Nemaska Lithium files for creditor protection

Canada’s Nemaska Lithium (TSX: NMX) has filed for creditor protection after attempts over several months to find new investors and continue operations.

The Montreal-based company is trying to avoid becoming the latest victim of an oversupply of the metal needed in the batteries for electric cars and high-tech devices, which has squeezed the market this year.

Nemaska said it had received approval from its board of directors to apply to the Superior Court of Quebec for creditor protection under the Companies’ Creditors Arrangement Act (CCAA).

While on CCAA, the company anticipates conducting a review of its operations and seeking court approval for a formal investor solicitation process. Through the process, Nemaska aims to source more financing, sell assets, enter a joint venture, or a combination thereof.

The company had been in talks with mine financier, the Pallinghurst Group, to secure a potential $600-million equity investment, but has yet to announce a deal.

Nemaska Lithium’s shares, which have been suspended from trading, have dropped since the company announced plans in November to place its Whabouchi project in Quebec on care and maintenance.

In October, the company bumped up its estimate for the total investment needed for the project from US$1.1 billion to US$1.5 billion.

As proposed, Whabouchi contemplates an open-pit and underground mine, northwest of the municipality of Chibougamau, as well as a processing plant in Shawinigan.

The mine would have a production capacity of 3,000 tonnes per day over an estimated 26-year mine life.

Prices for lithium carbonate, the most common type used in electric vehicle batteries, doubled over 2016 and 2017. Since then, prices have fallen by more than 40% to around US$9.50 per kilogram, down from US$18 per kilogram in May 2018, according to S&P Global Platts.

The main factor behind the price slump is the avalanche of new supply that has hit the market over the past year, triggered by mine expansions and government subsidy cuts for electric vehicle buyers in China.

In November, Albemarle (NYSE: ALB), the world’s No. 1 lithium miner, said prices were down a third last year and that the industry has two or three times more inventory than needed. Trying to offset the glut, the company postponed in August plans to add 125,000 tonnes of processing capacity. It also revised a deal to buy into Australia’s Mineral Resources’ (ASX: MIN) Wodgina lithium mine and said it would delay building 75,000 tonnes of processing capacity at Kemerton, also in Australia.

Chile’s SQM, the world’s second-largest lithium producer, has pushed back an expansion at its Atacama salt flat operations from the end of 2020 to late 2021. The Santiago-based lithium giant said in November that profit had fallen almost 28% in the three months to Sept. 30.

This article first appeared in our sister publication, Mining.com: https://www.mining.com/nemaska-lithium-goes-bankrup-first-victim-of-market-glut/