WASHINGTON—An Australian company’s acquisition of an Idaho cobalt mine is being challenged by the state’s former governor, who wants the U.S. government to scrutinize the deal for possible hidden Chinese links.
Jervois Mining Ltd. of Melbourne closed a $44 million deal this week to acquire eCobalt Solutions , giving Jervois control of the company’s cobalt mining site in western Idaho.
The former Idaho governor, C.L. “Butch” Otter, sits on the board of a rival company, First Cobalt Corp. , a Toronto mining company that made its own offer for eCobalt’s mining operations and opposed the Jervois acquisition. Mr. Otter asked for a review of the deal by U.S. Treasury Secretary Steven Mnuchin, whose department oversees the Committee on Foreign Investment in the U.S.
“I would urge you to review this transaction to ensure that Jervois—and the cobalt resources it is acquiring—is free from Chinese control,” Mr. Otter wrote in a July 9 letter to Mr. Mnuchin. “My great concern is that without a plan for North American refining and a commitment to supply domestic consumers, Idaho cobalt ore will be shipped to China.”
Jervois Mining Chief Executive Bryce Crocker said the cobalt won’t be sent to China for refining and dismissed Mr. Otter’s concerns as an attempt by a losing bidder to derail the deal.
Mr. Crocker said that at one point his company was in investment talks with potential Chinese business partners, but that those plans were abandoned in November. He said Jervois doesn’t have Chinese shareholders with stakes large enough to steer decision-making.
The Treasury Department declined to comment on the national security review request. The Treasury-led Cfius panel can launch an investigation even after a deal is concluded and has the power to force companies to sell off ownership stakes if they find national security implications.
Mr. Otter joined First Cobalt’s board less than two months after leaving office in January. His letter didn’t mention his ties to First Cobalt; he said his board position was well publicized and he didn’t intend to mislead Treasury officials.
Mr. Otter said he had no evidence of a Chinese connection, but said he believed U.S. officials should review any acquisition involving cobalt, an iridescent blue metal used in the production of lithium batteries that can power electric vehicles.
“Full disclosure gives us a first line of defense over any form of fraud,” Mr. Otter said.
Attorney Kenneth Nunnenkamp with Morgan, Lewis & Bockius in Washington, said it’s common for companies involved in mining critical minerals to disclose such transaction details to the Treasury-led panel because their supply is valuable to U.S. manufacturers.
Cobalt and rare earths are essential parts of the defense supply chain, said Mr. Nunnenkamp, who represents clients with national security and trade issues.
The Trump administration has declared cobalt, rare earths and dozens of other minerals to be critical to the country’s economic and national security, calling reliance on foreign minerals a problem.
Government figures show that more than 130 transactions in the mining, utilities and construction sectors were reviewed by the panel between 2009 and 2015, the latest figures available from Treasury.
ECobalt Solutions spent more than $135 million to develop the site but ran low on cash before completing the project, according to its financial statements.
Mr. Crocker said his company plans to open the mine in 2021, but that it still needs $80 million in improvements before opening. It would employ about 100 people and pull 2,000 tons of the mineral each year from the mountains that run along the Salmon River.
The Idaho mine could reduce the country’s reliance on foreign-mined cobalt as global demand for the mineral surges, thanks to corporations’ race to build electric cars, longer-lasting smartphone batteries and energy storage systems for the aerospace and U.S. military technology. The Democratic Republic of Congo is the world’s largest producer of cobalt, while China is the mineral’s top refiner.
China’s ready access to cobalt raises concerns that it will give that country an advantage against U.S. and European auto makers in the effort to produce electric cars.
“The U.S. genuinely needs its own source of a secure supply of cobalt,” Mr. Crocker said.
Write to Katy Stech Ferek at katherine.stech@wsj.com
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https://www.wsj.com/articles/former-idaho-governor-questions-cobalt-mine-acquisition-11564143565
2019-07-26 12:19:00Z
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