with a -44.83% change over the last twelve months as of Q1 2023.
InvestingPro Tips:
- Debt and Profitability: Jervois Global operates with a significant debt burden and analysts do not anticipate the company will be profitable this year. This is crucial for investors considering the company's ability to manage its finances in a challenging market.
- Stock Performance: The stock is in oversold territory according to RSI indicators, and it has taken a considerable hit over the last week, month, and year. This could potentially signal a buying opportunity for contrarian investors or a red flag for those concerned about the company's near-term prospects.
Investors seeking more comprehensive analysis can find additional InvestingPro Tips for Jervois Global, which can be accessed at https://www.investing.com/pro/JRVMF. There are a total of 14 InvestingPro Tips available, offering a deeper dive into the company's performance and expectations.
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Full transcript - Jervois Mining OTC (JRVMF) Q1 2024:
Operator: Good morning and welcome to the Jervois Global Investor Webinar and Conference Call. All attendees are in a listen-only mode. [Operator Instructions] I'll now hand over to Jervois CEO, Bryce Crocker. Thank you, Bryce.
Bryce Crocker: Thanks very much and a pleasure to be here today for the Q1 2024 investor and analyst call. Turning on to slide two, please note the usual disclaimers and let's move on to the highlights slide please, moderator. So turning to the highlights, Jervois Finland contributed US$40 million in revenue for the quarter and adjusted EBITDA of US$0.7 million. The first quarter results continue to be driven by low cobalt prices caused by Chinese oversupply from the DRC with an average quarterly cobalt price of approximately US$12.60 per pound. Jervois' cash balance at the end of the quarter was US$26.6 million, which James will unpack further in coming slides. Discussions on various partnership transactions and with lenders continued across the quarter. As I've mentioned previously, selectively introducing partners who can share the holding costs of our portfolio across the cyclical downturn is a top priority, whilst also ensuring Jervois' shareholders remain exposed and can benefit from the inevitable cobalt price recovery. Whilst oversupply of cobalt intermediates is prevalent today, the demand trends I have spoken about on prior calls regarding rising OEM or automaker requirements, in particular for Inflation Reduction Act, or IRA, compliant material for the United States electric vehicle market continues to strengthen and underpins our medium term refinery expansion plans both in Europe and America. The Department of Defense, or DoD, partnership advanced during the quarter with an inaugural mineral resource estimate released for the Sunshine deposit at Idaho Cobalt Operations, or ICO. Drilling also commenced underground in the RAM deposit following development to access the underground drill pads. All quarterly exploration activities in Idaho were 100% funded by the DoD. Work in the quarter also continued on the cobalt refinery bankable feasibility study, or BFS, again, funded by the DoD. We narrowed down to two sites and due diligence on those sites, one in Pennsylvania and one in Louisiana, both advanced. If you could please turn to slide four, operator. So our focus remains on ensuring Jervois' sustainable self-funding across the commodity and asset development cycle. It's underpinning how we are pursuing improvements to our current business and also looking to introduce partners. Jervois Finland, as I mentioned, delivered positive EBITDA what is the fourth consecutive quarter despite lower cobalt prices. I just returned from Kokkola and the focus of the Finland team again is on cost reduction and asset improvement initiatives which are delivering lower operating costs. An internally driven cost improvement program is continuing to realize benefits and key input costs such as refinery reagents are falling. Partner negotiations on the asset level funding options across our portfolio continued with discussions progressing regarding all three sites in the United States, Finland and Brazil. And as I mentioned, lenders are actively engaged. Constructive engagement with the U.S. government on broader financial partnership and issues continued across the quarter. Prior to Kokkola, I was in Washington, DC, where we are supporting efforts to implement the bipartisan recommendation on a cobalt price floor for U.S. cobalt production from the House Congressional Select Committee on China. I'll now pass over to James to pick up the balance sheet in more detail.
James May: Thanks, Bryce. On the balance sheet, the focus remains on pursuing steps to enhance our liquidity and establish a durable capital structure. Cash utilization in the first quarter included the semi-annual bond interest payment for US$6.25 million in January and holding costs for the ICO and S&P assets. At Jervois Finland, as Bryce noted, we delivered fourth successful quarter of positive adjusted EBITDA and remain focused on delivering production efficiencies and improving financial performance to offset the impact of cyclical weakness in the cobalt price. The positive operating result in the quarter was offset by working capital movements. Whilst inventories remained stable relative to the prior quarter end, a series of other minor changes in working capital did impact the cash flow in the period. The Mercuria loan balance remained stable 31 December versus 31 March, sitting at US$44 million. Initiatives to strengthen the balance sheet are continuing. We appreciate that this has been our message for several quarters and are continuing to pursue these initiatives as a priority. Through this period, we have been encouraged by the breadth and depth of engagement across the asset portfolio and interest from high-quality counterparties. It is clear that there are capital providers who believe in the thematic and the strategic positioning of the Jervois portfolio. Our aim remains to execute one more transaction that supports liquidity, deleveraging and creation of value for shareholders. Importantly, we are also engaging closely with our major lenders on options to strengthen the balance sheet. Our lenders have been key partners in establishing the business over the past three years and remain key stakeholders in the steps we take to strengthen the company for its next phase. On guidance, sales volumes for the quarter were 1,239 metric tons, representing a 13% increase relative to the prior quarter, but slightly lower than historical average levels due to the continued weakness in commodities markets and impacts to March sales associated with the finished port strikes. Delays to inbound shipments of compatible materials linked to those port strikes also mean that production and sales volume levels for Q2 will be lower than historical average volumes. All other guidance shown in the table is unchanged. Holding costs for ICO continue at US$1 million per month and S&P at a rate of US$500,000 per month. Bryce, back over to you to summarize.
Bryce Crocker: Thanks, James. Our focus remains on establishing and strengthening partnerships, as I've mentioned previously, with both industry and government. I do believe our portfolio will end 2024 looking different to how it does now. Whilst the cobalt price continues to disappoint, as I've mentioned previously, destocking has been underway for an extended period of time, particularly in a historical sense, and inventory levels are low. If demand does start to rise, then prices can respond unexpectedly and rapidly. There are pockets of strengthening demand, particularly in alloy-grade material into aerospace with rising defense budgets globally providing significant support and a differentiating factor to standard-grade pricing. The EV story will be subject to volatility as it rolls out, but again, the overall trend is unmistakable, and we see this in 2025 and onward order requests from our current and future customers. We continue to work closely with our host governments across both Europe and the United States, and the importance of cobalt to the west energy transition and national security is undiminished. I'll close, operator, here and open up to questions from analysts. Thank you.
Operator: There are no questions at this time, so I'll now hand back to Bryce for closing remarks.
Bryce Crocker: Well, thank you. I look forward to being back here for the next quarterly results, and thank you for your time as we move forward across Q2 2024. Thank you.
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