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Nemaska Lithium - Near-term Lithium Production in Quebec

Nemaska Lithium – Near-term Lithium Production in Quebec

Overview

Nemaska Lithium Inc. (TSX:NMX,OTCQX:NMKEF) is a near-term lithium producer focused on becoming a supplier to the emerging lithium battery market. The company’s wholly-owned Whabouchi Spodumene Mine project in Quebec, Canada, is estimated to be the second richest and largest lithium deposit in the world. Nemaska Lithium has developed innovative patent-pending methods of converting lithium sulfate from Whabouchi into high-purity lithium hydroxide and carbonate.

The company recently completed a 17,000 meters in-fill drilling campaign during which it discovered a new mineralized zone, named Doris, at Whabouchi. Mineralization has been confirmed in some of the drill holes down to the 500-meter level, and assay results. A new resource estimate is expected by the end of October 2016 to be followed by a new mining reserves update by year end.

In order to feed its Phase 1 hydromet plant currently in construction in Shawinigan, Quebec, with mine representative ore, Nemaska Lithium is installing a new self-contained dense media separation (DMS) modular mill at the mine site. It will be commissioned by year end and will process about 60,000 tonnes of ore. The sample will later be milled and processed into lithium hydroxide at the company’s Phase 1 Plant.

An updated 2016 feasibility study, encompassing a combined open pit and underground mine plan, recently replaced a 2014 feasibility study to reflect the hydromet plant location change from Salaberry-de-Valleyfield to Shawinigan, and process optimization. The new study lowers production costs for lithium hydroxide by 22 percent and by 18 percent for lithium carbonate, compared to the 2014 study. Development of the Whabouchi lithium mine has been green-lighted by both the provincial and federal governments. A completed feasibility and permits in place makes the Whabouchi projected significantly de-risked compared to its peers in the space.

Nemaska Lithium expects to initiate Phase 1 production in Q4 2016 with full commercial production slated for H2 2018. The company has signed its first commercial off-take agreement with Johnson Matthey Battery Materials Ltd.

Nemaska Lithium completed prospectus offering in July 2016, securing $69 million in financing, and began trading on the Toronto Stock Exchange (TSX) under the symbol NMX. Prior to that it was the second best performing mining stock on the 2016 TSX Venture 50® and was the Top Company Overall of the 2016 OTCQX® Best 50.

Investment Highlights

  • Near-term lithium producer in world-class mining jurisdiction of Quebec
  • Key asset: Whabouchi – a world class lithium deposit
    • 2nd richest and largest deposit in the world with 27.3 MT Proven and Probable Reserves
    • Permitted Mine Site (Federal and Provincial)
  • Feasibility study complete and permits in place—project significantly de-risked compared to peers.
  • Process uses electrolysis with the main input costs being electricity which in Quebec is $0.05 kWh, keeping our costs low and predictable
  • Phase 1 Chemical Plant to be operational in Q4 2016; commercial production in H2 2018.
  • Lithium hydroxide is the chemical compound of choice for battery manufacturers such as Tesla and Panasonic—higher power density, longer lifecycle and enhanced safety features
  • Excellent lithium market macros—demand outpacing limited supply

Key Projects

Whabouchi Mine

Located roughly 300 kilometers from Chibougamau, Quebec, the Whabouchi Property is made up 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 as a combined open pit and underground mine with production derived from the open-pit portion for the first 20 years.

Whabouchi benefits from its proximity to existing infrastructure, as there has been a significant amount of development by Hydro-Quebec in the area. The site is near the Route du Nord, the daily serviced Nemiscau Airport and the Relais routier Nemiscau camp (lodging facility) and to the Cree community of Nemaska.

Nemaska Lithium - Near-term Lithium Production in Quebec

According to the updated 2016 feasibility study, the Whabouchi project contains proven and probable reserve of 20 million tonnes of 1.53 % lithium oxide (Li2O) for the open pit and proven and probable reserves of 7.3 million tonnes at 1.28 % Li2O for the underground mine. This is the highest grade proven and probable reserve in North America, second highest in the world, as well as the largest proven reserve known.

The 2016 feasibility study also includes:

  • an estimated life of mine of 26 years
  • a net present value of $1.9 billion
  • a pre-tax internal rate of return of 37.7 percent

New lithium-bearing zone discovered

Nemaska Lithium recently completed a 17,000 meters in-fill drlling campaign during which it discovered a new lithium bearing zone in the southwestern end of the planned pit area A total of 16 holes have intercepted the new mineralized zone.

“Drilling has gone even better than expected and I am obviously very pleased with this new lithium discovery,” said Bourassa. “What we know now is that the new zone is quite a thick dyke and we are seeing true widths similar to the main zone at Whabouchi.”

Nemaska Lithium’s infill drilling program encountered mineralization where expected, increasing confidence in the existing block model. Drilling also confirmed that known dykes are mineralized and present down to at least the 200-meter level, while mineralization has been confirmed in some drill holes around the 500-meter level near the existing extension.

Mill installation and bulk sample increase for Phase 1 Plant

Nemaska has applied for a Certificate of Authorization for the installation and operation of a new self-contained dense media separation (DMS) modular mill with a processing capacity of 10 tonnes per hour. The mine representative bulk sample was also increased from 29,000 tonnes to 60,000 tonnes, and later processed into lithium hydroxide at Nemaska Lithium’s Phase 1 Plant currently under construction in Shawinigan. Met-Chem Canada will prepare the site and install the DMS modular mill, which is expected to be completed by the end of October 2016 and in production of a DMS concentrate over the next 12 to 18 months.

“The modular mill is a critical component of our Phase 1 Plant project as it will produce the necessary concentrate that will be further processed into lithium hydroxide samples for customers that are seeing to qualify our products,” explained Bourassa.

Social and Environmental Impact

As a lithium producer with end users based in the green technology market, Nemaska Lithium is working hard to reduce its environmental and social impacts. In addition to a fly-in, fly-out program for mine workers, Nemaska Lithium is looking to employ local members of the Cree nation in order to increase economic benefits for the local community.

Importantly, Nemaska Lithium’s mine plan does not encroach on any lakes or rivers. Overall, the small pit size and low-strip ratio of the project will make Whabouchi a relatively low-impact mine.

Whabouchi is expected to be a low-cost producing mine due to its low-strip ratio of 2.2:1. This low amount of waste material will allow for a smaller mining pit and waste pile, keeping Nemaska Lithium’s environmental footprint small and respecting the environmental wishes of the nearby Cree population in the village of Nemaska.

With regards to tailings and waste rock management, best economically and technically available technologies have been integrated to project design so that filter-pressed tailings will be produced at the mine site to be co-disposed with waste rocks on a dedicate pile. Such method enables high process water and reagents reuse rates in the concentrator as well as the absence of dyke/dam required to store tailings and therefore no risk of dam failure. Moreover, filtered tailings can be progressively revegetated, i.e. before mine closure, as the mine is still in operation.

Nemaska Lithium’s processing method for converting spodumene concentrate into lithium hydroxide uses electrolysis. Quebec’s energy comes from low-cost, renewable hydro-electricity, making Nemaska’s lithium products one of the greenest in the industry. The deposit at Whabouchi also features fewer impurities such as mica, sodium and potassium than amounts commonly found in other lithium deposits. This translates into a simpler processing for a higher quality end product.

Permitting Completed

In July 2015, Nemaska Lithium received a positive federal environmental assessment decision for the Whabouchi Project from the Minister of Environment Canada. In September 2015, Nemaska Lithium received the General Certificate of Authorization for the Whabouchi Project from the Quebec government.

“Whabouchi is the only permitted lithium project within the Eeyou Istchee James Bay territory,” said Bourassa. “Quebec is an excellent jurisdiction in which to build a mine, in particular the Eeyou Istchee James Bay region. Since the beginning, our project has been supported by the various Quebec exploration funds. As we move towards a construction decision, the project benefits from the recently relaunched Plan Nord program from the Quebec Government.”

Phase 1 Plant and Hydromet Plant

Located in Shawinigan, Quebec, Phase 1 Plant will transform spodumene concentrate from the Whabouchi Mine into high-purity lithium hydroxide and carbonate. Commercial samples will be sent to large end users in the lithium battery industry for qualification process. The commercial hydromet plant will also be located in Shawinigan next to the Phase 1 Plant.

In May 2016, Nemaska Lithium completed the acquisition of existing manufacturing facilities in Shawinigan, Quebec. The facilities will house the Phase 1 plant and the future commercial Hydromet Plant. In June 2016, the City of Shawinigan obtained zoning approval for the Phase 1 Plant and the Commercial Hydromet Plant

Nemaska Lithium - Near-term Lithium Production in Quebec

The goal of Nemaska Lithium’s Phase 1 plant is to qualify its products with end users and sign off-take agreements while constructing of the commercial Hydromet plant.

The plant will use Nemaska Lithium’s proprietary, patent-pending electrolysis process to produce high-purity lithium hydroxide and lithium carbonate at a rate of 500 tonnes per year. Unlike more traditional processes that use soda ash to produce lithium carbonate for the production of lithium hydroxide, Nemaska’s electrolysis based process produces lithium hydroxide directly, eliminating a greater amount of impurities. Nemaska Lithium has advanced its electrolysis process in order to nearly eliminate the use of soda ash in the creation of lithium compounds, as the volatile price of soda ash can greatly affect the price of lithium.

Patents Pending

Nemaska Lithium is pursuing patent protection on its proprietary lithium production process in multiple global jurisdictions and owns the rights to 35 pending patent applications represented by seven patent families. In June 2016 Nemaska received a Canadian patent that describes its proprietary process of preparing lithium hydroxide and lithium carbonate from spodumene sources using membrane electrolysis. Nemaska has also received a notice of allowance for the corresponding patent application in the United States.

Financing and Off-take Agreements

In July 2016, Nemaska Lithium completed a public offering, raising $69 million at an offering price of $1.15 per unit, and began trading on the Toronto Stock Exchange under the symbol NMX. Net proceeds from the public offering are to be used for engineering fees for the Whabouchi Mine, concentrator and the Shawinigan hydromet plant, down payments for long-lead items, construction of the concentrator building, in-fill drilling and other capital expenses.

“We are starting the detailed engineering work of both the hydromet plant and the mine site, ordering long-lead items, as well as initiating construction of the main buildings at the Whabouchi mine site,” said Bourassa. “This will allow us to continue our work in enclosed facilities during the winter of 2017, which is critical to keeping us on target for production in Q2 2018 when the market for lithium compounds is projected to be very tight on the supply side.”

Nemaska Lithium entered its first commercial off-take agreement with the May 2016 announcement finalizing agreements with Johnson Matthey Battery Materials Ltd. (JMBM) of Candiac, Quebec, completing financing of the Phase 1 Plant. The first agreement included an up-front payment of $12 million by JMBM, held in an escrow account to be disbursed as milestones are reached, in exchange for equal-value products and services from the Phase 1 Plant. The second agreement provides for a long-term supply of lithium salts between Nemaska Lithium and JMBM.

The Quebec Government has been a supporter of Nemaska since the beginning through numerous exploration and development funds. Whabouchi’s fortunate location allows Nemaska to take advantage of Quebec’s Plan Nord program which offers support for resource development north of the 49th parallel. Nemaska’s Whabouchi project qualifies for support under this plan including provisions for:

  • government aid to finance projects in the form of direct equity positions (up to 20 percent); and
  • special tax incentives for value added resource transformation projects representing up to $40 million in tax reductions.

The Phase 1 \plant is fully financed for construction and operation for two years. The project was financed through a number of sources including: $12.87M grant from Sustainable Development Technology Canada (SDTC), $3M grant from the Quebec Government’s Technoclimat program, $12M from Johnson Matthey Battery Materials which is a forward payment for lithium salts and services and finally $10M in equity investment from Ressources Quebec. The project was largely financed through non-dilutive financing instruments.

Managment

Guy Bourassa – President and Chief Executive Officer

Mr. Bourassa is President and CEO of Nemaska Lithium Inc. since the Company’s inception in 2008, bringing more than 30 years of experience in the mining industry to this role. Among other things he was instrumental in identifying and negotiating the acquisition of the Whabouchi lithium property and securing over $150 million through different types of financing to develop the Whabouchi project. Through his leadership, the Company brought an historical lithium showing to a world class deposit and has developed new innovative processes of producing high purity lithium hydroxide and lithium carbonate, which should allow Nemaska to become a world leader in these lithium salts markets. Mr. Bourassa is a recognized industry expert on lithium exploration and development and has spoken at numerous national and international conference. Throughout his career, Mr. Bourassa has been involved in exploration and mining companies as President and CEO, legal counsel and in-house corporate counsel and director. These companies were producers of gold, copper, calcite and dolomite. Mr. Bourassa holds a law degree from Université Laval.

Steve Nadeau, CPA, CGA – Chief Financial Officer

Professional accountant for more than 22 years, Steve Nadeau is a member of the CPA, CGA Association of Québec as well as the CGA Association of Canada since October 1998. Prior to joining the company as Chief Financial Officer in May 2008, Nadeau held several senior financial positions at companies producing products related to the granite industry, electronics and automotive field as well as companies involved in the maritime transport and warehousing. He is also Chief Financial Officer of Monarques Resources since March 2011.

François Godin – Vice President Operations

François Godin has 28 years of experience in progressively senior operations and process optimization roles mainly in the Iron & Titanium division of the multinational mining company Rio Tinto. During the final years of his tenure there, he built a mining organization, started and operated a billion-dollar mining project from scratch in Madagascar, employing 640 people with an annual operating budget of $150M. His expertise spans the life of a mining project from start up, to operations, to chemical and mining process optimization. In addition, he brings experience in chemical processing from minerals using innovative new technologies. He is responsible for overseeing operations at the Whabouchi mine and the Shawinigan plant. Godin holds a bachelor’s degree in metallurgical engineering from Ecole Polytechnique of Montreal.

Jean Francois Magnan, Eng. M.Sc. – Technical Manager

Jean Francois Magnan is a professional engineer with more than 20 years of experience in the metallurgical industry. During his career, he held several positions within the lithium industry including: R&D Advisor, R&D Project Manager, Consultant and Quality Control Metallurgist. He also acted as Project Manager for Phostech Lithium in 2000 and 2001. He will work closely with Nemaska Lithium’s technical consultant, Gary Pearse, on the technology implementation as well as playing an active role in securing new contracts for Nemaska’s lithium products. Magnan is the author/inventor of several patents in the lithium rechargeable batteries field. He holds a Master’s Degree in Materials Engineering from Laval University (2000).

Michel Baril, Eng. – Chairman

A mechanical engineer with over 30 years of experience in management, Michel Baril is the former President and Chief Operating Officer of Bombardier’s Recreational Products division and former Executive Vice-President of Bombardier Transportation. He currently serves as a senior executive at Raymor Industries Inc., and as a director of numerous public and private companies.

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.

François Biron—Director

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 implement, based on the latest automation mining technologies and to improve the mining process.

Gordon Gao – Director

Gordon Gao is Vice President of TQC Equipment Inc. (TQCE), the Canadian subsidiary of Chengdu Tianqi Industry Group Co. Before joining TQCE in 2009, he worked as an international business manager of Chengdu Enwei Group Co., from 2002, which specializes in medicine and health products. Gao holds a Bachelor degree of Economics of East China Normal University, Shanghai, China (2000).

Judy Baker – Director

Judy Baker is a consultant in the mineral industry and currently serves on the board of directors of Nemaska Lithium, Star Gold and Arbitrage Exploration. Baker has 20 years of experience in the mining and mineral exploration sector including equity analysis, fund management, and exploration and mining company activity. She holds an Honours B.Sc. Geological Engineering in Mineral Resources Exploration from Queen’s University (1990) and an M.B.A. from the University of Western Ontario Business School (1995).

René Lessard – Director

René Lessard is an independent sales consultant. He was the Sales Manager of Campagna Motors and also of T-Rex Vehicles for over 4 years. He also acts as a director of Monarques Resources.

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