Nemaska seeks more funds for lithium project

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Nemaska Lithium Inc. [NMX-TSX, NMKEF-OTCQX, NOT-Frankfurt] is looking to secure additional funding for its Whabouchi lithium mine in Quebec by issuing equity, taking on debt or selling assets.

“Everything from M&A to more debt to equity is on the table,” Nemaska’s head of investor relations Wanda Cutler told Reuters during an interview. “Over the next few months, we will be making those decisions.”

Cutler made the comments during a lithium conference in Santiago, Chile, that was expected to focus on oversupply concerns as well as calls for transparency in the way that industry pricing is tracked.

Albemarle Corp. [ALB-NYSE], the world’s largest lithium producer, has said it will not participate in the London Metal Exchange’s plan to launch a new contract for lithium, a move that will deprive the industry of a key source of pricing data, Reuters said in a report.

Meanwhile Nemaska shares eased 1.8% or $0.005 to 27 cents on Thursday. That’s down from a 52-week high of $1.01.

Whabouchi is facing cost overruns of over $300 million. The company has said it will need the additional funds to complete the construction of project (mine and electrochemical plant).

This is due to indirect items that were not forseen. They include building lodging at the mine for workers and design challenges with the chemical processing facility.

The announcement follows a “cost to complete reassessment” which was performed to reflect the current level of detailed engineering and reception of numerous firm quotes for equipment and installation.

The additional funds are also needed to meet the drawdown conditions provided in the streaming agreement with Orion Mine Finance and the senior secured bonds closed on April 12 and May 30, 2018 respectively.

Nemaska is aiming 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.

A feasibility study announced in January, 2018, estimated the total initial capital cost at $801 million (Canadian), average life of mine revenue of $581 million per year, and life of mine production of seven 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 envisaged annual average production of 213,000 tonnes of concentrates, generating 23,000 tonnes of lithium hydroxide and roughly 11,000 tonnes of lithium carbonate.

As part of a large plan to fund the proposed lithium project, the company recently announced various components of a proposed US$775 million to US$825 million financing package. The components included:

  • A US$150 million streaming agreement with Orion Mine Finance LP.
  • A US$350 million bond offering.
  • A private placement of 88.4 million subscription receipts to SoftBank Group Corp. in escrow for $99 million. The SoftBank private placement was expected to result in the conversion of 83.7 million subscription receipts into Nemaska common shares and the release from escrow of $93.8 million.

Following the completion of the private placement SoftBank was expected to own 9.9% of Nemaska

By the end of 2018, $138.4 million had been incurred at the Whabouchi mine and $67.3 million for the Shawinigan electrochemical plant, mainly to cover the cost of engineering, site and civil works.

The company said it currently has $335 million in unrestricted cash and cash equivalents.

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