Electra Battery Materials has signed a term sheet with the Ontario government for C$17.5 million, part of a broader C$100 million effort to build North America's first dedicated cobalt refinery. For EV watchers, this is a significant development - even in a world increasingly shifting toward cobalt-free battery chemistries like lithium iron phosphate (LFP).

Why cobalt still matters

While LFP batteries are gaining traction thanks to their lower cost, longer cycle life, and improved safety, cobalt is far from obsolete. Automakers still rely on cobalt-containing chemistries—such as nickel manganese cobalt (NMC) and nickel cobalt aluminum (NCA)—for high-performance, long-range electric vehicles. These formulations deliver higher energy density, which matters for vehicles that need to go farther on a single charge or push performance limits.

Where the cobalt will come from

Electra plans to source cobalt from a mix of locations, giving the refinery flexibility and resilience. This includes ore from Ontario’s historic Cobalt mining camp, feedstock from Electra’s Iron Creek cobalt-copper project in Idaho, and imported cobalt hydroxide from the Democratic Republic of the Congo. Electra is also testing recycled “black mass” from used EV batteries, supporting a more circular supply chain.

U.S. backers and strategic support

Beyond Ontario’s investment, the project has U.S. backing. In 2024, the U.S. Department of Defense awarded Electra US$20 million under the Defense Production Act to help build and commission the refinery. This support underscores cobalt’s role as a critical mineral and the strategic interest the U.S. has in securing reliable supplies from North America.

Tariffs and trade tensions

The on-going tariff war between the Trump administration and Canada has introduced uncertainty for cross-border trade. While many critical minerals, including cobalt, are being reviewed for exemptions, changes to tariff policies could raise costs for exporting refined cobalt sulfate to the U.S. For now, cobalt shipments appear largely exempt, but Electra and its customers will need to monitor this evolving trade environment closely.

Where the cobalt will be used

Electra has signed an offtake agreement with LG Energy Solution for up to 80 percent of the refinery’s output in the first five years. This cobalt will flow into global supply chains, including North American battery production. Some refined cobalt could be used in emerging Canadian battery plants, but much is expected to supply U.S. manufacturers, especially given defense and industrial demand.

The LFP question

LFP is on the rise—especially in affordable, mass-market EVs where cost and safety outweigh the need for maximum range. Tesla, Ford, BYD, and others are adopting the chemistry. But analysts expect cobalt demand to persist in higher-end models, grid storage that requires higher energy density, and emerging applications like electric aviation. Even if LFP takes more share, cobalt demand will remain significant.

What it means for EVWorld readers

For EV buyers, investors, and policy watchers, Electra’s refinery highlights an important balancing act:

• Chemistry diversity: The EV market will use both LFP and cobalt-based chemistries depending on performance needs.
• Strategic independence: Local refining reduces reliance on overseas supply chains and strengthens North America’s EV ecosystem.
• Sustainability: Incorporating recycled material adds circularity to the industry.
• Policy risk: Tariffs remain an uncertain factor that could affect cross-border supply chains.

In short, Canada’s cobalt refinery won’t stop the LFP wave, but it will ensure that when cobalt is needed, EV makers can source it in a way that is more secure, sustainable, and closer to home.