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Financing delays force Nemaska Lithium to lay off half its staff

BY Patrick Quinn Nov 8, 2019

Only a week after the Nobel Prize in Chemistry was awarded to the developers of lithium-ion batteries, Nemaska Lithium announced plans to lay off about half of its staff due to financing delays.

However, the company is still confident that its Whabouchi mine, 30 km east of the Cree Nation of Nemaska, will become one of the world’s largest suppliers of lithium hydroxide, a key component in lithium-ion batteries.

The project’s impact benefit agreement (IBA), called the Chinuchi Agreement, was signed with the Cree in 2014 after five years of negotiations. It guarantees local employment and training opportunities while ensuring that processing would be done outside the territory for a smaller environmental footprint. The resulting 99.99% pure lithium would be destined for electric vehicles (EVs) and other green-energy products.

Earlier this year, rising labour and steel costs were blamed for a $375 million funding shortfall, but a tentative agreement announced with the Pallinghurst Group this summer was expected to get the project back on track. However, as no definitive agreement has yet been concluded with these investors, mine-preparation activities will be suspended and 64 employees collectively laid-off to preserve remaining cash flows.

“We have always asserted that we recruited the best talent to make this project a success,” stated CEO Guy Bourassa. “We are still deeply convinced of this, which makes this decision all the more difficult. As we cannot confirm the timeline for the resumption of construction, and although negotiations with Pallinghurst are progressing well, this is the responsible decision to be made.”

The company said a further three months would be needed to finalize $600 million in funding from Pallinghurst, meaning operations at both the Whabouchi mine and the processing plant in Shawinigan will be halted until at least next spring. The remaining employees will winterize the site, preserve company assets and ensure regulatory compliance.

“This is a big blow to us, for sure,” said Robert Kitchen, Nemaska’s economic development officer and one of the Chinuchi Agreement’s lead negotiators. “We were initial investors in the project. We gave Guy Bourassa the seed money to start up his company. At the end of the day, a lot of our entrepreneurs are impacted by this.”

About 60% of all construction contracts have been awarded to the community and other Cree partners. Since 2009, Crees have been actively involved in the project’s co-development in various capacities – there is even Cree translation on the company website.

“I’m always impressed by how things are moving forward with the Cree Nation of Nemaska,” said Simon Thibault, Nemaska Lithium’s environmental and social responsibility director. “In 2014, when the Crees really got involved in the co-design, they made suggestions that made us save significant amounts of money, millions of dollars, to relocate the pipeline for the final effluent, changing the water management plan.”

Thibault said they have remained in communication with Nemaska’s chief and council about the latest developments. On October 23, the company hosted a community information session to discuss the layoffs and future plans.

“Let’s look at this delay positively,” said Wayne Rabbitskin, Nemaska Lithium’s community liaison agent. “We know who wants to put in the money to sign the financing contract but it’s just a matter of when. We need to focus on the long-term opportunities, which are operational.”

At the information session, Rabbitskin suggested the delay was an opportunity for Crees to develop business initiatives such as ore transportation and bus shuttle services, so they can be ready once production resumes. He also recommended taking vocational training, which could then be combined with the company’s LEAD (Learning Employment and Development) mentorship program to gain on-the-job experience.   

The company’s Training and Employment Committee had been working with the Cree School Board and Apatisiiwin Skills Development to develop a Cree workforce in accordance with the Chinuchi Agreement, with paid incentives and specialized training available on the mine site. The operation’s slowdown means that LEAD and other programs are postponed indefinitely with focus now shifting to supporting laid-off employees.

“We hired a guy named Darius Wapachee, who is one of the persons who was dismissed,” Rabbitskin told the Nation. “We’re trying to help him find employment with one of the mining companies. Even one of the directors said we’ll do anything to help. Once the mine starts hiring again, these dismissed people get first priority if they want to come back.”

Wapachee is proud to be the company’s first mobile mechanic at the mine and assured the Nation that his career won’t end here. Rabbitskin added that the company has hired a therapist to assist those struggling with the dismissal and resources to transition employees from prepaid insurance programs. Laid-off employees can take their final two weeks as paid leave.

Nemaska Lithium’s difficulties reflect a widespread drop in lithium investment in worldwide markets. A vast oversupply has kept prices in a free fall – a problem similarly faced by another Eeyou Istchee company, Stornoway Diamond, which was granted bankruptcy protection in September.

“The situation for Stornoway and Nemaska Lithium are extremely different,” asserted Thibault. “We know that we see lower prices, but it is essentially for commodities that are lower quality, not in the range that we will produce. There’s not enough lithium on the market for supplying half of what people expect will be the EV demand.”

Indeed, this demand is projected to skyrocket over the next decade as volume, scale and technology improve. While lightweight rechargeable lithium is used in laptops and phones, only the highest quality lithium is sought for EVs and energy storage systems, which Kitchen anticipates will be the “next big thing.”

“When I did the negotiations at the time, there were certain areas we didn’t understand,” Kitchen told the Nation. “One was the conversion technology, to convert that raw material to the highest quality. That’s where you make the money.”

As only companies in South Korea, Japan and China have currently mastered the standard conversion process, shipping the raw material from North America would swallow any profit margin. Nemaska Lithium has a patented electrolysis process to remove impurities directly from Whabouchi’s output but it has thus far only been demonstrated in smaller quantities.

With numerous mineral deposits in the region, Kitchen would like to see a strategic approach for processing future materials closer to home. He also believes amending the treaty clause that surrenders subsurface mineral rights is a key to unlocking wealth in Eeyou Istchee.

“I think we can find a way to amend that in order for us to have a bit more control over our natural resources,” said Kitchen. “Then you can knock on the doors of the lithium world, the people who want to get involved in resource development with the Crees. Now we seem to be just stuck with IBAs, but we’ve got to think beyond the box.”

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Patrick Quinn lives in Montreal with his wife and two small children. With a passion for words and social justice, he enjoys sharing Eeyou Istchee's stories and playing music.