Nemaska tumbles on reassessment news

Nemaska Lithium Inc. [NMX-TSX; NMKEF-OTCQX; NOT-FSE] shares tumbled Wednesday February 13 after the company said it will need an additional $374 million to complete the construction of its Whabouchi Project (mine and electrochemical plant) in Quebec.

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 company said in the press release on Wednesday.

The additional funds are required to complete construction and 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 shares sank on the news, falling 35.45% or $0.0195 to 35.5 cents on volume of over 32 million. The stock had previously traded in a 52-week range of $1.73 and 53 cents.

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, Quebec and converted into lithium hydroxide and lithium carbonate.

A feasibility study announced in January 2018, estimated the total initial capital cost at CDN $801 million, average life-of-mine revenue of $581 million per year, and life-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 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

“We now have a better understanding on the remaining scope of the project, estimated budget and current market conditions,” said Nemaska President and CEO Guy Bourassa. “The revised overall cost reflects a more precise outlook on installation costs and other key variables to the completion of our project,” Bourassa said.

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.