Nemaska Lithium has accepted a sales proposal that would reorganize the company into a new entity, called New Nemaska Lithium, giving new hope for the Whabouchi Mine located 30 km east of Nemaska. It had filed for creditor protection in December after failing to find investors to continue operations.
The sale is structured as a credit bid from its largest secured creditor, Orion Mine Finance, along with Investissement Québec (IQ) and the Pallinghurst Group. Orion would retain its share of the secured debt, about $135 million, while the other two entities would split remaining control of “New Nemaska Lithium” 50-50.
Based on the terms of the bid, the company will no longer be listed on the stock exchange and current shareholders will be left with nothing. A shareholders’ group upset with this restructuring will likely be heard when Quebec’s Superior Court determines whether to approve the sale in mid-September.
“I’m sad on one end because people have lost money with the financial restructuring,” said Pierre Fitzgibbon, Quebec’s Minister of Economy and Innovation. “It involves some risk so that’s why we’re doing it with some partnerships. We’ve got the right partner and the right sequence. The project is very important for Quebec.”
Although eight potential buyers had emerged earlier this year, all eventually withdrew except for Pallinghurst and IQ, which is the entrepreneurial arm of the provincial government. According to a shareholder spokesperson, this is a result of political interference from Minister Fitzgibbon, who was publicly critical of Nemaska Lithium’s funding structure.
“The minister has failed in his duties,” shareholder spokesperson Alain Clavet told La Presse.
“If you are a foreign investor and you hear the Minister of the Economy talking about a company like that, that does not make you want to invest.”
The company declined comment until the sale is approved, which is expected to close on October 15. After laying off most workers last fall, the Whabouchi Mine has been continuing basic maintenance activities with a small crew.
Pending sale approval, current employees will transition to New Nemaska Lithium and the company’s obligations with the Crees under the Chinuchi Agreement will continue to be honoured.
“There is no reason for us to depart from it,” Fitzgibbon told the Nation. “It was well negotiated, and we will respect it. I expect the Cree community to be enthusiastic about the project, to help us bring the project home.”
Fitzgibbon has called the company the first piece of a puzzle for Quebec to develop its own batteries. High quality lithium-ion, which the Whabouchi Mine intends to produce, is an essential component for the burgeoning electric vehicle market.
“I think Quebec has a chance to be a world leader, especially for the North American market, in that supply chain,” said Fitzgibbon. “I hope to be involved in every piece of the chain. The first piece of that puzzle has been placed with Pallinghurst but we’re working on numerous other parts.”
The challenge, as expressed by Nemaska’s economic development officer Robert Kitchen last autumn, is that ultimate success depends on a viable conversion technology. Nemaska Lithium had planned to perform this processing at a separate electrochemical plant in Shawinigan but struggled to raise the significant funding required.
Pallinghurst had been expected to contribute $600 million but was apparently concerned about the company’s presence on the Toronto Stock Exchange, with its inherent pressure to deliver short-term dividends. Under the new deal, Pallinghurst and IQ will immediately inject $95 million each into the company, which will increase up to $300 million each.
“It’s a very comprehensive process,” said Fitzgibbon. “That’s why I went to China in December, because the project is so big in terms of financial resources and expertise. I want to make sure we have the proper analysis.”
He expects operations at the Whabouchi Mine won’t resume until a thorough analysis into the various mining, extraction and conversion activities are conducted over at least a few months. As Pallinghurst is a renowned international investor in the mining sector, their experts will be heavily involved in determining the next steps.
“They have a team that will be working with us,” Fitzgibbon explained. “Obviously the sooner the better, but it will be done in the right order. We have to really do our homework. This is a restart on a solvent and well-established foundation. That’s the most important message.”