Electra Battery Materials (TSXV:ELBM,NASDAQ:ELBM) has received a US$20 million grant from the US Department of Defense to support the construction and commissioning of a cobalt refinery in Ontario.

According to a Monday (August 19) press release from the Department of Defense, the money will come to Electra via the Defense Production Act Investments Office and will use funds from the Ukraine Supplemental Appropriations Act of 2022.

The US$250 million refinery project is situated approximately 500 kilometers north of Toronto in Temiskaming Shores, a location strategically chosen to support North America’s expanding electric vehicle (EV) supply chain.

The grant is part of the US’ broader strategy to reduce its reliance on foreign sources of essential minerals used in the defense and technology sectors. The funding will be used to build a cobalt sulfate refinery, and Electra says it will be the only one of its kind in North America dedicated to producing battery-grade materials for lithium-ion batteries.

The cash injection follows earlier investments in Canadian mining projects from the Department of Defense. Fortune Minerals (TSX:FT,OTCQB:FTMDF) and Lomiko Metals (TSXV:LMR,OTCQB:LMRMF) were the recipients of the funds, which were accompanied by additional investments from the Canadian government.

Canada has also contributed US$3.6 million to support Electra’s battery materials recycling technology.

Electra paused construction of the cobalt plant last year due to a downturn in prices and higher-than-expected costs. CEO Trent Mell noted that the firm is in talks to get more funding from the Canadian government.

“We’re not in a free market, with China subsidizing producers and overproducing. I think it’s essential that, if we’re going to build our own domestic supply chain, we have this financial support,” he told Bloomberg on Tuesday (August 20).

The new facility will contribute to the regional EV supply chain by providing a steady source of cobalt.

It also coincides with other efforts to streamline and improve EV facilities in Ontario, such as automaker Honda’s (NYSE:HMC) plans to invest approximately C$15 billion to establish an assembly plant in the region.

Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.