The Arizona-based company said its facility will be the first for solar-powered cobalt processing in the US. The facility will produce cobalt sulfate and cobalt metals to service the North American electric vehicle (EV) market, as well as the aerospace and defense industries.
Introducing the first solar-powered cobalt facility in the US
In an exclusive interview with Fastmarkets on Friday, April 11, Gil Michel-Garcia, EVelution co-founder, executive vice president and general counsel, noted that the Yuma region in southern Arizona has experienced rising electricity prices. This is due to rising demand and decreasing supply from neighboring hydropower facilities.
“Since Yuma County is the sunniest county in the United States, this made solar power the natural and cheapest solution to power our facility,” Michel-Garcia said.
“Generating our own solar [power] permits us to sell our excess power during the day to local farmers, providing them with a cheap local source of electricity and gaining their support for the project,” he continued.
The project is expected to start at the end of 2025 and be fully operational by the end of 2027. When fully operational, the company said the facility is expected to have a production capacity of 7,000 tonnes per year of cobalt — up to 40% of estimated domestic cobalt demand.
Strategic location and feedstock sourcing
The facility will be on a 293-acre property near Wellton, Arizona — close to the California-Arizona border — according to EVelution’s website. The property is near a Union Pacific Railroad track and US Interstate Highway 8. EVelution’s website says the company expects to receive cobalt hydroxide feedstock by truck, from the ports of Ensenada, Mexico, and Houston, Texas.
The facility will “mostly” source its cobalt hydroxide feedstock from the Democratic Republic of Congo (DRC), the largest global supplier of cobalt hydroxide, according to company documents. EVelution has signed letters of intent with Trafigura, Glencore and ERG to source cobalt hydroxide feedstock.
Advancing sustainability through water recycling and tailing management
EVelution said it will source water from aquifers running under the property and recycle 70% of the water used to minimize new water usage and disposable water. Additionally, the facility will have no on-site tailings. EVelution will collect, transport and dispose of its tailings at a licensed local landfill located less than 20 miles from the facility. By not installing tailing ponds on its property, EVelution said it will minimize the risk of potential contamination of its property or nearby land.
Michel-Garcia said that the water recycling and commitment to no tailings were important elements for the plant design and for garnering support from local stakeholders. This is because the property is located in a rural valley surrounded by agricultural land.
“As a result of these efforts, EVelution Energy was able to expeditiously obtain its zoning and special permits to build and operate a cobalt processing facility […] obtaining the unanimous approval of the Yuma County Board of Supervisors to that effect,” Michel-Garcia said.
EB-5 program basics and EVelution’s financing approach
EVelution is financing the project under the US’ EB-5 program through a special-purpose vehicle created by Intermestic Capital, an Arizona-based EB-5 advisory firm. The EB-5 program grants permanent US residence to foreign individuals and families who are accredited investors and make significant qualified investments in projects approved by US Citizenship and Immigration Services (USCIS).
“The EB-5 program is an attractive option for developers of projects located in rural and/or high unemployment areas in the US, because it provides for mechanisms to raise financing — usually subordinated debt — in the early stages of a project at attractive rates, because of the built-in interest of certain foreign investors of immigrating to the US and being able to obtain their permanent US residency in an expedited manner,” Michel-Garcia said.
Advantages of the EB-5 program for EVelution
The EB-5 program is a “very useful financing tool” used in the real estate industry as “the money comes first” with less limitations than other financing structures, Michel-Garcia said. Additionally, he said the program offers better rates to EVelution.
“It’s doubtful we would be able to secure mezzanine debt at this stage of the process,” he said. “Through EB-5, you’re able to secure it and you’re able to get it at better rates than you’d otherwise get, even if you were able to secure it.”
“The EB-5 money helps you finish up some of the work that needs to still get done before construction starts, like finishing up testing, wells and water. There’s a bunch of work and money that’s currently being spent that the EB-5 money absolutely helps get done,” Navaid Alam, EVelution’s president and chief executive officer, said in the same interview.
USCIS administers the EB-5 program and approves projects that generate jobs in rural areas and areas with high unemployment in the US. Individuals must invest a minimum of $800,000 to potentially qualify for US permanent residency, also called a “green card.”
National support and complementary funding sources
EVelution filed its project with USCIS as an “expedited national security interest project.” Michel-Garcia said that, while EVelution does not yet have the designation, the designation will make the project “infinitely more marketable.” The company said it expects to receive priority processing treatment from USCIS as its project is “critical to the resilience of the US defense industrial base.”
“For projects like ours that meet that national interest criteria, it’s very fast, reasonable and flexible money that comes in first,” Michel-Garcia said.
The company previously received $200 million in senior secured financing from the US Export-Import Bank under the Make More in America initiative and the China and Transformational Exports Program. Both sources of financing will provide EVelution with “a substantial majority” of the required capital to construct the solar-powered cobalt processing facility, according to the April 9 press release.
Additionally, the cobalt processor start-up is in the process of obtaining $57.2 million in equity under the Opportunity Zone Program. The program provides tax incentives to US investors who invest in “economically depressed areas” in the US, Michel-Garcia said.
Bipartisan support drives solar-powered cobalt refining
The project has strong bi-partisan support from multiple federal, state and local government officials, according to EVelution. The company included Arizona Governor Katie Hobbs, US senators Mark Kelly (D-AZ) and Ruben Gallego (D-AZ), US Representative Paul Gosar (R-AZ District 9) and the Yuma County Board of Supervisors in its statement.
“The US lacks a lot of cobalt refining, which is a challenge for supply chains that are trying to decouple from China,” Andrew Saucer, Fastmarkets battery raw materials analyst, said.
Cobalt is a critical mineral that is essential for aerospace alloys, defense technologies and lithium-ion batteries. Most of the world’s cobalt is refined in China. The US currently has no commercial-scale cobalt processing facilities.
“The United States is dangerously dependent on supplies of cobalt from our adversaries,” Michel-Garcia said. “It is imperative that the United States quickly develop its own capacity to supply the defense industrial base with all the critical minerals that are needed for our national security, including alloy-grade cobalt, which is of immediate importance to most of the American weapon systems — including samarium-cobalt permanent magnets, whose export just recently got restricted by China.”
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