Nemaska adds US$150 million streaming component to lithium plan

By Peter Kennedy

Nemaska Lithium Inc. [NMX-TSX, NMKEF-OTCQX, NOT-FSE] entered into a US$150 million streaming agreement with Orion Mine Finance LP as part of a large plan to fund a proposed lithium mine in Quebec.

The move comes just two weeks after the company announced the components of a plan to raise between US$775 million and US$825 million to fund the construction of a lithium mine on the Whabouchi property and electrochemical plant near the Cree community of Nemaska, about 300 northwest of Chibougamau, Quebec.

Aside from the $150 million streaming agreement, the company said it has been making progress on a number other financing fronts, including:

• A private placement for up to $99 million with SoftBank Group Corp. Under an agreement, SoftBank will acquire up to a 9.9% stake in Nemaska once project financing is completed.
• A US$350 million to US$300 million debt financing.
• In keeping with plans for additional equity offerings through private and/or public offerings, the company said it has obtained a receipt from Canadian securities for its final base shelf prospectus.

The company said it expects to provide more details in the short term about its debt financing endeavours.

Nemaska’s main aim is to become a leading supplier of lithium hydroxide and lithium carbonate to the consumer and automotive lithium-ion battery market.

It hopes to achieve that goal by mining lithium contained in spodumene, initially from an open pit operation at Whabouchi.

Concentrates produced at the mine site will be shipped to a hydrometallurgical plant in Shawinigan, Que., and converted into lithium hydroxide and lithium carbonate.

“We have made solid progress in our project financing endeavours over the past couple of weeks, firstly with private placements with SoftBank, a global technology leader, and now with the signing of this agreement with Orion, a leading and well-regarded financier in the mining industry,” said Nemaska President and CEO Guy Bourassa.

“This streaming agreement is a financing tool which limits shareholder dilution, lowers Nemaska Lithium’s cost of capital, and is under terms which are both competitive and flexible,” Bourassa said.

Terms of the streaming agreement are as follows:

• It provides for the sale and delivery to Orion of 14.5% of all lithium hydroxide and lithium carbonate produced at the electrochemical plant in Shawinigan, and sold to third parties (collectively, Stream products).
• Orion’s purchase price paid to Nemaska Lithium under the Streaming Agreement will be 40% of the sales proceeds of Stream products. Nemaska will act as Orion’s agent in the sale of the stream products to third party off-takers.
• Through this arrangement, Orion will receive 60% of the sales proceeds of the stream products, which will result in Orion receiving a net portion of approximately 8.7% of the stream product sales.
• The maximum amount of stream products deliverable per year will not exceed the equivalent of 5,000 tonnes of refined lithium products, Nemaska said.

Under the agreement, Orion will make an advance payment of US$150 million to Nemaska Lithium Shawinigan Transformation Inc., a unit of Nemaska.  The advance payment will be released in two equal US$75 million tranches. The first is expected to be paid once the project financing is in place and once Nemaska has satisfied certain customary conditions which it expects to satisfy soon after the project financing is complete.

The second tranche will be payable upon satisfaction of certain technical and other customary conditions that must be satisfied no later than December 31, 2019.

In the event that these latter conditions are not satisfied, the second tranche will not be released and the percentage of stream products will be reduced from 14.5% to 7.5%.

Details of the streaming agreement were announced after the close of trading on North American markets, Thursday.

On Friday, Nemaska shares rose 2.73% or $0.035 to $1.31. The 52-week trading range is $2.44 and 95 cents.

A 9.5%-owned affiliate of China’s Tianqi Group (the world’s largest producer of lithium chemicals), Nemaska sees itself as being several years ahead of its Canadian competitors.

An updated Whabouchi feasibility study announced in January, 2018, encompasses a combined open pit and underground mine operation, concentration facilities, tailings and water management at mine site as well as a hydrometallurgical processing facility in Shawinigan.

The feasibility study foresees a total initial capital cost of $801 million (Canadian), average life of mine revenue of $581 million per year, and live-of-mine production of 7 million tonnes of spodumene concentrate. That material would be converted to 770,000 tonnes of battery grade lithium hydroxide and approximately 361,000 tonnes of battery grade lithium carbonate. The estimated mine life is 33 years.

The study foresees annual average production of 213,000 tonnes of concentrates, generating 23,000 tonnes of lithium hydroxide and roughly 11,000 tonnes of lithium carbonate.