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After failing to secure additional funding to maintain its current operations, lithium producer RB Energy announced Wednesday that it has halted work at its Quebec lithium plant. The statement follows last week’s news that the company has not completed a best-efforts offering “due to difficult market conditions.”
The statement follows last week’s news that the company has not yet completed a best-efforts C$78- to $88-million offering that was announced midway through September. RB Energy stated at that time that it was considering “alternative options,” and warned that a temporary shutdown of its Quebec lithium plant was in the cards.
RB Energy has also “temporarily” laid off most of its employees to further curtail costs. A small number of workers will stay on to maintain the Quebec project on a care-and-maintenance basis.
Unfortunate timing
The company recently announced its first commercial shipment of lithium carbonate from the Quebec operation, so it seems especially unfortunate that operations have been suspended so quickly. That said, the earlier achievement came following a number of setbacks — in July, the company ran into issues surrounding the plant’s kiln and the conversion of technical to battery-grade lithium carbonate. RB Energy stated that it would not be able to meet its 2014 production targets and that it would push back nameplate production to the start of 2015.
However, the company was able to pull through, and an independent technical process review in September found no “fatal flaws” with the plant’s process, concluding that it would be able to reach nameplate production. But it seems that wasn’t enough to garner investor confidence, as demonstrated by the results of RB Energy’s most recent financing.
The company also tried selling its Aguas Blancas iodine operation in Chile to raise additional cash and hone its focus on lithium, but that sale didn’t come through in time either.
Difficult market conditions?
As most investors know, the markets have not been kind to resource companies lately, and many have experienced difficulties securing funding. Echoing RB’s explanation for its incomplete financing, Capstone Mining (TSX:CS) canceled a planned offering of $300 million worth of senior notes due to “general market conditions” in mid-September, while Luna Gold (TSXV:LGC) canned the second tranche of its private placement “as a result of market conditions” around the same time.
However, with all the buzz in the lithium space surrounding Tesla Motors’ (NASDAQ:TSLA) gigafactory, it’s remarkable to see a lack of investor interest in a lithium company — especially one that’s producing battery-grade material in North America. And unfortunately, that lack of enthusiasm also extends to RB Energy’s directors. Concurrent with today’s update on the Quebec lithium project, RB Energy announced that Ron Hochstein, Robert Chase and Pablo Mir have resigned.
At close of day on Wednesday, shares of RB Energy were down 33 percent, trading at $0.05. The company has dropped 95 percent year-to-date, having fallen from around $1.10 at the start of January.
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.
