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Nemaska Lithium’s (TSE: NMX) stock plummeted Wednesday after disclosing it has been forced to revise the budget for the Whabouchi lithium mine and Shawinigan electrochemical plant upward by C$375 million. The company, with a $300 million market cap on the TSX, clawed back some of the early day’s losses, but still closed the day down 35%.
Nemaska, which has also received funding from the Quebec provincial and Canadian federal governments, is building the Whabouchi hard rock lithium mine in the James Bay region and Shawinigan processing plant north of Montreal, aiming to put Canada on the global lithium production map.
Nemaska has already spent over $138 million on the Whabouchi mine and mill, and another $67.3 million for the plant in Shawinigan.
The additional funding is largely related to installation and indirect costs, said the company
The additional funding is largely related to installation and indirect costs, said the company. Direct purchase package costs – mainly equipment – are in line with the original budget.
“The revised overall project cost reflects a more precise outlook on installation costs and other key variables to the completion of our project,” Nemaska president and CEO Guy Bourassa said in a media statement.
“We now have a better understanding on the remaining scope of the project, estimated budget and current market conditions.”
“Our objective remains to close the required financing on time to stay on target to complete mine construction in October 2019, in order to make the first shipment in December 2019, followed by the start-up of the Shawinigan facility the year after,” Bourassa said.
The Canadian developer arranged $1.1 billion financing for the lithium project last year. SoftBank’s Vision Fund entered the mining sphere for the first time in May 2018, buying up to 9.9% of Nemaska Lithium.
Construction and purchasing at both sites are on schedule, the company said.
Lithium prices have been under pressure for the past six months. While demand continues to accelerate the supply response has been dramatic— pushing down prices for the battery raw material. Four new spodumene mines went into production last year. While spodumene traded either side of $900 a tonne for most of 2018, prices fell sharply in January.
While generally higher on the cost curve than brine operations, spodumene concentrate is converted into battery-grade lithium hydroxide which trades at around $16,000 per tonne ex-works in China, down from $20,000 six months ago.
Pumping and evaporating brine solution produces lithium carbonate which sometimes requires further refining or conversion to feed into the battery supply chain. Battery-grade lithium carbonate in China has halved in value over the past year and is now trading under $12,000 a tonne.
7 Comments
Doug Scher
How do you miss on a project cost estimate by 350Mil? I could see 20 mil, 35 even but 350 says one of two things. Either Guy Bourrasa is incompetent to run the business or he is just another canadian penny mining stock con artist. He should step down voluntarily or be fired by the board and replaced by a cost conscious CEO. What do they have to show for the 1 bil already raised? Where did the money go? I bought a bunch of stock at a buck, many paid more than that. Widows, orphans, hard working trusting people. This guy has taken our money on false pretenses and vanished it. If anyone is interesting in suing him, please contact me at [email protected]
Guest
I hypothetical ‘widows and orphans’ bought this stock, or ANY penny stock at any time, they are being grossly misdirected by their investment advisors. Any stock trading under a dollar on a venture exchange is speculative, and should NEVER be traded by anyone but those who can affords to lose their entire investment.
Bruce Murdoch
An overage of this level is clearly mismanagement. A 10% overage is too much and that would only amount to just over $100 million. They aren’t re-inventing the wheel here and there are plenty of qualified mine builders out there who could have nailed the cost down much better than this. Something doesn’t make sense here.
Mark Doldon
Wrong. Firstly, overages of 30% in a new mine are very common, almost the norm. And they ARE reinventing the wheel. The processing plant includes a number of patented methods which have never been built on a commercial scale. That portion of the project could easily result in massive overruns
klgmac
Green energy. The crime against humanity. Renewables do not and will not cost less than fossil fuels for a long time. Making electricity a luxury item hurts our most vulnerable citizens the most.
LD50
Energy poverty shortens and ends lives, and condemns people to low(er) standards of living. Yet, it is the inevitable outcome of every non-nuclear “green” energy proposal.
Quizzard
This has absolutely nothing to do with green energy. Lithium is a valuable component of batteries, which are used to transport energy, not to produce it.