Mr. Trent Mell reports

ELECTRA LAUNCHES DEBT-TO-EQUITY CONVERSION AND US$30 MILLION FINANCING WITH LENDER SUPPORT TO ADVANCE NORTH AMERICA'S FIRST BATTERY GRADE COBALT REFINERY

Electra Battery Materials Corp. has entered into a term sheet and transaction support agreement with its lenders pursuant to which it will launch a debt-to-equity conversion that will reduce its convertible debt outstanding by 60 per cent as part of a comprehensive financial restructuring. In addition, the company intends to launch a $30-million (U.S.) financing, which will include a $10-million (U.S.) conditional commitment from the lenders. Together, the transaction and equity financing are designed to strengthen Electra's capital structure and provide the financing required to advance the commissioning of North America's first cobalt sulphate refinery.

Key terms:

• Electra will convert approximately $40-million (U.S.) of its outstanding notes, plus accrued and unpaid interest, into equity at a price of 60 U.S. cents per common share. This exchange will reduce total debt under the notes to approximately $27-million (U.S.).
• The concurrent equity financing will consist of $30-million (U.S.) of units at a price of 75 U.S. cents per unit. Each unit will consist of one common share and one common share purchase warrant, with each warrant exercisable for one common share for $1.25 (U.S.) for a period of three years from the date of issuance. The equity financing is expected to close in tandem with the transaction.
• Current shareholders will have the right to purchase units on the same terms as new investors, in proportion to their existing common share ownership.
• The remaining 40 per cent of the notes, plus accrued and unpaid interest, will be exchanged for a new term loan, maturing three years after completion of the transaction.
• To support operations during the restructuring process, the lenders are providing $2-million (U.S.) in short-term bridge debt in the form of 90-day bridge notes. In return, the lenders will gain the right to appoint one director to Electra's board of directors.
• The bridge notes will finance working capital needs leading up to a meeting of shareholders of the company, regulatory approvals and the closing of the equity financing, mitigating near-term default risk.
• Following completion of the equity financing and the transaction, the company intends to increase its board size from five to seven members, with the lenders having the right to appoint up to three board members, relative to their ownership stake in the company.

"Today marks a turning point for Electra," said Trent Mell, chief executive officer of Electra. "By equitizing a majority of our debt and securing bridge financing, we are taking decisive action to create a sustainable capital structure and advance the steps required to complete the cobalt refinery, including arranging approximately $30-million (U.S.) in additional capital.

"This restructuring is undeniably dilutive and difficult for existing shareholders, but it is both timely and necessary. We have rigorously explored the alternatives, including asset sales, mergers and alternative financing structures, and none offered a preferable outcome. The lenders have provided continued support since construction of Electra's refinery was paused due to post-COVID inflation and supply chain disruption, including through new debt funding, equity commitments, and multiple waivers or amendments to loan conditions. This transaction preserves the value of our core asset and provides the foundation for future growth.

"With shareholder approval, lender participation and government support, we will soon be in a position to complete construction of North America's first cobalt sulphate refinery. This step, though challenging, is essential to strengthening the region's battery materials supply chain and enabling Electra to become a reliable partner for governments, OEMs and commercial stakeholders."

"By significantly reducing our debt and securing new capital, we are strengthening our financial foundation and aligning our funding with a clear, executable path to production," commented Electra chief financial officer Marty Rendall. "Together, this restructuring and financing, alongside other well-advanced financing initiatives, are expected to provide the capital needed to complete the refinery and create long-term value across our stakeholder base."

Electra's battery materials refinery is central to North America's efforts to onshore critical mineral supply chains, reduce reliance on China, and strengthen national and economic security. By advancing the continent's first cobalt sulphate refinery, Electra will provide a low-carbon, domestic source of a material essential for both electric vehicles and defense applications. The company has already attracted support from multiple levels of government and from its lender group, reinforcing broad-based confidence in the strategic importance of its project.

Details of the transaction

Pursuant to the transaction, holders of the notes will exchange 60 per cent of the aggregate principal amount and the aggregate amount of all accrued and unpaid interest of the 8.99 per cent senior secured convertible notes due Feb. 13, 2028, and 12.0 per cent senior secured convertible notes due Nov. 12, 2027, for common shares at an exchange price of 60 U.S. cents per Electra common share, representing 60 per cent of the aggregate value of the notes, inclusive of principal and accrued and unpaid interest, reducing total debt under the notes to approximately $27-million (U.S.).

The lenders will exchange the remaining 40 per cent of the aggregate principal amount and the aggregate amount of all accrued and unpaid interest of the notes for an equal aggregate principal amount of a new term loan. Interest on the new term loan will be payable in cash or in kind at the company's election at a rate per annum of 8.99 per cent if paid in cash or 11.125 per cent if paid in kind. The new term loan will mature three years from the date of the closing of the transaction.

To support operations during the transaction process, the lenders have agreed to purchase $2-million (U.S.) aggregate principal amount of unsecured 90-day promissory notes to finance working capital. Interest on the bridge notes will be payable in cash at maturity at a rate of 12.00 per cent per annum. Upon purchase of the bridge notes, the lenders shall have the right to appoint a director to the board of directors of the company. The company must redeem the bridge notes at a redemption price equal to 100 per cent of the aggregate principal amount of the bridge notes, plus all accrued and unpaid interest thereon, in connection with the completion of the transaction.

The transaction remains subject to the satisfaction of a number of conditions precedent, including receipt of regulatory approvals (including the TSX Venture Exchange) and shareholder approval, as it is expected that the transaction will result in the creation of one or more "control persons," as defined under applicable securities law, and the negotiation and execution of definitive documentation for the transaction on terms acceptable to the company and the lenders. In connection with the transaction, the company will hold a special meeting of shareholders, expected to be held in October, 2025, where shareholders will, among other things, be asked to approve a consolidation of the company's shares at a ratio to be determined by the board. The transaction is expected to close shortly thereafter. All components of the transaction are expected to occur concurrently, other than the financing of the bridge notes, which is expected to occur in the coming days.

Details of the equity financing

The equity financing will consist of units raising $30-million (U.S.) at a price of 75 U.S. cents per unit. Each unit will consist of one common share and one warrant, with each warrant exercisable for one common share for $1.25 (U.S.) for a period of three years from the date of issuance. The equity financing will include a $10-million (U.S.) commitment from the lenders, subject to the satisfaction of certain conditions.

It is anticipated that the net proceeds from the equity financing will be used to finance the completion and ramp-up of the company's cobalt refinery in Temiskaming Shores in Ontario, to repay the bridge notes to be issued to the lenders, and for general corporate and working capital purposes.

The equity financing will close in tandem with the transaction. In the event the gross proceeds from the equity financing are greater than $34.5-million (U.S.), the company will allocate the excess to repayment of the notes at a purchase price of par plus accrued and unpaid interest.

The company will issue a further news release once the structure for the equity financing has been finalized.

TSX-V waiver

Neither the equitization price of the notes nor the offering price of the units complies with the TSX-V minimum pricing requirements under TSX-V Policy 4.1, Private Placements, which mandate that the offering price of securities issued under an equity offering must not be less than the discounted market price (as defined in the policies of the TSX-v) for the common shares. The company has therefore applied for a waiver in respect of the pricing requirements, however, there is no assurance that such a waiver will be granted.

About Electra Battery Materials Corp.

Electra is a leader in advancing North America's critical minerals supply chain for lithium-ion batteries. Currently focused on developing North America's only cobalt sulfate refinery, Electra is executing a phased strategy to onshore critical minerals refining and reduce reliance on foreign supply chains. In addition to establishing the cobalt sulphate refinery, Electra's strategy includes nickel refining and battery recycling. Growth projects include integrating black mass recycling at its existing refining complex, evaluating opportunities for cobalt production in Becancour, Que., and exploring nickel sulphate production potential in North America.

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