Otter seeks security review of cobalt-firm merger. He sits on competing firm’s board

Part of the eCobalt team tours the site of its proposed cobalt mine near Salmon.
Part of the eCobalt team tours the site of its proposed cobalt mine near Salmon.

Former Idaho Gov. Butch Otter, who sits on the board of a Canadian-based cobalt mining company, has called on U.S. Treasury Secretary Steven Mnuchin to investigate possible Chinese involvement with another company that could mine cobalt in Idaho.

Otter, who left office in January after 12 years, said he’s concerned with Australia-based Jervois Mining Ltd.’s move to acquire ECobalt Solutions, based in Vancouver, British Columbia.

In a July 9 letter to Mnuchin, Otter said he believes the merger is the “wrong investment for Idaho and for our nation’s security.”

ECobalt has spent more than $135 million over the past 20 years developing its cobalt mine 26 miles west of Salmon. Cobalt is a key component of lithium-ion batteries used in electronic devices and electric vehicles.

Otter in February joined the board of Toronto-based First Cobalt Corp. Last year, First Cobalt bought US Cobalt, which had been exploring cobalt deposits in the Iron Creek area 18 miles southeast of Salmon.

The Salmon River mountains of east-central Idaho contain the only deposits of cobalt in the United States.

Former Gov. Butch Otter has called on Treasury Secretary Steven Mnuchin to look at whether a proposed merger between companies with a stake in Idaho’s cobalt industry could harm national security. Katherine Jones

Otter said he is concerned because Jervois is pursuing a joint venture that would include Chinese investment.

Jervois CEO Bryce Crocker told Reuters earlier this year that his company was in discussions with a number of parties for a 20% to 40% joint venture in a nickel-cobalt project in Australia, including miners, battery producers and original equipment makers from China, Japan and South Korea.

Otter called on Mnuchin, in his role as chairman of the Committee on Foreign Investment in the United States, to review Jervois’ corporate ownership and control, along with its plans for mining and refining of Idaho cobalt. The committee has authority to examine transactions that could harm national security.

“I would urge you to review this transaction to ensure that Jervois — and the cobalt resources it is acquiring — is free from Chinese control,” Otter wrote.

“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,” Otter wrote. “This would be the worst imaginable outcome for our national security, economic development and job creation.”

By law, the Committee on Foreign Investment in the United States cannot disclose to the public information filed with the committee.

“Accordingly, the department does not comment on information relating to specific CFIUS cases, including whether or not certain parties have filed notices for review,” Brian Morgenstern, a deputy assistant secretary for the U.S. Department of the Treasury, wrote in an email to the Statesman.

China dominates the world’s cobalt processing. The U.S. has no cobalt refiners.

Most of China’s cobalt comes from the Democratic Republic of the Congo, an African nation beset by violence and the use of children to mine the ore. Congo produces nearly two-thirds of the world’s cobalt.

Otter was traveling on Friday and unavailable for comment, said his spokesman, Larry Grossman of the Crosby Textor Group, an international political-strategy consulting firm.

Grossman said in an email that the “issue of control of refined cobalt is at the center of this.” He said China controls nearly 100 percent of the world’s refined cobalt. U.S. manufacturers, he said, rely almost entirely on China for cobalt.

“There is growing concern that this dependence on China for cobalt — as well as for other critical minerals — is very risky for the U.S.,” he said.

The Trump administration, he said, has been pursuing efforts to ensure a reliable domestic supply of critical minerals like cobalt.

“But if you don’t have a domestic capability to refine cobalt ore into what would be used in weapons systems or energy storage systems, Idaho cobalt would have to be shipped to China to be refined,” Grossman said. “The U.S. can do all it wants to develop resources, but control of the commodity is essential to ensure a reliable supply here in the United States when we might need it the most.”

He denied that Otter raised his concerns to benefit First Cobalt over its competitors.

First Cobalt, formed in 2018, lists Iron Creek as its main cobalt operation. It estimates 27 million tons of ore, yielding 0.11% cobalt, are available in an area taking up 1,700 acres. An additional 4.4 million tons is expected to yield 0.30%. First Cobalt also hopes to restart a shuttered cobalt refinery in Ontario province within the next two years,

“Gov. Otter has spent a significant part of his life as a public servant, working for the betterment of Idahoans and all Americans,” Grossman said. “While he is on the board of directors of First Cobalt, there can be no doubt that Butch starts and finishes his day thinking what’s best for the United States.”

On Thursday, Florida Republican Sen. Marco Rubio introduced legislation meant to make the United States more competitive in processing rare-earth minerals.

The bill would allow establishment of a privately funded cooperative that would be exempt from antitrust laws in order to hit back against government-backed competition from China, the Wall Street Journal reported.

“Continued U.S. dependence on China for the mining and processing of rare earths and the manufacture of those metals into useful products is untenable — it threatens our national security, limits our economic productivity, and robs working-class Americans of future opportunities for dignified work,” Rubio wrote in a release.

ECobalt shareholders are scheduled to vote on Wednesday, July 17, whether to accept Jervois’ merger offer.

First Cobalt has written letters to ECobalt shareholders telling them the Idaho project would be harmed by the merger and would emphasize African exploration at the expense of American interests. Jervois has denied the accusations and has said ECobalt’s Idaho operation would be enhanced.

ECobalt has not secured needed funding to begin production at its mine west of Salmon. In February, the company announced widespread layoffs that cut its 32-person workforce there to a skeleton crew needed to maintain the site, the Idaho Falls Post Register reported.

Cobalt prices have fallen by two-thirds in the past year to about $14 per pound, according to FastMarkets data reported by Bloomberg.

Related stories from Idaho Statesman

Reporter John Sowell has worked for the Statesman since 2013. He covers business and growth issues. He grew up in Emmett and graduated from the University of Oregon.If you like seeing stories like this, please consider supporting our work with a digital subscription to the Idaho Statesman.