Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Shares in Canada’s Nemaska Lithium trading in Toronto jumped 4.7% at the open on Friday after the company inked a $150m streaming deal with private equity giant Orion Mine Finance.
The streaming agreement – an upfront investment in exchange for a share of future production, usually at a steep discount – lifted the Quebec City-based company’s market value to $412m.
Nemaska is building the Whabouchi hard rock lithium mine in the James Bay region and Shawinigan processing plant north of Montreal in Quebec for a capital outlay of roughly $620m (up to $825m including working capital and reserves).
The deal provides for the sale and delivery to Orion of 14.5% on all lithium hydroxide and lithium carbonate produced at the Shawinigan plant up to a maximum of 5,000 tonnes per year.
The deal comes just a week after a $100 billion Japanese technology fund bought a 10% stake in Nemaska Lithium for $77m. Nemaska has also received funding from the Quebec and Canadian governments. The company is also working on a $350m debt financing package.
In its March corporate presentation the company said it can produce lithium carbonate from its plant for $3,403 per tonne and lithium hydroxide for $2,811 making it one of the lowest cost producers anywhere in the world.
Nemaska is targeting production of 23kt of lithium hydroxide and 11kt of lithium carbonate from the spodumene mine per year. The company has already signed offtake agreements for 40% of its future production excluding Softbank’s option. The bulk of lithium today is produced from salt flats in South America followed by hard-rock mines in Australia.
New York-based Orion earlier this year closed a $2.1 billion mining investment fund, the second largest private equity fund of its kind in history and the biggest in five years for the sector.
