Congressional Working Group continues U.S. critical minerals policy talks led by Kathy Castor, Rob Wittman

On July 23, the Select Committee’s Critical Minerals Policy Working Group, led by Democratic U.S. Rep. Kathy Castor and Republican U.S. Rep. Rob Wittman of Virginia and convened once again to tackle the pressing issue of the United States’ heavy reliance on Chinese imports for critical minerals.

This third meeting continued to examine into the complexities surrounding the U.S. supply chain, bringing together key voices like Peter Mattis, President of The Jamestown Foundation; Emily De La Bruyere, Senior Fellow at the Foundation for the Defense of Democracies and co-founder of Horizon Advisory; and Jennifer Hinton, Group Manager ESG at Jervois Global.

As the committee convened, it became clear that one name — Jervois Global — would continue to surface in discussions.

In our previous coverage, we explored the growing concerns surrounding Jervois’ Idaho Cobalt Operations (ICO), which is emblematic of the broader challenges the U.S. faces in reducing dependence on foreign sources of critical minerals. Despite significant investment from the U.S. government, Jervois’ ongoing financial and operational instability has cast doubt on the company’s ability to serve as a reliable cornerstone of the nation’s mineral strategy.

This meeting underscored those concerns and prompted further scrutiny into whether Jervois is becoming a cautionary tale of inadequate oversight in this high-stakes sector.

The July 30 Quarterly Report from Jervois paints a concerning picture. The company’s cash reserves have dwindled to just $21.3 million, with a modest positive operating cash flow of $4.3 million. Despite this seemingly positive cash flow, the report reveals a broader backdrop of severe operational and market challenges.

At the core of these challenges lies the Idaho Cobalt Operations (ICO), which is supposed to be a cornerstone in the U.S. strategy to reduce reliance on foreign critical minerals. However, ICO is struggling with financial sustainability, hampered by over $169 million in debt and continuous operational losses.

In July 2024, Jervois restructured its debt by transferring significant obligations to the majority bondholder of the ICO’s $100 million Senior Secured Bond. The bondholder is now the lender under the facility, which remains secured against the assets, working capital, and shares of Jervois Finland owned by Jervois.

The terms of the facility remain unchanged, including an unsecured parent guarantee from Jervois, but the debt restructuring underscores the mounting financial pressures. The July 26 announcement of this debt transfer reflects Jervois’ ongoing attempts to stabilize its balance sheet amidst persistent challenges.

Despite these financial pressures, Jervois continues to promote the ICO plant as a success. The company has claimed improved operational efficiency and output at the Idaho site, with ongoing extensional drilling at the RAM deposit.

Supported by funding from the U.S. Department of Defense under the Defense Production Act Title III, Jervois completed four extensional drillholes, each intersecting strong grades of mineralized horizons across mineable widths. However, these reports of progress are clouded by the company’s history of financial instability and past operational halts.

The big question remains: Are these achievements sustainable, or do they mask more profound financial vulnerabilities?

During the July 10 U.S. Congressional Critical Minerals Committee meeting, Republican U.S. Rep. Carlos Giménez raised pertinent concerns about the origins and processing stages of the minerals sourced by companies like Jervois.

The reliance on problematic regions like the Democratic Republic of Congo and China for raw materials, coupled with Jervois’ precarious financial foundation, underscores the gaps in the oversight of U.S. policies that support such ventures.

While the U.S. Department of Defense has invested $30 million in Jervois to enhance domestic cobalt production, the company’s reliance on foreign sources for raw materials and the ongoing instability of its operations could undermine this strategic investment.

The more significant concern is whether U.S. policies adequately address the long-term sustainability and stability of ventures like Jervois. The company’s financial woes raise questions about whether governmental investments are being directed at companies capable of contributing meaningfully to U.S. national interests. Despite the influx of government funds, the ICO’s future remains uncertain, and with it, Jervois’ ability to fulfill its promises of bolstering U.S. critical mineral independence.

Jervois’ strategy continues to evolve as the company explores potential asset sales and partnerships to support deleveraging. As outlined in the quarterly report, negotiations on asset sales are ongoing, and Jervois continues to work with lenders to explore additional transactions aimed at strengthening its balance sheet. The June 2024 quarter-end cash balance of $21.3 million and drawn senior debt of $144.1 million further illustrate the financial strain under which the company operates.

As the U.S. government seeks to fortify its domestic supply chains against geopolitical threats, the ongoing challenges at Jervois Global serve as a cautionary tale. The company’s precarious position not only calls into question the efficacy of current due diligence practices but also underscores the potential risks to the U.S. mineral strategy.

This situation challenges policymakers to reconsider the wisdom of continued investment in ventures with such volatile financial foundations. As stakeholders assess the future of U.S. mineral strategy, a more cautious and discerning approach in funding and oversight is needed to prevent history from repeating itself — potentially with severe economic and strategic repercussions.