Near-term Lithium Production in Quebec
This Nemaska Lithium Inc. profile is part of a paid investor education campaign.*
Nemaska Lithium Inc. (TSX:NMX,OTCQX:NMKEF,FWB:N0T) is building one of North America’s richest and largest hard rock lithium mines and lithium salts processing facilities through a unique deposit in Nemaska and a state-of-the-art electrochemical plant in Shawinigan, both located in the province of Quebec, Canada. The project is permitted making it one of the next fully-integrated lithium salts suppliers in the world. Once in commercial production, Nemaska Lithium is projecting to be one of the world’s lowest cost producers of lithium hydroxide and lithium carbonate.
The global lithium market is expected to grow at a compounded annual growth rate (CAGR) of 12.93 percent between 2018 and 2022. The growth in the lithium market is due to the forecasted growth of electric vehicle (EV) sales; however, many analysts are concerned that the supply cannot keep up with the demand. According to Albemarle, the demand for lithium-ion batteries from the EV industry is expected to grow at an annual rate of 20 to 30 percent through 2024.
According to Nemaska Lithium’s 2019 technical report, the Whabouchi project has an expected mine life of 33 years and an initial payback period of 4.6 years. The project also features an after-tax NVP of C$2.3 billion (eight percent) and an after-tax initial rate of return (IRR) of 27.4 percent. With these encouraging numbers, Nemaska Lithium intends to resume construction on the mine in the near term with plans to commence production in 2020 at Whabouchi and 2021 for the electrochemical plant.
In the meantime, Nemaska Lithium is securing the necessary financing and off-take partners needed for success. To date, the company has entered into offtake agreements with Johnson Matthey PLC (LSE:JMAT), Northvolt and LG Chem Ltd. (KRX:051910). In addition, the company has financing agreements with Orion Mine Finance and SoftBank Group Corp. (TSE:9984). Through its Phase 1 Plant, the company can have its products verified by potential customers and finance the development of the mine and processing plant.
Nemaska Lithium Company Highlights
- Whabouchi is designed to be a vertically-integrated lithium project.
- Once the mine and processing facility are built, high-quality spodumene concentrate produced at the mine site is expected to be transported directly to the Shawinigan electrochemical plant to generate high-purity lithium hydroxide products.
- The project is expected to be North America’s richest and one of the largest reserves of lithium spodumene in the world.
- Whabouchi has a 37-million-tonne proven and probable reserves for an initial 33-year mine life.
- Whabouchi is forecasted to be one of the lowest cost producer of lithium hydroxide worldwide.
- Proprietary chemical process uses electrolysis. With electricity being the main input cost, which is $0.05 kWh in Quebec, the operating costs are low and predictable.
- Vertical integration, meaning the mine and therefore the source of lithium is 100 percent owned by the company, is a key factor in keeping costs minimal.
The Whabouchi Project
Whabouchi Lithium Mine
Nemaska Lithium intends to mine its lithium from its wholly-owned Whabouchi lithium mine located in northern Quebec, Canada. Controlling the raw material provides the company with a cost advantage over Chinese producers who are sourcing their concentrate from mines in Australia at contracted prices. Nemaska Lithium, however, is able to produce lithium at cost rather than buy concentrate.
Located roughly 300 kilometers from Chibougamau, Quebec, the Whabouchi property is comprised of one block totaling 33 claims over 1,761.9 hectares. The property features significant grades and volumes of spodumene hard rock lithium. Nemaska Lithium plans to develop the project into a combined open-pit and underground mining operation. The underground mine is expected to be developed towards the end of the open-pit life.
Whabouchi benefits from year-round road access via the Route du Nord, Nemiscau airport, Relais routier Nemiscau camp (lodging facility) and a local workforce comprised of Cree community of Nemaska. Whabouchi is also in close proximity to a network of powerlines that connect with two hydro-electric power stations located within 20 kilometers of the property.
The Whabouchi deposit
The Whabouchi project contains proven and probable reserves of 27.9 million tonnes grading 1.33 percent lithium oxide for the open-pit and proven and probable reserves of 8.7 million tonnes grading 1.21 percent lithium oxide for the underground mine. This is one of the highest-grade proven and probable reserves in North America and the second highest in the world. The mineralization at the project makes it easy for the company to establish an open-pit mining operation due to the low strip-ratio.
2019 Technical Report
In August 2019, Nemaska Lithium released an updated technical report for Whabouchi. The report outlined new economics for the project. Highlights include:
- An expected mine life of 33 years with an after-tax payback period of 4.6 years.
- Total capital costs of C$1.26 million.
- An after-tax NVP of C$2.3 billion with an eight percent discount.
- An after-tax IRR of 27.4 percent.
- A yearly average production of 205,000 tonnes of concentrate grading 6.25 percent lithium spodumene from the Whabouchi mine.
- A yearly average production of 37,000 tonnes of lithium hydroxide from the Shawinigan electrochemical plant.
Nemaska Lithium intends to resume construction on the mine in the near term and plans on commencing production in 2020 at Whabouchi and 2021 for the plant.
Shawinigan Electrochemical Plant
Nemaska Lithium constructed and developed a Phase 1 Plant in 2016 and 2017. The plant was a 1:65 scale demonstration plant. The facility transformed spodumene concentrate from the Whabouchi mine into high-purity lithium hydroxide and enabled the Corporation to showcase the reliability of its patented process and the quality of its product intended for the lithium battery market. Commercial samples were then sent to large end-users in the lithium battery industry for qualification process.
Proprietary Lithium Hydroxide Production Process
The commercial plant is expected to use Nemaska Lithium’s proprietary, patent-pending membrane electrolysis process to produce high-purity lithium hydroxide at a rate of 37,000 tonnes per year. This process was modified from an industrial process used in the chlorine alkali industry. The key operating cost of this method is electricity, which in Quebec is contracted long-term for $0.05 kilowatts per hour.
Phase 1 Plant
The Phase 1 plant was in operation from February 2017 to December 2019. The plant has successfully produced lithium hydroxide from Whabouchi spodumene concentrate, demonstrating Nemaska Lithium’s ability to produce lithium hydroxide. This allows the company to send samples to potential customers for qualification.
A battery-grade lithium hydroxide solution has been delivered to Johnson Matthey, who has sent the product to its customers for verification. To date, Johnson Matthey has received over 80 tonnes of lithium hydroxide for consumer verification.
Social and Environmental Impact
Nemaska Lithium is committed to a low carbon footprint, environmentally-responsible production model throughout its process from concentrate to finished lithium salts. At both the plant and mine site, Nemaska Lithium has designed a project that minimizes the project’s footprint and recycles materials when possible.
- Co-disposal of filter-pressed tailings with waste rocks at the mine site;
- Almost-100 percent process water reuse at both sites;
- Low greenhouse gas (GHG) emissions due to use of electrolysis with hydroelectricity;
- Valorization of all side products with the result of having no waste at the Hydromet site.
In addition to a fly-in, fly-out program for mine workers, Nemaska Lithium is looking to employ local members of the Cree nation to increase economic benefits for the local community. The company’s mine plan also does not encroach on any lakes or rivers and the small pit size and low-strip ratio of the project is expected to make Whabouchi a relatively low-impact mine.
Whabouchi is expected to be a low-cost producing mine due to its low-strip ratio. Minimal waste material results in a smaller mining pit and waste pile, keeping Nemaska Lithium’s environmental footprint small while respecting the environmental wishes of the Cree population of Nemaska.
With regards to tailings and waste rock management, the best technologies available have been integrated into the project’s design, ensuring that the filter-pressed tailings produced at the mine site are co-disposed with waste rocks on a dedicate pile. Such methods ensure that there is high water and reagents reuse rates in the concentrator. The absence of a dyke or dam to store tailings eliminates the risk of a dam failure. Moreover, filtered tailings can be progressively revegetated while the mine is still in operation.
Nemaska Lithium’s processing method uses electrolysis to produce a lithium hydroxide product. Quebec’s energy comes from low-cost, renewable hydro-electricity, making Nemaska Lithium’s products one of the greenest in the industry. The deposit at Whabouchi also features fewer impurities than other lithium deposits. This translates into a simpler processing for a higher quality end product.
Nemaska Lithium intends to fund the construction, commissioning, working capital and reserve funds for its Whabouchi lithium mine and Shawinigan electrochemical plant. To date the company has signed a number of financial agreements, including:
- Signed a US$150 million streaming agreement with Orion Mine Finance. So far, the company has received its first US$75 million payment from Orion.
- Signed private placement for up to C$99 million with SoftBank to hold no more than 9.9 percent of the shares outstanding once project financing is completed. In addition, Softbank has the right of first offer on up to 20 percent of Nemaska Lithium’s products.
- Signed C$80 million private placement with Resources Quebec.
- Completed a C$280 million public offering through a bought deal.
On December 23, 2019, Nemaska Lithium announced is has obtained from the Superior Court of Québec protection from creditors under the Companies’ Creditors Arrangement Act (“CCAA”), to enable the Corporation to finalize its financing efforts in order to complete the construction and begin the operation of the Whabouchi project, following the previously announced cost reassessment.
The Corporation intends to commence a proposed sale and investor solicitation process (the “SISP”) on February 28, 2020, to be conducted in consultation with the Monitor and the Corporation’s financial advisors, National Bank Financial Inc. and Clarksons Platou Securities AS. These financial advisors have significant knowledge of the Corporation’s affairs as well as relevant expertise regarding SISP procedures.
The SISP is intended to generate interest in either a recapitalization of the Corporation, or in the business or its assets, with the goal of maximizing return in respect of the Corporation’s assets and potentially creating the foundation of a plan of compromise or arrangement for all stakeholders of Nemaska Lithium.
Nemaska Lithium’s Board of Directors and Management Team
Jacques Mallette – Chairman
Jacques Mallette is President and an entrepreneur investor of Raymor Industries Inc., a high technology company specialized in manufacturing advanced carbon materials for batteries and electronics. He is also a seasoned director with considerable experience within international companies.
Mallette previously served as CFO of Québecor Inc. and Cascades Paperboard International Inc. He also acted as President and CEO of this latter company and of World Color Press Inc. He is a member of the Québec Order of Chartered Professional Accountants and graduated from l’École des Hautes Études Commerciales in Montreal.
Michel Baril, Eng. – Director
A mechanical engineer with over 30 years of experience in management, Michel Baril was a top executive with Bombardier Inc. Presently, he acts as director of numerous public and private companies.
François Biron is a senior professional mining engineer with 40 years of experience in the mining industry. His extensive experience in mining operations has been developed through acting in several senior site-based positions with well-known international mining companies, and recently he has acquired experience in the executive management of a Canadian industrial minerals company. Biron has an entrepreneurial vision oriented towards business development and a perspective of industry growth with respect to the environment. He participated in the management of major open pit mines with the best operating standards to achieve goals and corporate objectives. Biron elaborate recently a new mining project in introducing the social acceptability concept and public consultations in the local communities where the project will be implemented, based on the latest automation mining technologies and to improve the mining process.
Paul-Henri Couture – Director
Paul-Henri Couture has over 35 years of experience as a financial management and investment professional. He has held senior positions at the Caisse de dépôt and placement du Québec and at Sentient Asset Management Canada. During his tenure at the Caisse, Couture led a team responsible for a $3-billion investment portfolio with a focus on financial institutions and natural resources sectors. While at the Caisse, Couture also launched two innovative mining funds: Groupe Sodémex and MinQuest Capital. He built and developed a $3-billion portfolio in turnarounds and corporate restructurings. Couture is President of Minvest Capital, a business providing management and investing consulting services.
Vanessa Laplante – Director
Vanessa Laplante has more than 25 years of experience in finance, accounting and taxation, including 12 years in the mining industry. She is a member of the board of directors of the Quebec Mining Association (QMA) since 2015 and chairs its tax committee.
A leader in her field, Laplante has developed expertise in mining management and taxation through her experience with major Canadian gold producers. She currently holds the position of Director of Taxation and of the Montreal Office of the Canadian Malartic Partnership, a joint venture between Agnico Eagle Mines Limited and Yamana Gold Inc., which operates the Canadian Malartic mine. She is a member of the Ordre des comptables professionnels agréés du Québec.
Shigeki (Sean) Miwa – Director
Shigeki Miwa holds several positions concurrently within the SoftBank Group including Representative Director and CEO of SB Energy Corp. (from 2017), General Manager and CEO Project Office (from 2016) at SoftBank Group Corp., Board Member of the Renewable Energy Institute (from 2014), Representative Director and CEO of Bloom Energy Japan Ltd. (from 2013) and Director of Clean Energy Asia LLC (from 2012). Before joining SoftBank in 2011, he worked for Mitsui & Co. Ltd., from 1991, mainly in the natural resources and energy sector, based in Tokyo, Sydney and Brisbane. Miwa graduated from Waseda University in Tokyo with a B.A. in History, received a Master of Financial Management and an MBA from the Graduate School of Management, Macquarie University in Sydney and completed the General Management Program at Harvard Business School in Boston.
Luc Seguin – Director
Luc Séguin is a consultant and a Certified Company Director (ASC). He has 25 years of experience in operational and general management in the industrial sector, including eight years in Europe, as well as 12 years in corporate development and financing. He was notably Senior Vice President Mines, Metals, Energy and Environment at the Société générale de financement du Québec and Vice President at Investissement Québec. He is a member of Québec’s Ordre des ingénieurs, graduated from l’École Polytechnique in Montreal.
Steve Nadeau, CPA, CGA – Chief Financial Officer
Steve Nadeau is a CPA, CGA and has been the Chief Financial Officer of Nemaska since its inception in 2008. He brings more than 20 years of experiences and knowhow in management, accounting and finance. Prior to joining Nemaska, he held several senior financial positions for companies which were either extracting or manufacturing products related to the granite industry, electronics and automotive field. Nadeau was also Chief Financial Officer of Monarques Gold Corporation from March 2011 to December 2015.
Marc Dagenais – VP Legal Affairs and Corporate Secretary
With more than 30 years of national and international mining experience, Marc Dagenais is responsible for the leadership and management of the overall legal affairs and corporate governance matters of Nemaska Lithium. In addition, he actively contributes to strategic planning and other key corporate functions.
Prior to joining Nemaska Lithium, he headed legal affairs for Graymont Limited and Cambior Inc. (now part of Iamgold Corporation), as well as for the African Region of Kinross Gold Corporation (being based overseas). He holds bachelor degrees in Law from Université de Montréal and Management Accounting from UQAM.
Chantal Francoeur – VP Human Resources and Organizational Development
Chantal Francoeur brings more than 25 years of human resources experience in the mining industry, both in Canada and internationally. During her career, Francoeur attracted and assembled the necessary teams required to build three mines. Most recently she was Vice President of Human Resources and Communications for Koniambo Nickel, a large-scale nickel operation in New Caledonia. At Nemaska Lithium, she leads the development, implementation and execution of all aspect of HR services; including attracting, developing and retaining the necessary talent to achieve Nemaska Lithium’s goal of becoming a lithium salts producer.
Robert Beaulieu – VP Operations & Construction
Robert Beaulieu has been Vice-President Operations since January 2019. With over 25 years of experience in the mining industry and extensive expertise in the development of complex and innovative projects, he currently oversees the work of Nemaska Lithium at the mine as well as the electrochemical plant. Prior to joining Nemaska Lithium, he was the Technical Director at Koniambo Nickel SAS, a major nickel producer in New Caledonia.
Over the course of his career, Beaulieu has led several projects in the mining and metallurgical sectors. Within our team, he will ensure the transition from construction and development activities to the growth of our business activities, as well as the optimization of our process. He is a member of the Ordre des ingénieurs du Québec.
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