Nemaska Lithium Snags Potential Partnership with Johnson Matthey Subsidiary

Last week, Nemaska Lithium (TSXV:NMX,OTCQX:NMKEF) signed a memorandum of understanding (MOU) regarding its Quebec lithium project with Johnson Matthey Battery Materials (JMBM), a subsidiary of Johnson Matthey (LSE:JMAT).
Subject to final due diligence and agreements, the collaboration between Nemaska and JMBM will include an upfront payment of C$12 million for Nemaska’s Phase 1 lithium production plant in Shawnigan, Quebec, with provisions for a long-term lithium carbonate and lithium hydroxide supply agreement for JMBM’s battery products.
“We are very pleased to have entered into this strategic agreement with JMBM, a leading supplier of lithium iron phosphate cathode materials for automotive and non-automotive applications,” said Nemaska President and CEO Guy Bourassa in Thursday’s release. “We are confident in our ability to deliver very pure lithium salts from the Phase 1 Plant and in our ability to subsequently become a long term supplier to JMBM.”

Bourassa added that Nemaska is aiming to begin production at its Phase 1 plant, which will have a capacity of 500 tonnes per year of lithium hydroxide and carbonate, within 12 months of completing the required financing for construction. The company expects the financing to be closed by February 2016.
Nemaska still needs to raise roughly $500 million to build its Whabouchi lithium mine in Quebec as well. The company received federal environmental approval for Whabouchi at the end of July, and secured provincial approval at the start of September.
Jon Hykawy of Stormcrow Capital sees the JMBM announcement as a significant de-risking event for the company. “Johnson Matthey is technically astute. Arguably more so than any group that has signed an agreement with a junior lithium company to date,” he states in a note. “They understand, from first-hand experience, what it takes to move a new process from the laboratory to the commercial scale.”
That’s an important point, as Nemaska is advancing its proprietary process to produce lithium hydroxide directly from spodumene concentrate. Traditionally, lithium carbonate is produced from spodumene and hydroxide is produced afterwards. Nemaska received notice of allowance for its patent for this process in October.
Hykway also believes that the agreement is a sign that JMBM and Johnson Mathey are “recognizing the likely difficulty in sourcing inexpensive lithium hydroxide that will soon be facing the battery industry,” an issue that a number of analysts, including Hykawy, have been speaking about for some time now. Further to that point, he added that China’s Tianqi Lithium (SSE:002466) currently holds shares of Nemaska.
Overall, Stormcrow has increased its target price for Nemaska from $0.54 to $0.71.
Nemaska’s share price has risen 65 percent over the past three months and is up 115 percent year-to-date, but was down 2.74 percent, to $0.355, last week. Nemaska has a market cap of 71.3 million and has traded within a 52-week range of $0.15 to $0.45.
 
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article. 
Editorial Disclosure: Nemaska Lithium is a client of the Investing News Network. This article is not paid-for content.