Electra Stock: Discounted And Growing (NASDAQ:ELBM)

New hires

A couple months ago, just a few weeks before Electra’s graduated from the opaque over-the-counter pink sheets to having its shares trade on the NASDAQ, the long-time Chief Financial Officer, Ryan Snyder, bowed out to take a job with a major global mining company. When he left, Mr. Snyder owned 21,400 shares of the company, or about 0.07% of float, and has not filed for any changes.

When he left, Mr. Snyder expressed confidence in the company, stating he would remain a long-term shareholder. Indeed, it seems that he is true to his word, and he remains the fifth largest shareholder on record.

It is natural to worry about the prospects of a company following the departure of a senior executive. However, as I mentioned in a previous article, this was a logical off-ramp for him.

Electra has now filled the position with Craig Cunningham. On the day of the announcement, the share price popped over 35%, reflecting the good news that this brought to the company. Mr. Cunningham is not listed as an insider shareholder, yet — this will likely change as his work is remunerated.

Electra has also retained the services of David Marshall. Mr. Marshall is the second executive recruited from global miner Vale in recent months, following Ms. Renata Cardoso who was named to head ESG and Low-Carbon initiatives mid-April 2022. He will be leading the evaluation of a second refinery in the province of Quebec.

Electra has hired Joseph Racanelli to lead investor relations. Mr. Racanelli should bring increased visibility to Electra and be able to better articulate the value proposition to investors. This should attract more institutional money and the valuation of the company as reflected in the stock price should be commensurate with the unique position that Electra is staking in the North American battery supply chain.

The strengthening leadership at Electra, as well as the rapidity in which it is able to fill roles in a tight labour market demonstrates the continued growth — and growing ambitions — of this company.

Possible Expansion into Quebec

The province of Quebec, neighbouring the province of Ontario where Electra is currently conducting most of its operations — the notable exception being the Idaho mining property which struck additional high-grade cobalt deposits — has been heavily investing in a battery park. The Minister of Economy and Innovation, Pierre Fitzgibbon, has been heavily promoting (and subsidizing) the Bécancour region in Quebec as a “battery valley”. Major companies like General Motors (GM), chemical company BASF (OTCQX:BASFY) and the chemicals subsidiary of POSCO (PKX) have already signed on to the province’s strategy for battery development. Panasonic (OTCPK:PCRFY) among other companies, is also in talks with the government. The Bécancour region is strategically located next to major highways, rail line, and on the banks of the St. Lawrence Seaway with port facilities in the city itself as well as nearby. Like the province of Ontario, the province of Quebec boasts of very large hydroelectric generating capacity.

The provincial strategy is seeking to concentrate firms in the area in order to create batteries with green energy. This fits within the broader Canadian strategy revealed in the latest federal budget, as well as the global realignment of supply chains to avoid an (over-)dependence on geopolitical rivals for strategic materials. It fits with Electra’s brand and strategy of supplying low-carbon, traceable battery materials. In my opinion, it is very likely that the company will find a second home in the welcoming province of Quebec.

Slow and steady

The stock price is down. It popped, as I expected, upon listing on the NASDAQ and if you were actively trading the shares, I’m happy for you and your substantial profit. Now the share price has come down, dragged down by market forces rather than company fundamentals which have in fact improved, while the main catalyst — commercial production — is still on track to be realized by the end of the year. The price of gasoline is forcing a lot of people to rethink their next vehicle; long-term demand for EVs is not going down. The geopolitical tensions are increasing rather than loosening and nations are actively reviewing with whom they do business. The fundamentals are good for Electra. It continues to make steady progress towards commissioning the refinery.

Although Canada is experiencing relatively high inflation and the central bank’s rhetoric continues to indicate a strong resolve to tame it, Electra is not a highly levered company. The latest filings show that at the end of the first quarter of 2022, Electra did not have much long-term debt. This may change materially when the next earnings are released in the next few days — they are expected for June 24, 2022 — but it is unlikely that a company with a lot of cash on hand and pursuing an equity-financing strategy would have a need to take on a lot of debt and be exposed to the rising rates. Rates matter of course, but not enough to justify the discounted valuation — especially not when cash is expected to start flowing into the cash-burning company so soon.

Use the depressed prices to accumulate

This is an opportunity to add to your holdings if your portfolio allows it. Otherwise, recall the old adage: don’t sell when the price changes, sell when the fundamentals change. In the case of Electra, the fundamentals are improving. Take this opportunity to score some discounted shares.